Exit and Growth Strategies for Middle Market Businesses

Archive for the ‘Private Equity’ Category

PEGs and Company Management

By David Sinyard | Jun 24, 2013

Business Meeting with PaperHow do Private Equity Groups (PEGs) view the role of management as they consider investing? Many view the quality of the management team as a fundamental issue in a proposed transaction. In reality, PEGs show flexibility regarding the quality of the management team. There is a continuum from those who see the existing management team as being very important to others who are far less concerned. Some indicate that the businesses must have good management in place. Other PEGs express less concern with the existing management: they just want a competent management team. What appeared to matter more was that someone be identified who would remain with the firm post transaction. The relationship between the management team and the PEG is also important as they are very much focused on the chemistry between their group and the management team. The issue is whether the ownership culture is willing to embrace change. Management generally will be supplemented and upgraded. The PEGS expect it. The usual function that is most focused on is finance as the incumbent typically will not have the qualifications and skills to handle the role. The PEGs will put in new CFOs to upgrade the position, in particular, in terms of reporting. Additionally, the PEGs anticipate the need to invest in information systems and putting professional processes in place.

Posted by David Sinyard.

Capital Ideas Newsletter

Thomson Reuters Q3 League Tables Ranks CFA in Top 10

By Kim Levin | Mar 10, 2013

Corporate Finance Associates (CFA), an international middle-market investment banking firm providing merger and acquisition, capital resource, and financial advisory services, ranks among the top ten of all US Investment Banks serving the middle market on transactions up to $50 million, according to the recently published Thomson Reuters Small Cap M&A Advisory Report.  CFA also ranks 21st in Thomson Reuters  Mid-Market M&A Advisory Report which focuses on larger M&A deals up to $500 million.  The Report measures transaction volume for the first three quarters of 2012.

“Our position in the industry’s League Tables is a direct result of the dedication and professionalism of our investment bankers who have worked tirelessly completing client transactions,” said Peter Heydenrych, Chairman and CEO of Corporate Finance Associates.

League Table Q3 2012

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.

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 Advises Designed Conveyor Systems, Inc. and Express Installation, Inc.

By Kim Levin | Sep 25, 2012

CFA Advises Designed Conveyor Systems, Inc. and Express Installation, Inc.Corporate Finance Associates (CFA), an international middle-market investment banking services firm providing merger and acquisition, business valuation, capital resources, and financial advisory services, announced it advised in the management recapitalization of Designed Conveyor Systems, Inc. and Express Installation, Inc. by Ambassador Enterprises, LLC.

Employing over 75 full time employees, Designed Conveyor Systems and Express Installation, Inc. specialize in the design, manufacture and installation of world-class conveyor systems and material handling solutions for the parcel and distribution industries. Founded on a culture of collaboration and team work, Designed Conveyor Systems prides itself on its long-standing customer relationships, many of which have been in place for more than a decade.  From project inception to completion, Designed Conveyor Systems has industry-leading engineering, project management, fabrication, installation and ongoing support – all under one roof.

When the management team at Designed Conveyor Systems decided to seek a growth partner, Greg McKinley of CFA Nashville led the search for a company whose culture and dedication mirrored that of Designed Conveyor Systems and found such a partner in Ambassador Enterprises.  With Ambassador’s resources and managerial and corporate development capabilities, Designed Conveyor Systems and Express Installation, Inc. are better positioned for future growth.

“I have thoroughly enjoyed working with Ken Wood and the Designed Conveyor Systems management team.   They have built an exceptional business in which both customers and employees are at the top of their priority list,” said Greg McKinley, Managing Director of Corporate Finance Associates in Nashville and lead advisor in the transaction.


Private Equity vs. Stock Market

By Kim Levin | Aug 23, 2012

August Issue Middle Market Pulse

Middle Market PulseThe goal of savvy investors is to earn the highest rate of return while wisely managing the associated risk.  Balancing risk vs. return has been very difficult lately for traditional investments.  With interest rates on treasuries ranging from .05 to 2% and corporate stocks, bonds and mutual funds seemingly a roll of the dice, the private equity markets have been and continue to be an interesting and viable option for investment capital.  Private equity funds and strategic buyers alike have found that investing in a company poised for growth can provide the kind of return on capital that has been missing from traditional equity and debt markets.

Reuters announced in June 2012 that “U.S. private equity investments outperformed the stock market in 2011 and distributions to investors reached a record as fund managers seized on an opportunity to sell long-held assets.”  In 2012 PE exits remain strong and we could see an acceleration of exit activity as owners look to cash in before tax hikes take effect January 1, 2013.

