InSight

Exit and Growth Strategies for Middle Market Businesses

Archive for the ‘Acquisitions’ Category

CFA Advisor to Ergo-Mechanical Industrial in Majority Sale

By Kim Levin | Nov 15, 2012

Corporate Finance Associates, an international investment banking services firm providing merger and acquisition, business valuation, capital resource and financial advisory services, announced that it was the exclusive advisor to Ergo-Mechanical Industrial in its majority sale to Arch Equity Partners.

Ergo-Mechanical Industrial (EMI) operates two subsidiaries Ergonomic Material Handling Systems (EMH) and Tennessee Valley Industrial (TVI) that engineer, design, integrate and install a wide variety of custom material handling and ergonomic equipment for Fortune 500 OEMs.

EMH is a full systems integrator specializing in the design, installation, project management, and overall integration of custom material handling and ergonomic equipment for OEMs. EMH operates out of its Decatur, IL facility with equipment such as operator lift platforms, conveyors, overhead rail, assist arms, pallet changers, dollies, and other custom equipment.

TVI specializes in mechanical installation and turnkey projects. Based in Georgetown, Kentucky, TVI’s project experience includes the installation of roller, belt, slat, power and free chain and electrified monorail systems. In addition, TVI performs rigging and installation of machine centers, overhead steel, demolition, relocation services, equipment refurbishing, painting and scheduled maintenance.

In most cases, EMH provides the design and products, while TVI provides the critical project management and installation that are a core requirement of its customers. Customers include Toyota, Nissan, Honda, Caterpillar, and John Deere.

“From the first meeting it was evident that EMI’s dynamic management team and the principals of Arch Equity shared the same vision for the company’s future. The tremendous growth opportunities on EMI’s horizon coupled with Arch Equity’s access to capital made this a clear match,” said Anthony Contaldo, Director of Corporate Finance Associates’ Chicago Office.

St. Louis, Missouri based Arch Equity Partners was formed in 2008 as a private equity firm that concentrates on investments for companies in the lower middle market. The private equity group actively partners with management teams to ensure they have a meaningful ownership position, targeting management team ownership of 15-25%.


CFA Exclusive Advisor to R&D Enterprises in Sale to Resilience Capital Partners

By Kim Levin | Oct 25, 2012

Resilience Partners Acquires R&D EnterprisesCorporate Finance Associates, an international investment banking services firm providing merger and acquisition, business valuation, capital resource and financial advisory services, announced that it was the exclusive advisor to R&D Enterprises in its sale to Resilience Capital Partners.

R&D Enterprises, founded in 1974, is an original equipment manufacturer of highly-engineered heat exchange and cooling products serving the off-road, marine, on-highway and industrial end markets. Based in Plymouth, Michigan, R&D Enterprises’ fluid cooling products, ranging in size from small oil coolers for low horsepower engines to coolers for 10,000 horsepower engines, are used in recreational boats, commercial marine vessels, industrial equipment, trucks, automobiles and agricultural equipment. The Company is a Tier 1, ISO 9001:2000 certified supplier.

R&D Enterprises is Resilience Capital Partners’ first add-on acquisition by its Thermal Solutions Manufacturing investment platform, which it acquired in February 2012. Thermal Solutions Manufacturing is an aftermarket manufacturer of heavy duty and light truck heat exchange products serving the off-road, on-highway and industrial end markets through its 25 distribution locations in North and Central America.

“It was a pleasure working with the management team at R&D Enterprises.  It was clear from early on in the process that the team at Resilience were true professionals and that R&D Enterprises and Thermal Solutions were a very good fit,” said Bob Contaldo, Managing Director & Principal, CFA Chicago.

Established in 2001, Resilience Capital Partners is a leading private equity firm headquartered in Cleveland, Ohio. Since its inception, Resilience Capital Partners has invested in 24 companies under 18 platforms, together representing over $2 billion in revenues and over 5,000 employees. Resilience Capital Partners manages multiple private equity funds with capital under management in excess of $320 million.


LOI – The Engagement Ring of the M&A World

By David Hulett | Oct 16, 2012

Shaking HandsYou were introduced by mutual acquaintances and have been “dating” for a while now.  Via probing questions and answers you realize you are compatible, synergistic and seemingly a perfect fit.  It’s time to move to the next step… the engagement ring?  No… the letter of intent, or LOI.

In the mergers and acquisitions world, the LOI is a legal document which spells out the initial price and terms upon which a buyer acquires a company.  In M&A, rarely is the balance of power between a buyer and seller even.  Prior to the signing of an LOI, the seller is more in control of the process.  They are negotiating for the best possible price and deal terms and are usually speaking with more than one potential suitor.  With competitive bidding underway, the seller has the ability to negotiate his sale price upward.  Favorable deal terms are part of this negotiating process.  However, once the buyer has been selected and a letter of intent signed, power shifts.

