Exit and Growth Strategies for Middle Market Businesses

Archive for the ‘Acquisitions’ Category

Is an Acquisition Strategy Viable For a Small Company?

By Terry Fick | Aug 06, 2013

gearsMost small companies never think about acquisition as a viable strategy and many that do dismiss it as unfeasible. However, in some instances, a lower middle market privately held firm can reap huge benefits from acquiring one or more smaller companies or a company of equal size. That strategy is easier today than ever due to the availability, flexibility and cost of debt. Let’s take a look at one such success story implemented by a CFA client.

A B-to-B service company earning $5 Million of EBITDA on $20 Million of revenue saw acquisition as a strategy to address three issues that raised their risk profile and lowered their market value.

  1. They had a significant customer concentration issue.
  2. Their fortunes were tied to a less than stable industry.
  3. The company had likely reached capacity within their geographic market.

On paper, the solution was simple.  Find a company or two in their industry that (a) sold nothing to the currently large customer, (b) that sold its services into a different industry, and (c) was in a different geographic  market.  Assuming that it may well take more than one acquisition to solve all of these issues, only two small hurdles remained.  First, was such a company (or companies) available for sale? Next was how to finance the acquisition(s). Let’s take a generic look at the process that was applied and can be applied to any such company. Read more »

Corporate Finance Associates Highly Ranked in 2012 on Thomson Reuters League Tables

By Kim Levin | Jul 26, 2013

Corporate Finance Associates (CFA) finished 2012 ranked in the top ten on the Thomson Reuters U.S. Small Cap League Tables for transactions up to $50 million.

CFA also left their mark on several other Thomson Reuters league tables including the Small Cap Worldwide chart for transactions up to $50 million (#41), the U.S. Mid-Market chart for transactions up to $500 million (#25), and India involved transactions for both Small Cap (#24) and Mid-Market (#31).

“This has been a fruitful year for Corporate Finance Associates.  During a time when some M&A firms experienced a lackluster business environment, we added new offices and additional investment bankers, made an impact on the M&A charts and celebrated a win at the M&A Atlas Awards,” said Peter Heydenrych, Chairman and CEO of CFA.  Peter adds, “We are looking forward to the coming years as the baby boom generation looks toward retirement and business exit planning shifts into high gear.”

Thomson Reuters League Table

Mergers & Acquisitions Outlook for 2013

By Kim Levin | Mar 05, 2013

February Issue Middle Market Pulse 

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As we put 2012 behind us, we look to see what greets us on the M&A horizon for 2013.  Conditions are paradoxically both ripe for improvement and uncertain enough to hint at challenges in the coming year.

On a global scale, deal flow contracted for the second consecutive year in 2012.  Investors were skittish due to economic and political uncertainties.  Although some of the issues concerning politics and taxation were somewhat put to bed as we entered the new year, as we step into month two we note a quiet time.  Is this the calm before the storm, and by storm we mean a flurry of activity? Read more »

CFA Advised Reedy Industries, Inc. on Successful Acquisition of Monroe Mechanical, Inc.

By Kim Levin | Dec 13, 2012

Reedy Industries acquired Monroe MechanicalCorporate 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 advisor to Reedy Industries, Inc. in its acquisition of Monroe Mechanical, Inc.

Established in 1968, Reedy Industries is a third-generation family-owned collection of companies providing commercial and industrial mechanical services, food equipment repair, and food equipment parts distribution. For nearly a century the Reedy name has been the standard bearer for exceptional service and support. Based in Glenview, Illinois, Reedy Industries is passionately committed to expanding its family of companies and their suite of services via organic growth and strategic acquisitions. The acquisition of Monroe Mechanical marks the 15th successful transaction in the company’s history.

Monroe Mechanical (MMI), founded in 1954, is a third-generation family-owned mechanical services firm providing HVAC, refrigeration, and other energy-saving mechanical services to commercial and industrial customers throughout Ohio and Northern Kentucky. MMI boasts a diverse customer base that includes Fortune 100 clientele. MMI’s superior customer service and integrity has earned them an impeccable reputation with customers and community members alike.

“Culture integration is critical in every transaction, but even more so when you are dealing with two third-generation family businesses,” commented Anthony Contaldo, Director at Corporate Finance Associates’ Chicago office. “It was exciting to see how well the two cultures meshed—a perfect fit. We are honored and pleased to have played a role in the storied histories of both companies.”

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 »