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Exit and Growth Strategies for Middle Market Businesses

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M&A News In The Consumer Retail Industry Sector

By Joe Sands | Sep 11, 2018

The report below gives a good overview of the third quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q2 2018 included 90 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions closed in June when Fairfax Financial Holdings Ltd acquired Toys “R” Us Ltd, trading as Toys “R” Us (Canada) Ltd from Toys “R” Us, Inc. for CAD300 million (US$237.9 million), via bankruptcy. The acquisition is in line with the growth strategy of Fairfax Financial Holdings. The transaction was subject to customary closing conditions, including remaining court and applicable regulatory approvals. Toys “R” Us is located in Concord, Ontario and retails toys, games and electronics for children.

Driven in large part by the ubiquity of Amazon, retail dollars seem to be on a continuous trend toward leaving storefronts for the online giant.

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M&A News In The Consumer Retail Industry Sector

By Joe Sands | Jun 01, 2018

The report below gives a good overview of the second quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q1 2018 included 149 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was announced in March when Bodega Latina Corp, majority owned by Grupo Comercial Chedraui SAB de CV, acquired Fiesta Mart LLC, a portfolio company of ACON Investments LLC, for a reported US$300 million. The transaction would expand the company’s operations in Texas and its market position in the US Hispanic population. Fiesta Mart is located in Houston, Texas and operates grocery stores.

As e-commerce sales continue to take market share from traditional brick-and-mortar retailers, the percentage of consumers buying products directly from their mobile devices continues to expand.
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M&A News In The Consumer Retail Industry Sector

By Joe Sands | Mar 26, 2018

The report below gives a good overview of the first quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer Retail sector for Q4 2017 included 94 closed deals, according to data published by industry data tracker FactSet.

One of the notable transactions of the quarter was announced in December when Colgate-Palmolive Co acquired Physicians Care Alliance LLC, trading as PCA Skin, a portfolio company of Norwest Venture Partners for US$730 million in cash. The acquisition would allow Colgate-Palmolive Co to expand its personal care business. The transaction was subject to customary closing conditions, including US antitrust clearance and is expected to accretive the earnings of Colgate-Palmolive Co in 2018.

The old-world retail sector continues to lag as brick-and-mortar stores struggle to compete against Amazon and other e-commerce businesses. This is true for midmarket retailers as well as several major retailers – including RadioShack, PayLess ShoeSource, Vitamin World and Toys R Us, which filed for bankruptcy protection in 2017.

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M&A News In The Consumer and Retail Industry Sector

By Joe Sands | Dec 12, 2017

The report below gives a good overview of the fourth quarter M&A activity in the Consumer and Retail Industry Sector. M&A activity for North American based target companies in the Retail and Consumer sector for Q3 2017 included 93 closed deals, according to data published by industry data tracker FactSet.
E-commerce is continuing to dominate retail and e-commerce solutions have been a big spark for M&A. In September Pitney Bowes, Inc. acquired Newgistics Inc., a portfolio company of Littlejohn & Co LLC, for US$475 million in cash. Newgistics, Inc. provides e-commerce services to retailers. It offers end-to-end e-commerce solutions that integrate every step in the order life cycle from customer acquisition through fulfillment, delivery and returns.

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M&A News In The Consumer And Retail Industry

By Joe Sands | Sep 08, 2017

The report below gives a good overview of the third quarter M&A activity in the Consumer and Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q2 2017 included 118 closed deals, according to data published by industry data tracker FactSet. The average purchase price was $268 million.

The brick-and-mortar retail sector continues to suffer and shoppers buying habits shift toward online sales.

Retailers who rely on 0% financing deals to encourage big-ticket purchases are facing leaner profits or the possibility of lost sales as interest rates rise, according to The Wall Street Journal. Historically low interest rates since 2009 have enabled US retailers to effectively cover the financing costs for customers by paying a bank or finance company a few percentage points of a product’s purchase price upfront: a practice known as “buying down the rate to zero.” As the US economy improves, the Federal Reserve Bank has begun raising rates, most recently in March 2017.

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Consider A Family Office as a Potential Buyer or Partner for Privately Held Businesses

By Joe Sands | May 18, 2017

Selling My BusinessAn Emerging Trend: Family Offices Seeking Private Company Investment Opportunities

There is a growing trend of family offices acquiring or investing in private businesses and the trend is picking up steam for good reasons including but not limited to:

• Direct investing provides Family Offices with the potential for superior returns, transparency and control of their investments in private companies

• In some cases, private companies’ interests can be better aligned with a Family Office as an investor or owner than with a traditional funding source

What is a Family Office?

A Family Office is an entity that provides services to either a single wealthy family or multiple wealthy families. The Family Office (FO) is generally set up by the wealthy family (a family with assets typically in excess of $100 million and often in the billions) and ranges in the number of professionals employed and services covered. The services provided by a family office are tailored to the family’s needs, and can cover: (i) wealth management, (ii) investment management, (iii) private banking, (iv) accounting and tax management and (v) other services such as travel, legal, bill paying and security. The rationale for setting up a family office is centered around privacy, confidentiality, control, transparency and a consolidated team working together without any bias or conflicts of interest. FOs invest across a wide array of domestic and international public and private securities as well as real estate. Collectively, family offices are estimated to hold assets in excess of $2 trillion.

Advantages for the Private Company:

• A FO’s primary objective is to preserve and grow wealth over the long term rather than selling their best investments quickly or using high amounts of debt in order to generate a high IRR of new investment funds.

• FOs are more likely to hold a good investment for many years or even potentially in perpetuity and to be an ongoing source of growth capital for the company.

• FOs are already running businesses and are sensitive to the softer issues such as company culture, succession issues, impact on the local community as well as maximizing business strategies. Most have been through up and down economic cycles and won’t take short-cuts to preserve their jobs.

• The different investment objective of a FO can also manifest itself in less balance sheet leverage being employed which may be attractive to business owners who want to be sure of the future stability of the company. Many institutional investors focus on maximizing IRRs which can bring with it an interest in maximizing debt levels since the higher the leverage, the higher the return on the equity, everything else being equal. Most FOs, on the other hand, are more conservative on the use of debt in their acquisition financing.

• Finally, FOs are using their own capital and can therefore close on investments quickly without relying on bank or investment committee approvals.

Conclusion:

When considering a sale or capital raise for a privately owned business, there are many types of traditional and non-traditional capital providers and acquirers. A well thought-out strategy for each situation must be developed to engender a successful outcome. Doing so requires evaluating which types of investors to reach out to and including multiple types of investors. This will no doubt maximize business value as well as the ongoing operating relationship. Family Offices are a good complement to a robust investment banking process.