The financial health of the aerospace and defense (A&D) industry has rebounded significantly from the negative economic COVID-19 impacts of 2020, poising the sector for a strong M&A market in 2022. The earnings of commercial aerospace firms have recovered, and original equipment manufacturers (OEMs) have announced a series of production rate increases for the years 2023 to 2025, raising the likelihood of supply chain acquisition activity in 2022. Additionally, the defense budgets of both the United States and Europe have remained stable, leading to high demand for defense products and services despite some production offsets due to supply chain challenges. 

Now that you have found the perfect business for you to acquire, the question is, how do you finance the transaction? Most buyers will use a mix of debt and equity, but if you are a first-time acquirer, you may need help on where to go for the debt piece of the equation.

If you have never acquired another business before, the process of securing a loan for the acquisition might be challenging. Here are some things to consider when looking at your debt options.

Upon your initial conversation with a banker, be prepared to discuss your intent regarding the acquisition and your plans for the business’s future. You should also be ready to discuss your background and its relation to the company you are buying. In addition, you will want to understand the bank’s commercial loan options and which might be best for your goals. For example, you might need a traditional commercial loan or an SBA loan, depending on the acquisition size and details. While there are alternative financing options available, they could be much more costly.

Most financial institutions will underwrite the business and the borrower. If you own a similar business, they might underwrite both businesses as if they are one. Be prepared with documentation regarding your credit history, tax returns for all related entities (potentially including your personal tax returns), collateral options, and industry experience. The financial institution might request a balance sheet, profit and loss statement, projections, etc., for the business you are considering purchasing.

Lenders will provide you with their initial terms. Be sure to compare interest rates, fees, and other terms closely. Some terms you may want to consider are prepayment penalties and covenants that might affect the business. If there is real estate involved in the purchase, you will want to ask questions about the bank’s need for appraisals and various phases for the property.

After considering your options, you will then need to apply for the loan. Each financial institution will have its specific application and underwriting process. Depending on the loan size and the bank, the loan request may need to go to a special loan committee that meets periodically. This could add time to the approval process. You might want to discuss debt options with a bank with which you have a current relationship, as they will know you best given your existing history. If you have already received a loan from the bank, it could make the transaction process easier, which will make for a much better experience for you and the seller of the business you are looking to acquire.

  Author
  Kendall Stafford
  Managing Partner
  Benchmark International

  T: +1 (512) 347 2000
  E: Stafford@benchmarkintl.com 

When a company is sold, it can have major effects on employees, customers, clients, and suppliers. Uncertainty stokes fear in most people, as they wonder about their security and their futures. Even top management can feel as though they failed at their jobs when the company is being bought out. For these reasons, it is important that the messaging and transition planning is handled very carefully and thoughtfully leading up to an acquisition—especially considering that the majority of acquisitions fall through. Announcing the news too early can cause widespread unrest over a deal that never happens

Communication is everything in this situation, but it needs to be planned. Before announcing a single word about the sale of the company, you should have a solid plan in place. A consistent message is critical and the distribution of the information should be carefully coordinated both internally and externally to avoid misinformation and confusion. Your plan should clearly outline intentions, steps, timelines and how the process will affect all parties. Predetermine what will be conveyed by whom and when. Figure out how to address questions that you are unable to answer and consider all potential scenarios for all parties involved. And always remember how critical confidentiality is during this time. You do not want details leaking to the press before you are ready to go public.  

Though every business will go through changes as it evolves, being acquired by a business is perhaps the one that can be the most stressful for its employees. There can be much uncertainty for a company that is acquired. If not handled properly, the buyer can lose some of their people (along with their customer relationships, institutional knowledge, etc.) that made the company successful. Managing the change positively during this tumultuous time can reduce a mass exodus after a sale is completed.

Key employees may be worried about whether their jobs will be intact after an acquisition. Perhaps they feel their role won't be needed, or the buyer will want to use their people to perform their functions. At the same time, the buyer may be worried that these key employees will leave. Leaders and other influencers within organizations set the tone for a company's culture, innovation, and strategic initiatives. Losing them reduces the value of the company they are acquiring.

One key to reducing uncertainty for the acquired company’s employees is first to create readiness for change. People will resist change unless they are ready for it. On the other hand, when they are open to change, employees are more likely to accept everything that comes with it. These employees will be an essential part of the transitional period after the acquisition. Getting their buy-in will pave the way for creating a stronger company in the future.

