Exit and Growth Strategies for Middle Market Businesses

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M&A News In The Print and Packaging Industry Sector

By Jeff Wright | Aug 16, 2018

The report below gives a good overview of the third Quarter M&A activity in the Print and Packaging Industry Sector. M&A activity for North American based target companies in the Print and Packaging sector for Q2 2018 included 21 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was announced in May when R2G Rohan Czech Sro, a subsidiary of R2G Rohan SARL, acquired First Quality Nonwovens, Inc. from First Quality Enterprises for US$500 million. R2G Rohan Czech Sro, part of R2G Rohan SARL, is a Czech company that operates as an investment company. First Quality Nonwovens is an American company located in Hazle Township, PA, that manufactures and markets sanitary paper and spun melt nonwovens.

The price of pulp, paper and other allied products flattened out in the second quarter benefitting manufacturers who’d faced steady price increases since July of 2017.

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M&A News In The Print and Packaging Industry Sector

By Jeff Wright | May 24, 2018

The report below gives a good overview of the second Quarter M&A activity in the Print and Packaging Industry Sector. M&A activity for North American based target companies in the Packaging and Printing sector for Q1 2018 included 15 closed deals, according to data published by industry data tracker FactSet.

One of the notable transactions announced in the quarter was ProAmpac, one of the nation’s largest and fastest-growing flexible packaging manufacturers, acquiring Pactech Packaging (Pactech), a Rochester, New York-based manufacturer specializing in pouch converting. Pactech’s products complement ProAmpac’s existing flexible packaging offerings, which primarily serve the medical, industrial and consumer packaged goods markets. Financial terms of the deal were not disclosed.

According to data from industry group Smithers Pira, the global flexible packaging market is growing 3.5% annually and generates more than $230 billion annually.

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Avoid the Hazards of Single Suitor Negotiation

By Jeff Wright | Jun 20, 2017

Here is an issue we see all the time. A company owner gets an attractive “offer” lobbed over the transom. He’s flattered, intrigued. He’s been thinking of scaling back, maybe even selling the business and this top dollar overture has his attention. He starts to invest in the possibility and decides there is no harm in taking a meeting. This sounds like a path to a big payday and happy outcome. Right? Well, probably not.

There is a saying in our business that “one buyer is no buyer.” And while that’s a bit black and white, it does reflect the importance that we as M&A Advisors place on having multiple buyers and competition.

Back to our company owner. He meets with this suitor. He shares financials and other information. He’s getting hooked into a process and invested in an outcome. The potential buyer asks for an exclusivity period. They ask for more and more information. Our seller has now invested significant time and psychic energy in this process. The buyer finds some dings in the business and begins to adjust the price (really, downward is the only direction the price goes in situations like this). Even after many months of this cycle of information requests and price reduction, our owner is reluctant to give up, given all work and hope he has into this. Most of the leverage is with the buyer, little with the seller.

Oh, the owner has also taken his eye off the business and performance is slipping.

In our experience, most situations like this never close, waste a lot of time and may even taint the company for future sale opportunities. We believe that receiving an attractive “offer” is the perfect time for an owner to take a step back and get some professional help. Strategic and financial buyers know how to buy companies. They have teams of experts. They love the opportunity to scoop up acquisitions without competition. The playing field is lopsided in their favor as most company owners have never sold a business and when they do, it will be a “first time/last time transaction involving their biggest asset.

At CFA, our mission is to work with company owners to see that they are fairly paid for their lifetime of work, the value they have created and the risks they have taken. Hiring CFA does several things to advance this cause.

  • We bring competition to the table. With our contacts and research, we can invariably find multiple qualified buyers that will be competitive on price and terms, and do so confidentially.
  • We create a sense of urgency, keeping all buyers on a tight timeline simultaneously throughout the process.
  • The owner can focus on the company’s performance as we manage the process and interactions with buyers.
  • Valuation can be driven UP, because we don’t put a price on the company. We let the buyers do that, and drive up valuation in an auction with each other.
  • Owners have an M&A expert on their side to help structure an advantageous transaction and navigate the numerous deal traps in the definitive agreements (escrows, indemnities, working capital adjustments, consulting agreements, earn-outs, etc.)