Exclusivity is a normal component of the LOI.  Once a letter of intent has been signed, the seller is no longer allowed to engage in dialog with other potential suitors.  This exclusivity lasts from 30 to as long as 90 days, during which the buyer and his legal team begin the due diligence process.  During this process, the buyer makes certain that representations about the company are true and complete.  During due diligence, the buyer isn’t necessarily looking for more “good stuff”, but generally seeks out that which may have a negative impact on the acquisition, deal terms and purchase price.  The buyer usually has more control during this phase of the M&A process.  You’ll rarely see the purchase price negotiated up during due diligence.

Do all engagements end in marriage? No.  Do all LOI’s end in closed M&A transactions?  No.  LOIs give both the buyer and the seller time to decide “should we make the commitment final?”

Posted by David Hulett.

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Private Equity Deal Flow

By Kim Levin | Oct 12, 2012

Middle Market PulsePrivate Equity is a major source of funding for middle market business acquisitions and recapitalizations. We take notice when PE statistics are released, as they are a good measure of the private capital markets. Private Equity deal data for the first half of 2012 is in and the numbers aren’t pretty for the private equity firms, but the underlying message is good for private company owners.

Despite beginning the year on an optimistic note, PE deal volume is down 17% in the second quarter compared to Q1 2012 and when compared to last year, the number of deal closings are down a disappointing 39%. Private equity buyers aren’t happy about this. Their job, after all, is to buy or recapitalize companies now for a future return a few years out.

Private equity firms have $405 billion in idle cash that they need to invest. That’s more than they have invested over the last six quarters combined. We are seeing this demand for deals by increasing contact from private equity firms contacting CFA offices asking about our new clients. We interpret the current market as a “sellers’ market” where we get multiple bidders on companies that we are selling.

Q2 also saw the continued use of add-on investment strategies by PE firms. Firms are looking to make add-on deals because there is a lack of new investment opportunities. Nearly half of all PE deal flow in the first six months of 2012 has been in the add-on space and we see this trend continuing to play an integral role through year’s end.

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CFA Announces Sale of RT Associates, Inc. to The Segerdahl Group

By Kim Levin | Aug 30, 2012

Segerdahl acquires RT AssociatesCorporate Finance Associates, an international investment banking services firm providing merger and acquisition, business valuation, capital resource and financial advisory services, announced that it advised RT Associates, Inc. in the successful sale to The Segerdahl Group.

RT Associates, Inc., established in 1983, has grown to become one of the most technologically sophisticated marketing services providers in the Midwest. Based in Arlington Heights, Illinois, RT Associates offers a full suite of marketing campaign management tools as well as digital and offset printing (including large format) and fulfillment services. The Company uses six sigma lean manufacturing protocol, state-of-the-art digital technology and also provides a broad range of in-house bindery services (including folding, stitching, and shrink wrapping).

The Segerdahl Group is an employee-owned, leading integrated graphics solutions company headquartered in Wheeling, Illinois. Segerdahl provides tight control and consistency over every phase of the creative, printing, logistics and fulfillment process, leading to exceptionally efficient, accountable and cost-effective results. Segerdahl partners with many of the world’s largest and savviest marketers, providing the highest quality, delivering measurable ROI and helping their clients attain their critical business goals. Segerdahl is ISO 9001 certified.

“Corporate Finance Associates worked hard to find the right fit that would allow me and my employees to continue to excel in the field we love. They truly understood it was not just a deal, but it must be the right deal and made sure I understood the entire opportunity,” commented Bob Radzis, President and CEO of RT Associates.

When asked about the transaction, Bob Contaldo of CFA Chicago responded, “It was a pleasure working with Bob (Radzis) and his team and I was impressed with the deep commitment to both his clients and employees.  It is very gratifying to help clients find solutions where both parties to the deal are so satisfied.”


CFA Advises Barton Manufacturing in Sale to Tag Holdings and Seneca Partners

By Robert Contaldo | Feb 21, 2012

Barton TombstoneWe are pleased to announce that Corporate Finance Associates was the exclusive advisor to Barton Manufacturing, Inc. on its successful sale to TAG Holdings and Seneca Partners.

Barton Manufacturing, Inc. (Barton), based in Decatur, Illinois, is a Tier 1 supplier providing metal fabrication and precision machining of large weldments to Fortune 100 companies. Founded in 1950, the Company specializes in large part machining and welding and is capable of manufacturing parts with a cube size up to 60″ x 60″ x 120″ and weighing up to 3,000 pounds. Product examples include brake system components, track links, axle assemblies, engine supports, wheel hubs, hydraulic covers, and more. Additionally, the Company manufactures high volume small to medium sized precision parts such as industrial valve bodies and other components for a variety of applications. Barton is ISO 9001:2008 certified. Read more »


I Can Sell My Business Myself

By Gerald W. Lindsay | Aug 24, 2011


Business Selling Myths – Part 1

Would you feel comfortable going into open heart surgery with a doctor who had never performed the procedure before?  So, why would you try to sell your business alone, or let your CPA try?  Your business is your precious child.  Hire someone who is seasoned and understands the nuances involved in successfully marketing and selling businesses.  Hire an Investment Banker!  You’re more likely to get fair value for your business, in a reasonable time frame with fewer complications IF a good Agent represents you.