In their book Developing Management Skills, Whetten and Cameron suggest four ways to create readiness when leading positive change:

Benchmark best practice and compare current performance to the highest performance

Within the context of an acquisition, it's possible (likely even) that each of the involved organizations can perform certain functions better than the other. This may be one of the catalysts behind the acquisition. In that respect, synergies can be experienced when buyers and sellers learn each other’s best practices and implement improvements. Improvements can mean doing things better, faster and/or cheaper.

Institute symbolic events to signal the positive change

Symbolism can have a significant impact. The authors indicate that to be "successful in leading positive change, you must signal the end of the old way of doing things and the beginning of a new way of doing things." This can be accomplished in a variety of ways and can be elaborate or more reserved.

Create a new language that illustrates the positive change

Changing the way people talk about the change that is occurring is vital. If negativity abounds, positivity must replace that language. Taking the time to reframe things with a positive outlook can impact how employees view change.

Overcome resistance

People are typically against change because of the unknown. Finding common ground and having people participate in the change helps. Converting resistors is especially important because they have a way of influencing the rest of the team. Proactively identify the employees most likely to undermine the change and help them get on board first. They will, in turn, help persuade other employees.

Helping people understand the importance/urgency of the change that is happening through the acquisition will increase the likelihood they will stay and help ensure a smoother transition of ownership. The key is conveying that the company's employees are an essential part of the company's success going forward and preparing them for the change they will experience.

 Benchmark International Buyer Profiles

Want to be the first to know when new opportunities come to market that fit your acquisition criteria? Create a buyer profile today. While you're there, be sure to check out all the resources we've created specifically for buyers, including opportunities, on-demand webinars, buyer events, and our latest edition of The Mark magazine.

The art of starting a small business is a craft to which not every business person is well suited. It involves countless late nights, blood, sweat and tears, to turn an idea into a thriving small business. But, you’ve done that.  You’ve successfully turned a one-bedroom or small machine shop, and spark of inspiration, into a community staple with a name that will outlast your time in business.  But, you’ve also reached a point where your talents have been exhausted. And, you’re not sure what the next step is in taking your business to the next level.  Once again you have an idea, but this time you need outside help to turn that vision into a reality.

Many businesses reach this point at which they feel that they are unable to further increase the scope of their operations.  They find themselves turning away business or not able to expand into new and lucrative markets.  Perhaps, what is holding you back, it is a lack of cash on hand, or a deficit in managerial expertise.   Whatever the reason, bringing on additional investors is a key, and proven strategy through which a business is capable of gaining an infusion of needed capital and knowledgeable partners capable of taking a company to the next level.

Your passion is your business, and your clients have come to cherish your services.  Bringing in new partners with an influx of capital is an excellent way for you to continue doing what you love while growing your company’s client base and expanding the services you offer.  New partners may sound like dirty words you never thought you’d speak.  You might think of new partners as greedy investors who will come in and milk your business dry without care for the name brand and quality you are known for. 

That’s not always the case, and that’s where we at Benchmark International come in.  You can rest assured that Benchmark International will help you find new partners that care about your business as much as you do. Partners who can bring the capital and experience you need in order to keep your business growing and thriving. These new partners could bring in experience in managing larger organizations, or experience in advertising a small business to a new market, they might even have connections to customers who could grow your client base.

In engaging Benchmark International, you can expect our deal preparation and transaction teams to present your business to the market and find the perfect fit to take your business to the next level.  First, our deal preparation team will delicately craft marketing materials which accurately reflect the successes of your business and its potential for growth. After your approval of the marketing materials, the deal transaction team will take over and bring your company to the market.  Whether a trade buyer or a fellow competitor, the team will work tirelessly to find the right partner to help you grow your business.  This will ensure, that you take your business to the next level, without losing the heart of the business you painstakingly grew from an idea into a name synonymous with quality.

The process of staying onboard after a sale of your business or an injection of new capital is typically referred to as an elevator deal.  For more information on how elevator deals function, please see.

Author:
Patrick Seaworth
Senior Associate
Benchmark International

T:   +1 (512) 861 3314
E: Seaworth@benchmarkcorporate.com

Benchmark International has successfully facilitated the acquisition of American Precision Fabricators to Alpine 4 Technologes, Ltd.

American Precision Fabricators Inc. is located out of Fort Smith, Arkansas, and it is a steel-sheet manufacturing business. It provides assemblies and sub-assmeblies to original equipment manufacturers (OEM). The company supplies several industries with fabricated parts that it creates in-house. It offers several production capabilities with its state-of-the-art machinery. For over two decades, the company has been an industry leader for customers in the OEM markets.

