InSight

Exit and Growth Strategies for Middle Market Businesses

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News From the Industrial Industry

By John Hammett | Nov 05, 2015

Industrials FactoryDespite a decline in industrial production of late, US manufacturing production is forecast to increase 2.1% in 2015 compared to 2014, according to the MAPI (Manufacturers Alliance for Productivity and Innovation) Foundation. Manufacturing production is expected to further accelerate in 2016, with a rise of 3.4% amid employment and income growth, which should spur consumer spending. Credit availability and low interest rates should help stimulate demand for expensive purchases like automobiles and housing. Non high-tech manufactured goods production – which account for 95% of the manufacturing sector – is forecast to rise 2.3% in 2015 and 3.3% in 2016. Production of high-tech goods is expected to increase 1.5% in 2012 and 6.1% in 2016. While overall manufacturing production is forecast to be strong, demand for oil- and gas-related products, such as oil and gas field machinery, is expected to remain weak.

Industry Indicators

  • Total US manufacturers’ shipments, which indicate industrial industry activity, fell 3.8 percent year-to-date in July 2015 compared to the same period in 2014.
  • According to data from the Interindustry Economic Research Fund, Inc. (IERF), an economic research group, revenue for the US manufacturing sector is forecast to grow at an annual compounded rate of 5% between 2015 and 2019, based on changes in physical volume and unit prices.
  • US durable goods manufacturers’ shipments of machinery, an indicator of demand for industrial machinery, fell 0.9 percent year-to-date in July 2015 compared to the same period in 2014.
  • US steel mill product prices, an indicator of commodity steel costs for industrial machinery manufacturers, fell 14.1 percent in August 2015 compared to the same month in 2014.

Read the Entire Industrials M&A 4th Quarter Newsletter Here


Plastics & Rubber M&A News

By Jim Zipursky | May 22, 2015

Plastics & RubberAs the economy strengthens and manufacturing and production pick up demand for plastics & rubber products is expected to grow. According to data from the Interindustry Economic Research Fund (IERF), revenue for U.S. plastics & rubber products manufacturing is forecast to grow at an annual compounded rate of 5 percent between 2015 and 2019.

US demand for clean, recycled polyethylene terephthalate (PET) plastic is surpassing supply, according to the National Association for PET Container Resources. While recycling rates for PET plastic continue to climb, the rate of usable PET per bale of recycled plastic is in decline. Single-stream recycling efforts lead to a higher rate of contamination per bale, and PET packaging designs such as shrink or barrier labels can make packaging more difficult to recycle. The trend of lightweight packaging has also resulted in the need to sort and process a higher volume of material to produce a pound of usable recycled PET flake. Supplies of recycled PET have also tightened amid rising demand from US consumers, as well as from exports markets. As a result, plastic container manufacturers that use recycled PET as a feedstock may alter packaging design to make products easier to sort and recycle. PET container companies that also operate plastics recycling processing plants may invest in more sophisticated sorting machinery to increase recycled PET recovery rates.

Posted by Jim Zipursky.

Read the Entire Plastics & Rubber 2nd Quarter Newsletter Here


News From the Industrials Industry

By John Hammett | Apr 10, 2015

industrialsAnticipated growth in US industrials manufacturing could bode well for industrial equipment wholesalers in 2015. The Manufacturers Alliance for Productivity and Innovation Quarterly Economic Forecast calls for industrials manufacturing production to grow 4 percent in 2015. The economic environment is looking promising, with low inflation and stronger employment growth. High-tech manufacturing production is expected to grow 7.2 percent in 2015; non-high-tech manufacturing production is set to advance 3.8 in 2015. Good news for the industrial equipment distributors: industrial equipment expenditures are slated to grow 10.9 percent in 2015.

US manufacturing activity, a key demand indicator for industrials supply wholesalers, rose for the 17th consecutive month in October 2014, according to the Institute for Supply Management (ISM). Of the 18 manufacturing industries reporting to the ISM, 16 reported growth in October. Industries experiencing the strongest growth included makers of plastic and rubber products, textile mills, fabricated metal products, primary metals, electrical equipment, appliances and components, and nonmetallic mineral products. Overall, manufacturers reported faster growth in production, new orders, and employment.

Posted by John Hammett.

