Welcome to this issue of Capital Ideas, our
newsletter dedicated to business selling, business buying and
financial resources for mid-market companies.
Pointers on Successful Acquisitions
By Doug Nix, Managing Director
Oakville, Ontario, Canada Office, Corporate Finance Associates
Over the past 3 years we have seen a marked change in the level of mid-market acquisition activity in North America. Looking backwards, the reasons are fairly obvious.
Starting in mid 2008 and carrying through 2009, as the US economy softened, most businesses started to see a significant and accelerating decline in customer volumes – from customers going bankrupt to reduced order sizes and reduced order frequency. Year over year, it was not uncommon to see revenue declines of 50% or more. During this time, uncertainty was running wild; most presidents we talked to had no idea whether their operations had bottomed out or if there was still more bad news coming.
With falling revenues came tighter credit and less cash availability. Amid this uncertainty, almost all management teams opted for prudence and conservatism. Survival of their business became the watchword in almost every discussion we had with business owners.
As it always happens, things change. In early 2010, the North American economy stabilized and a new... Read more »
Do Your Diligence Before You Go To Market
By Jim Zipursky, Managing Director
Omaha Office, Corporate Finance Associates
What exactly is Due Diligence as it pertains to deals? We hear the term all the time and have heard various definitions, including:
- Due Diligence is the opportunity for Buyers to beat up Sellers on price, or;
- Due Diligence is the opportunity for lawyers and CPAs to kill deals, or;
- Due Diligence is the time for Sellers to come clean with the truth about their companies
While each of the aforementioned definitions are all humorous, none are technically correct nor accurate. According to Websters, Due Diligence is (1) the care a reasonable person exercises to avoid harm to other persons or their property, or (2) research and analysis of a company or organization done in preparation for a business transaction.
In our world of Mergers & Acquisitions, both definitions apply. Most often, Due Diligence is the detailed process we go through once buyers and sellers have agreed upon transaction terms. But, Due Diligence is also the process where sellers... Read more »
Situation: Amershire Investment Corporation sought to divest a portfolio of over-the-counter healthcare product brands. They engaged CFA to find a buyer. The subject brands had performed well during the first few years since inception. Some of the products were impacted by the downturn in the sector and retailers' decision to shrink inventories.
Solution: Peter Heydenrych, of CFA’s Los Angeles office, led the CFA team which talked to prospective acquirers in the US, Europe, China and India. CFA's office in Pune, India, under the direction of Girish Narasimhan, approached Surya Pharmaceuticals, a successful and fast growing pharmaceutical company with its corporate office in Chandigarh, India. Surya had launched a strategy to establish a presence in the North American market. By acquiring a number of brands from Amershire, Surya was able to launch their North American strategy with a platform business upon which they plan to build. CFA made the introductions and advised the Seller, and the Seller and the Buyer were both able to achieve their objectives.
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