As exits occur and portfolios reach the end of their life span, new un-invested capital is sitting on the sidelines waiting for the next round of fundraising to begin.  Considering the current rates of return in traditional markets, it is likely that this new capital will be waiting for a new round of private equity fundraising.  In addition, many private equity funds still have capital from existing funds to invest.  This is good news to business owners who are considering a sale, as both PE Funds and strategic buyers will seek out investment opportunities to build their portfolios or grow their businesses.

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M&A Activity in the Energy Sector

By Kim Levin | Jun 14, 2012

Digging DeepDeal makers are excited because advances in drilling technology such as horizontal drilling and hydraulic fracturing or fracking have made it easier to extract natural gas from shale and other rock formations, creating opening for private equity firms to place big bets in a capital hungry business.  Reference is made to the following graph to illustrate the M&A activity in the U.S. shale business.  The experts agree that the time to get in the play was over the past few years; however, recent windfalls indicate the gamble is still worth the effort with energy related investments showing gains of more than 30% in each of the past two years and have beaten industry overseas for 12 of the past 14 years according to Cambridge Associates.

Read  the Full Energy Newsletter

The Energy Practice Group is a multi-disciplinary group of investment banking advisors within Corporate Finance Associates. Collectively, the Energy Practice Group provides M&A advice to independent and integrated energy companies in all sectors of the energy industry, including power generation, oil & gas, utilities, mining and natural resources, renewable energy and businesses that serve the energy industry, in all aspects of oil and gas land-based transactions, mergers, acquisitions, joint ventures and financial resources. For more information contact your local Corporate Finance Associates office.

Facebook – Is it really that hard to play fair?

By David Sinyard | May 24, 2012

Facebook ChartAre there any lessons business owners can learn from the recent Facebook IPO?  If nothing else… it should teach us the importance of due diligence and fair play.

For months, Facebook’s IPO has been the dominant story in news media all around the globe and the more you read or view, the more interesting it gets.  The taking public of a private company is just one way for the initial investors in a growing concern to create a liquidity event.  But when your liquidity strategy involves government regulated entities, such as the public markets, you’d better do it by the book.  No shortcuts, no surprises.  And should anything surface that indicates a change in the economic picture of the company, you better let everybody know about it, and yes, all at the same time.  Unhappy investors are not usually investors for long.

As M&A professionals, we work on behalf of one party in a given transaction, and the goal is when all the dust settles, both parties in the transaction are pleased with the outcome.  Happy seller… happy investor.  That wouldn’t happen if one of the parties was acting on information that was inaccurate or untrue.  We stress a thorough due diligence process and the need to keep all parties informed of material changes in information, financial and otherwise.  No one wants to see surprises at the end of a deal.

The story of the Facebook IPO is certainly not over yet.  We’ll soon see how the inevitable investigation into who knew what when pans out.  Bottom line…would it really have been that hard to just play fair?

Posted by David Sinyard.

CFA Expands US Presence to Pacific Northwest

By Kim Levin | Apr 30, 2012

Michael WeissCorporate Finance Associates, a leading middle-market mergers and acquisition firm, is pleased to welcome Michael Weiss as Managing Director of CFA’s new office in Seattle, Washington.  CFA Seattle provides M&A advisory services to middle market companies in the Pacific Northwest.

Michael is an 18 year veteran of the middle-market M&A industry, representing clients in all areas of mergers,  acquisitions and corporate finance.  As a current owner of two manufacturing companies and a former CPA, Michael is uniquely positioned to understand the complex issues facing today’s business owners.  CFA Seattle offers a full range of investment banking services including business sales, capital raises, partial liquidity events and family transitions. 

“We are pleased to welcome Michael Weiss to our organization.  Michael’s extensive business background and M&A and corporate finance experience will be of great benefit to CFA clients,” said Peter Heydenrych, Chairman and CEO of Corporate Finance Associates.


Selling a Business – The Cost of Capital

By Peter Heydenrych | Jul 12, 2011

Whether you’re selling a business, buying a business or growing a business…securing affordable funding is an absolute must.  But, what’s affordable and available to one company may simply not be an option for others…depending on the circumstances.  Our July Middle-Market Pulse took a very quick look at the types of funding available to companies at different stages of development…and the costs associated with each funding type.

Woman with GraphOne thing to keep in mind when considering funding a purchase or planning for corporate growth…if you borrow it…you’re obligated to pay it back…whereas if you seek out investors, repayment need not be part of the game plan.  Please comment on your recent experiences obtaining funding.


Read the July Middle Market Pulse.

Posted by Peter Heydenrych.