Read the Entire Industrials M&A 1st Quarter Newsletter Here


Food and Beverage Industry News

By Terry Fick | Apr 03, 2015

Food and drinkActivity in the M&A food and beverage sector over the past two years has been heavily driven by consolidation as large corporations gobble smaller brands in trendy sectors such as organic foods and energy drinks. However, there were also a fair amount of mega transactions over the same period as global brands looked to gain market share.  Tysons’ acquisition of Hillshire Farm is an example of a transaction where two meat-processing market leaders joined forces to make a strong case for domination in their space. According to First Research, an industry research organization, commodity pricing has a strong effect on industry dynamics. The price of critical commodities such as corn, soybeans, wheat, dairy, coffee beans, beef, poultry, vegetables and sugars and oils can increase significantly due to poor farm yields, unpredictable weather patterns and market reactions to government farm subsidies. One sector that may soon feel the impact of government policy is dairy. Dairy product manufacturers could see increased volatility in the market price of milk after the European Union phases out milk production quotas in April 2015. Established in 1984, the quota system caps the amount of milk that EU member states may produce annually – if a country exceeds the limit, as eight nations did in 2014, it must pay a tax penalty to the EU. Dairy product manufacturers can expect some volatility in global raw milk prices soon after the quotas are lifted, and they may be able to benefit from initial price declines as the food and beverage market responds to the additional supply.

Posted by Terry Fick.

Read the Entire Food & Beverage 1st Quarter Newsletter Here


Should You Consider a Recap? Part 5

By Robert St. Germain | Apr 03, 2012

Money BlocksIn the last four blog posts I have discussed the different types of middle market business buyers in the market today, how they differ and what they look for when they invest.  Now that we know about the buyers…is there anything the seller can do to make sure the transaction runs smoothly?     

If all the prerequisites have been properly put in place, the seller has at least one more tool to extract the highest price and best terms from the PEG marketplace. That is a well constructed, competitive sale process consistent with the protocols and expectations of the PEGs. As with selling to any third party, competition among potential buyers can help maximize the outcome for the seller. Read more »


How Do I Know It’s Time To Sell My Company? Part 4

By Robert Contaldo | Jan 05, 2012

Part 4

Business ChartSelling your business, which is perhaps your largest asset, can be a difficult decision. It has been part of you and part of your family. It has been good to you like an old friend. You have loved it – you have cursed it – you have nurtured it, you have seen it from birth through the teen years and into maturity. Unlike us, it can live for generations – though the time will come when it must change hands.

When the cycle of business and our personal circumstances begin to herald the transition, it should be addressed in order to realize the financial security for which it was created.

In this series of blog posts I’ve been discussing the 10 signs that it might be time to sell your business.   The first sign is when the enthusiasm for the business has diminished.  A changing marketplace can also be a sign it’s time to exit, as can a risk/reward imbalance.

Sign #4 – A Change Would Be Good For the Family

Many have experienced the challenges of a family run business. As the succeeding generation grows into personal and business maturity, it may be time for a generational transfer of ownership. A recapitalization with a Private Equity Group as a financial partner can allow the founding shareholders to take the lion’s share of the business value in cash at closing, while the succeeding generation reinvests (through a small amount of the proceeds) for a meaningful share of the company going forward. The company would also have access to growth capital. How great would it be to again have a family relationship that is not encroached upon by business? Is the business stealing time from your kids? Are you trading memories for dollars? Many business owners have delayed a sale in spite of the concerns of a loving spouse who desires a different and better life for themselves.

 

Middle Market Pulse

 

Posted by Bob Contaldo.


Remembering Steve Jobs

By Peter Moore | Oct 06, 2011

No written history of the United States and the world will be complete without reference to and reverence for Steve Jobs. His visionary creation and leadership of Apple, Inc., his technology innovations and their revolutionary impact on our world, will be felt forever because of Steve Jobs.

His unique ability was to share his vision for creating great products that provided truly satisfying experiences for their users. He never stopped innovating, but rather continued to challenge himself and his colleagues at Apple Inc. to design, develop and deliver a continuous stream of blockbuster products. He set the standards for personal computing, movie animation, telephony, music enjoyment, and elegant design.

What an enormous contribution to mankind. And what a lesson about living your passion for everyone.

For me his greatest contribution was the originality of his ideas, his daring to articulate his own vision and his refusal to let others set his agenda.

Steve Jobs will inspire billions forever. What a legacy!

 

Posted by Peter Moore.

 


What are the Five Deal Killers to Selling Your Business?

By John Hammett | May 24, 2011

DOES YOUR COMPANY HAVE ONE OR MORE OF THESE POTENTIALLY FATAL ISSUES TO SELLING A COMPANY?

As we enter the second half of 2011, many companies’ sales and earnings are recovering.  For the first time since 2008, owners are seriously thinking of selling.

This is a good time, too, for private company owners to be selling.  Public companies (strategic buyers) have over $1,800 billion of cash sitting on their balance sheets and private equity funds (financial buyers) have over $500 billion in cash they need to invest.  In addition, banks have some $900 billion in excess cash to help both types of buyers to finance those acquisitions.

Owners who are preparing to sell need to be careful of what we call the five Deal Killers.  These are company attributes that can stop buyers cold when they look at a deal.  Deal Killers are not always fatal if company owners recognize them and take action ahead of time to reduce their effect. Read more »


CFA Opens New Office in DC

By Peter Heydenrych | Apr 20, 2009

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Press Release on PR Leap