Alpine 4 Technologies, Ltd. (ALPP) is a publicly traded enterprise with business-related endeavors in software, automotive technologies, electronics manufacturing, energy services and fabrication technologies, and industries that support those market segments. This acquisition was important for Alpine 4 Technologies to complete its industry platform strategy.

President of American Precision Fabricators, Andy Galbach, said “Pulling Alpine and APF together would not have happened without Benchmark International’s reach and knowledge of the market. As a first time seller, the team at Benchmark International guided me all the way, from preparing to go to market to the actual closing table. The team was always responsive and always willing to help when needed. I would recommend any seller to engage Benchmark International for the sale of their business.”

Benchmark International Senior Associate, Luis Vinals, shared his thoughts on this transaction: "The Austin, Texas team truly enjoyed working with Andy in preparing the business to market and managing buyer relationships," he said. " We were always conscious that time was of the essence in this deal, and we focused our efforts in finding the right buyer within our client’s time expectations.”

Benchmark International is pleased to announce the successful merger between the off-site monitoring division of Corporate Security (Cor-Secure (Pty) Ltd) and Off-site Monitoring (Pty) Ltd (OSM)

Established in 1984, Corporate Security has extensive technical knowledge and experience within the South African security industry. The company offers a range of security services, focusing on the design and installation of off-site monitoring (OSM) and other technically orientated security products.

Utilising select imported and local security products; Corporate Security offers a substantially more cost-effective security monitoring option boasting proven efficacy. The company’s 14-year investment in the Control Room has culminated in a state-of-the-art off-site OSM CCTV control station as well as an analytics system.

Off-Site Monitoring (Pty) Ltd offers its customers a premium 24-hour surveillance service for essential day-to-day systems and security.

The night-time economy is a recognised driver of growth across Europe and the U.S. and global cities like New York and London play host to some of the world’s most popular DJs and artists after-hours, throughout the year. Further afield, the Spanish Island of Ibiza is one of the most popular seasonal destinations and over the decades has seen rapid expansion of the business arms of some of its most recognisable brands. It therefore comes as no surprise that the well-established Pacha is set to be sold for in excess of €350m to private equity outfit Trilantic Europe, with the Group’s owner, Ricardo Urgell, confirming earlier this week that a deal has almost been reached.

M&A in the Biotech sector rose by 25 per cent in the third quarter of 2016 compared to the two previous quarters, but is still down in activity seen in 2015. This activity was driven by small and medium deals but also the biggest deal of the year so far; German drug manufacturer Bayer’s takeover of the US agricultural seed producer, Monsanto, for $66 billion.

The team at Benchmark International is often approached by business owners with questions about M&A and what the typical process looks like. As with most things in the business world, one merger or acquisition is rarely the same as the last, but there are some key areas that you need to be aware of if you are thinking of buying or selling a business.

Whether it is a food manufacturer acquiring a start-up that specialises in organic goods or a media company making an investment in app development, there is little doubt that a number of M&A deals are being driven by businesses wanting to make that shift to attracting a younger market.

Despite uncertainty surrounding Britain’s decision to leave the European Union in June, the British Fintech sector continues to grow and a flurry of M&A activity made last month one of the sector’s busiest months yet.

Following a summer of uncertainty post Brexit, investors all over the world are returning from summers spent on the beach, ready to do some serious M&A business to close out the year.

The reported record levels of profit generated in the global recruitment sector in the last few years has worked as a catalyst for high levels of M&A activity. The great news for recruitment is that this appetite looks set to continue as we approach the final quarter of 2016.

Media M&A has picked up significantly over the last few years in line with the structural changes to the industry. With the increasing development of technology that is now readily available to consumers has come a growing appetite to digest media through a number of channels.

In the first week of September, German companies announced M&A deals amounting to $72bn – a significant contribution to the country’s global share in M&A, which has now doubled.

Chinese Olympians managed to scoop a total of 26 gold medals at the Rio Olympic Games. Although the country’s medal haul was not enough to match its astonishing tally in Beijing in 2008, China finished a commendable third place behind the US and the UK in the medal table.

Benchmark International is pleased to announce that a deal has been agreed for the sale of LTC Services Limited to Russell Taylor Group.

Business culture is one of the most influential factors when it comes to mergers and acquisitions. Unfortunately, it is also often one of the most overlooked.