Buyers are particularly aggressive right now, with trillions of dollars to deploy and a limited supply of sellers in the market. Buyers are contacting owners directly more than ever with enticing “offers.” We advise owners to use this sellers’ market to their advantage and hire an M&A expert to help them achieve a high value and expeditious transaction.

Does Industry Expertise Matter When Selecting an Investment Banker?

By Jeff Wright | Mar 04, 2015

Investment BankerSometimes a company owner insists that an investment banker must be an “industry expert” to maximize value. To the contrary, my experience leads me to believe that the real benefits of specific category experience may be small and the potential pitfalls, larger.

It may seem counterintuitive, but being narrowly focused in an industry may actually be a detriment to owners seeking to sell their companies for maximum value. Here are some reasons this might be so:

  1. An “industry expert” may approach the assignment just like his last deal and not apply innovative thinking to the assignment. There is a risk of “phoning in the work”. We know that every company and every situation is different and deserves fresh thinking.
  2. The “industry expert” may see a limited buyer universe because he thinks he already knows all the buyers in the industry. This kind of banker may not dig as deep or think as creatively to find buyers who may have strategic adjacencies, because they are not directly in the client’s industry.
  3. Worse, due to long standing relationships, the banker may owe favors to certain buyers in that industry and lose some objectivity, maybe even unintentionally.

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A Company Doesn’t Have to be Perfect to be Sellable

By Jeff Wright | Apr 28, 2014

Dented CarWe will occasionally meet a company owner who is personally motivated to sell but feels that there are several things that need to be improved before the company is ready to be put on the market. This might involve hiring a key manager, or finishing a major internal initiative. We certainly maintain that there is a minimum threshold of company preparedness needed for a company to be in a position to be brought to market. However, we also know that companies can be successfully marketed even if there are some significant gaps or weaknesses.

When we meet with business owners we go through a 25 point Value Drivers checklist to assess their company. The farther to the right hand side of the scale the better. This checklist includes a section called “Deal Killers” and we will not take a sell-side assignment with a weak score on one of these criteria. For example, if there is no depth of management team and the owner is essentially mission- critical to the company, this is a deal killer situation. Read more »

The Baby Boom is Coming – Can You Beat the Crowd?

By Jeff Wright | Nov 25, 2013

Crowd of PeopleAfter World War II ended, returning GIs began a binge of family formation at a rate not previously seen in American history. Over 77 million babies were born in the US between 1946 and 1964, the generally excepted definition of the baby boom. Much has been written about the attitudinal and cultural traits of this generation. One thing is for sure: Boomers were entrepreneurial and formed businesses at an unprecedented rate. Over half the businesses in the US are owned by boomers, upwards of 10 million businesses.

Boomers are aging, with an average age of almost 60 years old and the oldest boomers almost 68. While it’s true that boomers think of themselves as younger than they are, this is still an age when many people look to retire. Or perhaps with boomers, re-invent. And this trend will continue for many years as the younger end of the boomer cohort ages and moves into retirement years. The number of people in the US in the 55 to 65 age range will continue to increase though 2018.

This means that is possible that there will be a flood of companies coming on to the market in the next several years. Based on 2010 census data, SME Research estimates that, excluding solo practices, the number of companies owned by someone 55 and older was about 2.7 million. PricewaterhouseCoopers in their recent Trendsetter Barometer Survey of Business Owners, estimates that 51% of owners over age 45 planned to sell their companies to other companies. Fewer than 18% planned to pass the business on to a family member and even less would consider selling it to their employees. Read more »

How “Anti-Fragile” are You?

By Jeff Wright | Apr 16, 2013

Black SwanI recently read Nassim Taleb’s new book Anti-Fragile. Taleb is the brilliant thinker and writer who also wrote the best-selling book The Black Swan a few years ago. Taleb’s books have stimulated my thinking about our business and the company owners we talk with.

Taleb is a former successful hedge fund analyst and trader. While on Wall Street he developed innovative models around risk management. His models demonstrate that down side risk cannot be predicted by normal bell curve distribution but rather have more of a “long tail” distribution. In colloquial terms he popularized the term “Black Swan” events to illustrate his ideas about risk and risk management.

Much like in nature, when due to a freakish genetic mutation, a rare black swan is born; in Talab’s world Black Swans are hugely disruptive events that seem to come out of nowhere. They are not predicable, and while they are rare, they WILL occur. Read more »