InSight

Exit and Growth Strategies for Middle Market Businesses

M&A Quarterly News In The Industrials Sector

By John Hammett | Nov 08, 2017

The fourth quarter M&A below provides you a good overview on activities in the Industrials Sector. M&A activity for North American based target companies in the Industrials sector for Q3 2017 included 124 closed deals, according to data published by industry data tracker FactSet.

One of the largest deals of the quarter closed in September when HB Fuller Co acquired Royal Adhesives & Sealants LLC, a portfolio company of American Securities LLC, for US$1.6 billion in cash. The consideration was financed through a new senior secured syndicated term loan facility with Morgan Stanley in an aggregate amount of US$2.1 billion, a public offering of new senior notes, and other financing alternatives. Royal Adhesives & Sealants manufactures and markets adhesives, sealants, and polymer coatings. The acquisition is in line with HB Fuller’s strategic objective to grow its engineering adhesives market.

The Industrials sector had a strong quarter on the public markets outperforming the S&P 500.

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M&A Quarterly News In The Business Services Industry Sector

By Brad Purifoy | Nov 07, 2017

The fourth quarter M&A below provides you a good overview on activities in the Business Services Industry Sector. M&A activity for North American based target companies in the Business Services sector for Q3 2017 included 172 closed deals, according to data published by industry data tracker FactSet. The average purchase price was $82 million.

The move by private equity firms into the broader professional services sector presents new competition and a potential long-term threat to consulting services firms, according to a recent blog post by Source Global Research. Private equity firms are investing in areas such as big data and analytics, digital transformation and cybersecurity, all of which are among the primary sources of growth for consulting firms.

One subsector growing considerably is cybersecurity. The U.S. Federal cybersecurity market is estimated to reach $22 Billion by 2022.

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M&A Quarterly News In The Food & Beverage Industry Sector

By Terry Fick | Nov 06, 2017

The fourth quarter M&A below provides you a good overview on activities in the Food and Beverage Industry SectorM&A activity for North American based target companies in the Food and Beverage sector for Q3 2017 included 49 closed deals, according to data published by industry data tracker FactSet.

Consolidation continues in the sector as McCormick & Co, Inc. acquired the business and assets of the food division of Reckitt Benckiser Group Plc for US$4.2 billion in cash. The deal includes a 100% stake in The French’s Food Co LLC, The French’s Food Co, Inc., The RT French’s Food Co Ltd and Tiger’s Milk LLC. The acquisition strengthens McCormick & Co.’s market position. According to reports, Kraft Heinz Co and other American private equity firms were interested in acquiring the business.

With the rise in popularity of organic foods, one sub-sector that continues to grow is the gluten-free sector, which is on a strong upward trajectory.

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M&A Quarterly News In The Energy Industry Sector

By Roy Graham | Nov 03, 2017

The report below presents you with a good overview on the fourth quarter M&A activity in the Energy Industry Sector. M&A activity for North American based target companies in the Energy sector for Q3 2017 included 69 closed deals, according to data published by industry data tracker FactSet. The average purchase price was $192 million. According to data from the U.S. Energy Information Administration, U.S. crude oil production is estimated to have averaged 9.3 million barrels per day (b/d) in September, an.. Read more »


Management Led Buyout

By George Walden | Oct 23, 2017

Today we will continue our discussion on the different types of buyers for your business. If you have a management team capable of making business decisions and running your company, you might want to consider some form of management buyout. This was first popularized in the 1980’s. Since the existing managers are buying the company, they know the corporate culture and processes. They have the inside scoop on the business and in a transaction there should be, in theory, no learning curve.

Management teams rarely have the ability to fund the buyout through traditional bank financing alone without some outside capital infusion or owner financing. Said another way, the company can only support a fixed amount of debt. That difference between the debt limits of the company and the valuation of the company must be made up with an equity capital infusion. Enter the financial buyer, such as private equity groups and hedge funds. The MBO, like was done in the 1980’s, with a management team receiving a controlling interest in the company, has transitioned.

Today’s most common structures, more of a hybrid, with minority equity interests going to the management team in exchange for continuing to run the company or a buy in at a percentage of the capital structure. Private equity groups and hedge funds often support this type of structure in exchange for the financing and capital needed to underwrite the transaction. The financial group gets a strong operational management team with solid industry knowledge. The management team gets ownership, committed capital and usually, thoughtful oversight with a strategy for future growth.

There can be drawbacks to management led buyout. Not every executive can make the transition from employee to owner, from the managerial mindset to the entrepreneurial. Not every team can handle the risk profile. It is one thing to receive a salary. It is another to take on the debt responsibilities and obligations of ownership. Another conceivable problem is the management team could become a competitor in the deal. This potential conflict of interest could work against the seller and lower the value of the company, even sabotage the deal.

There should always be an M&A adviser investment banker in this type of transaction to litigate the pitfalls. As a rule, having a management team capable of running a company makes a business more valuable to most prospective buyers. This best business practice is a goal owners should strive for.