The steep drop in the price of crude oil created significant instability and uncertainty across the sector, and traditionally-run organisations have had to make strategic adjustments and difficult decisions amid the crisis. Despite the recent challenges facing the Oil & Gas sector, the energy industry as a whole remains the most active sector within M&A, with dealmakers predicting that activity is set to rapidly accelerate over the next 12 months.

Some businesses engage in M&A activity to increase their capabilities in R&D or to leverage manufacturing operations. Others wish to increase their market share or gain a competitive advantage. Some need to diversify their products and services while others seek to cut costs. In some cases, it’s a change of leadership which leads down the M&A route, while other companies need investment simply to survive. However, one often-overlooked reason for becoming involved in mergers and acquisitions is to enable companies (or a company) to achieve growth in the future.

Rumours will typically run wild when M&A is on the horizon, which can create an atmosphere of fear and unsettling instability within an organisation. We take a look at the challenges facing businesses when trying to keep a potential deal under wraps, why timing is everything when it comes to a deal announcement and the tactics businesses can use when controlling their M&A story.

Benchmark International is pleased to announce that a deal has been agreed for the sale of Spectra Care Group to Octopus Investments Limited.

The technology sector has long dominated M&A media coverage, with some of the most recognisable brands sparking the public’s interest with mega-deals grabbing headlines. Increasingly, these deals are focusing on one of the next big battlegrounds for technology companies: the cloud.

A month is a long time in business and nothing has demonstrated this as much as games giant, Nintendo. Just a few weeks ago we discussed the £11.1bn that gaming phenomenon Pokémon Go had added to the value of Nintendo, with shares soaring by more than 86 per cent. Now, we are looking at quite a different story.

Benchmark International are pleased to announce that we have been named as the ‘International Corporate Finance Advisor of the Year’ by the 2016 Worldwide Financial Advisor Awards Magazine.

With Finding Dory set to be the blockbuster family movie of the summer, we are reminded of one of the most successful M&A stories from the last twenty years. Not only did Disney’s acquisition of Pixar Studios see the corporation’s luck start to turn, it also continues to provide a shining example of a successful post-acquisition strategy.

The UK and the EU might be in the throes of an acrimonious break-up that has sparked uncertainty in the business world and caused market instability, but there is apparently one sector that seems immune to the problems.

If you have children or know any young adults, you may have noticed them being even more engaged in their smartphones than usual. The reason is Pokémon Go – the gaming phenomenon that’s sweeping the world. Its popularity has added £11.1bn to Nintendo’s value within just one week and its share prices are at a six year high. We take a look at why Apps are making companies so profitable and attractive for investment.

Love it or hate it, sport is everywhere, not only featuring on the back pages of our newspapers, but also dominating the front pages too. The business of sport generates massive revenue – it is estimated the global sports industry is worth almost $600bn, so it is no wonder it has sparked interest from investors over recent years.

As the Brexit fallout clears from UK politics a new reality has set in. The new Prime Minister, Theresa May, has made it clear that the UK is still open for business. As if to emphasise that fact, only days after her official appointment, one of the UK’s largest and swiftest deals has been announced, demonstrating how the UK has maintained its attractiveness for investment from overseas companies.

Benchmark International is pleased to have advised on an agreed deal for the sale of Jet Environmental Systems to Wozair Limited.

Benchmark International is pleased to have advised on an agreed deal for the sale of Web Age Limited to Cloudstream Technology Limited.

Benchmark International is pleased to have advised on an agreed deal for the sale of Oakwood Technology Group Limited to Thermotech Solutions Limited.

Amid worldwide market uncertainty and unprecedented political upheaval, it’s reassuring to know that there is some good news in the world of mergers and acquisitions. We take a look at how FMCG M&A over the last year has brought strength to the market.

There are few things the M&A market likes less than political uncertainty and, following the results of the EU referendum and Brexit shaking up global markets, there is more to come in the form of the upcoming presidential elections in the US.

Think healthcare M&A is on its way out in 2016? Think again.

The corporate industry world has borne witness to some of the mega deals being signed throughout the year. Pharmaceutical giant Pfizer announced as $160 billion merger with Allergan. A deal that was, according to Bloomberg, “the largest ever deal in the history of healthcare industry and second biggest deal overall on record”.

In today’s environment of global competition, growth from within your company can only take you so far. One strategy is to expand through mergers and acquisitions, to enter a market or acquire innovation capability. It is risky as making a deal a success is one of the hardest tasks in business. So, how can you reduce the risks and increase the chances of carrying out a successful merger or acquisition?