An Investment Banker will:

•    Set Pricing Expectations:  We will work with you so you have a reasonable expectation for the price your company will bring in the market.  We will not set an asking price, as we let the market bring their best offer and create a competitive process.

•    Market the Business:  Marketing your business successfully is a time consuming and expensive process.  We have a team of professionals that work for you to prepare, and keep current, a Confidential Descriptive Report and Blind Profile.  We will handle all of the time consuming details while you keep an eye on the performance of your company.

•    Find and Screen Prospective Buyers:  We have a vast network of Private Equity Groups (PEGs) and Strategic Buyers that we work with on a regular basis.  Additionally, we will form a customized communication plan, based on your needs, to reach out to new prospects.  After prospects are found we quickly determine their financial and competitive qualifications as it relates to the potential transition.  An attractive offer is worth very little if the odds of a successful closing are low.  A good Investment Banker will not waste time or money with “tire kickers” or unqualified prospects.

•     Negotiate the sale:  There are so many other important factors to consider beyond price.  Of course, pricing is important and we will work so that no money is left on the table.  But, we have structured many sales and know how to ask for those “extras” that make the
deal really special.

•    Work through Due Diligence and Reach Closing:  This process can get rather involved.  We will help keep the deal on track and focused on reaching a successful closing.  We have experience that is much needed during this often frustrating phase.

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Posted by Gerald Lindsay.


Corporate Finance Associates Advises Saturday Capital, LLC

By Joe Contaldo | Jul 29, 2011

CFA Advises Saturday Capital, LLC in its Acquisition of first aid training company Code Red LLC.

July 6, 2011 – Chicago, IL – Corporate Finance Associates  is pleased to announce that Saturday Capital, LLC has acquired Code Red LLC. Code Red’s founder, Brian Leonard invested alongside Saturday Capital and will remain CEO of the company.

Code Red/Saturday Capital TombstoneCode Red, a leader in CPR, provides first aid and automated external defibrillator (AED) training to companies nationwide. Code Red was founded in 2005 by Brian Leonard with the mission of protecting the workplace from sudden cardiac arrest and workplace related injuries.  As a national training center for the American Heart Association, Code Red is able to provide clients with CPR, First Aid and AED training classes anywhere in the United States. Code Red also distributes AEDs for some of the largest AED manufacturers – serving clients nationwide.

Rob Umlauf, Vice President in our Chicago office, had a long relationship with Code Red… almost since the company’s inception.  When Mr. Leonard was ready to take the company to the next level, we immediately knew that this was a perfect fit for our client, Saturday Capital,” stated Joe Contaldo, Managing Director of Corporate Finance Associates.

“Corporate Finance Associates introduced us to the ideal situation for Saturday Capital – a great company with management excited for growth,” Patrick Doherty, Managing Member of Saturday Capital stated.

Saturday Capital is a St. Louis-based lower middle market private equity fund organized to acquire manufacturers, value-added distributors, and service companies headquartered in the greater Midwestern regions of the United States with $1 million to $3 million in EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization). Saturday Capital also invests in early stage and growth investments. For more information: www.saturdaycapital.com

Transaction Information:

On June 13, 2011, Saturday Capital, LLC acquired Code Red, LLC in a private transaction.  The details were not disclosed.  Joe Contaldo, Managing Director and Rob Umlauf, Vice President of Corporate Finance Associates  advised Saturday Capital in the transaction.

About Corporate Finance Associates:

Corporate Finance Associates is an investment banking firm, providing lower middle-market companies with a wide range of financial advisory services in support of mergers, acquisitions, divestitures, capital sourcing, and corporate restructuring.  From project inception to completion a senior principal guides clients through every challenge, advocates on their behalf, and leverages CFA’s experience and extensive resources.  Corporate Finance Associates has  20 offices in United States, three in Canada, three in India and 14 partner offices throughout Europe and Latin America.  More information about buying or selling a business is available via the Internet at www.corporatefinanceassociates.com.

For more information contact:

Joe Contaldo, Managing Director
Corporate Finance Associates
+1 (847) 836-7035
jac@cfachicago.com

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Posted by Joe Contaldo.


Buying – A Legitimate Exit Strategy

By Eduardo Berdegué | Jul 14, 2011

Although it may sound contradictory, expanding through acquisitions may prove a sound phased exit strategy for some.

There are companies whose size makes them too large for individual, life-style investors and too small for financial or strategic investors. In those cases, growing through acquisition as a means to achieve critical mass may be a good first step toward positioning the company for a future sale. Read more »


M&A Activity Holding Steady

By John Hammett | Jun 21, 2011

Above average financial performers are still accounting for the bulk of completed business sales during the first quarter of 2011.  Valuations and multiples have held steady for three consecutive quarters and the market seems poised to continue its slow yet steady improvement. 

 M&A Market Analytics

For an explanation about the historic trends in middle-market business activity, read this month’s Middle Market Pulse.

Posted by John Hammett.