M&A News In The Technology, Media and Telecom Industry Sector

By Dan Vermeire | Oct 23, 2017

The report below provides a good overview of the 3rd Quarter M&A activity in the Technology, Media and Telecom Industry Sector.  M&A activity for North American based target companies in the Technology, Media and Telecom Industry sector for Q2 2017 included 296 closed deals, according to data published by industry data tracker FactSet.  The average purchase price was $167 million.

Social media continues to be a major force in media as users all over the world flock online and away from cable. Below is a graph illustrating the user count for the largest social media networks in the world.

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Generational Family Succession – Mergers & Acquisitions Minute

By George Walden | Oct 17, 2017

Today we’re going to talk about generational family succession. Companies are sometimes passed on to the next generation. They can be the perfect vehicle for continued legacy transition. I grew up in a family business in the plastic extrusion and machining industry. I started working in the business when I was 14 I ran my own shift by the time I was 17. It was how I put myself through college, working four to midnight, and going to school during the day.
I love the business and grow up thinking I would be the owner one day. I went off to finish my master’s degree and when I came back, I found the company had been sold. Not the transition I expected nor wanted. Part of it was because it hadn’t really been discussed, but most of it was because, like most business owners, there was no thought or plan for a transition in place that addressed succession.

According to Forbes only about a third of family business survive the transition to a second generation. Fewer still make it to the third generation. Family business failures can essentially be traced to one factor. According to The Family Business Institute, that is a lack of succession planning.

Here are a couple of points I believe should be considered in evaluating family succession planning. Number one, the transition should be structured in advance and be thought of as a long term process. Just because you were born into a business does not make you the best qualified to run it. Family members should be honestly evaluated just like you would any other employee. Before being considered the recipient of the company, the family members must show a competence worthy of taking over the reins. That not only requires a succession plan but it requires a way to measure family member development and educational needs. This requires time, thoughtful milestones, and key performance indicators.

While it is important to be technically and tactically proficient on how the company operates. Family members also need to demonstrate leadership and managerial skills. If family members aren’t ready to take on all the roles necessary for success, consider outsourcing the gaps and work towards filling the voids through further training, education, or hiring practices.
Number two the company should be purchased by the next generation. The most common mistake I see in this form of transition is not treating the next generation as a true buyer for the company. If you were to ask most next generation family members that question they would unanimously agree the company should be gifted to them. That however does not create wealth for the parents. Family members should be required to buy into the company. They should have skin in the game. There is a place for gifting and the best structure actually has a component of both capital requirements and gifting.

Number three, have a system in place to handle conflicts and additional capital needs. Address in the beginning with a unilateral agreement or pact, how family members are to be treated. Establish for all members the terms and restrictions for a family member to be able to buy in, leverage, or transfer their shares of stock. Rules should be established in the beginning on how conflicts will be resolved.

Finally, establish the compensation and promotion policies of the company for all family members and how distributions will be handled in advance. In closing, transitioning your company to the next generation should be a thoughtful process designed to remove as many risks up front to avoid family conflict. There is nothing wrong with wanting to pass on your legacy to your descendants.


In-between

By Dan Halvorson | Oct 17, 2017
Selling My Business

While a company owner, and before joining CFA, I thought that with regards to an exit strategy it was simply ‘all-or-none’.  That I either retained ownership of my company, and perhaps position it for the next generation, or sell it and walk away.  Unless they’ve taken the time to research this (and surprisingly few have), most owners of lower-middle market companies feel the same way.  This leads to a natural hesitation and, at times, delay in planning their exit until.. Read more »


M&A News In The Energy Industry Sector

By Roy Graham | Oct 13, 2017

The report below gives a good overview of the third quarter M&A activity in the Energy Industry Sector. M&A activity for North American based target companies in the Energy sector for Q2 2017 included 44 closed deals, according to data published by industry data tracker FactSet. The average transaction value was $470 million.
One of the notable deals of the quarter closed in April when NOVA Chemicals Corp, a subsidiary of state-owned Mubadala Investment Co, acquired Williams Olefins LLC, a subsidiary of Williams Partners LP and ultimately owned by The Williams Cos, Inc., for US$2.1 billion in cash. The transaction allows NOVA Chemicals Corp entry to the US Gulf Coast market. NOVA Chemicals Corp. produces plastics and chemicals. Williams Olefins operates as a holding company with interests in the production of natural gas and petroleum products.

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M&A News In The Print and Packaging Industry Sector

By Anthony Contaldo | Oct 12, 2017

The report below gives a good overview of the third quarter M&A activity in the Print and Packaging Industry Sector. M&A activity for North American based target companies in the Printing and Packaging sector for Q2 2017 included 29 closed deals, according to data published by industry data tracker FactSet.
One of the largest deals of the quarter closed in May when Leonard Green & Partners LP, a subsidiary of LGP Management, Inc., acquired Charter NEX Films, Inc. from Pamplona Capital Management LLP for US$1.5 billion, including debt. Based in Milton, Wisconsin, USA, Charter NEX Films manufactures specialty polyethylene film for food and consumer packaging, and for industrial and medical applications.

Growing economies in developing nations combined with an ageing population are driving increased demand for more convenient, easy-to-carry, light, safe and functional packaging, which has led to increased sector sales.

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