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Businesses Are Just Like Classic Cars

Anyone who owns or has owned a classic car will attest that it’s a very special relationship and one not dissimilar to owning a business.

Classic cars and businesses are assets that relatively few have the privilege of owning, they take time to build or acquire, have personality, and generally represent a sizeable investment and very personal commitment for anyone.

At the outset of these relationships, our perceptions of what the experience will be like is dominated by excitement, passion and it is often a journey we have spent many years planning and saving for. The risks have been calculated and monetised yet despite knowing that as physical or metaphorical assets they do break, and cost money, we have an ingrained belief we’ll get through it and that value that will accumulate with time.

It is inevitable, unless one is fortunate enough to be able to pay a premium price for a pristine model, that the early stages of these ownership journeys are characterised by a series of unfortunate discoveries - usually requiring us to roll up our sleeves and invest both time and money to rectify. It’s something we readily do as this beast is now a part of us and with ownership comes responsibility.

Like classic cars, business ownership takes us on a rollercoaster ride of emotions that range from pride and joy to anger and despair. One faces a multitude of risks from accident to theft and even the collapse of a market for it. The sacrifices can be significant, yet from the outside others often perceive us as merely lucky and in viewing the finished product, do not have insight or appreciation for the all-consuming toil, sunk and personal cost that it has taken to get to this point.
 
 
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Driving the old stag was not possible without being approached by somebody wanting to acquire the car and whilst they’d all expressed an interest to buy, it was once the door to such a discussion was opened that they divert the negotiation from their motive and start to approach the transaction from a purely clinical perspective. It is at this point buyers begin quoting market-related metrics seeking to mitigate the risk of what will be their investment. Simply put, such an approach is common in business too as a seller the future value potential and emotional attachment can often outweigh the immediate cash consideration but yet we also fail to see the other side and balance the risk to a buyer. It is for this reason that the intangible benefits of a deal are often larger considerations than the price attributed.

Selling a classic car is a difficult decision. It marks the end of a very personal relationship and what has been an emotional journey - for some, it can be a process as difficult as picking a spouse for one of our kids might be. Price becomes important as it measures the worth we attribute to it, and the reward for the investment or sacrifices made. Equally, however in finding the right person who we can trust to nurture, protect, improve and care for our treasure, we’re achieving a value beyond compensation.

Central to the decision to sell a classic car is always the consideration of “what next”. If the transaction facilitates the acquisition of a more prized possession or the freedom to pursue a long-sought ambition, the decision becomes more palatable. The similarity in selling a business is that it is vital to plan for what comes next. For example, in the case of retirement, it’s key to have something to retire to, as opposed to from.

It is a commonly expressed view that anything is for sale at a price, but committing to the prospect of a sale is a fundamentally different process to being available to be bought. Knowing your asset, the buyer’s next best alternative, and the adventure you’d pursue next are all key to a successful outcome. Whilst experience, financial, analytical, and other corporate finance skills are minimum requirements for an advisor, someone who’s been there, done it, and who intimately understands the internal conflicts only a business owner experiences can certainly add value in navigating this journey.
 

Author
Andre Bresler
Managing Partner
Benchmark International

T: +27 (0) 21 300 2055
E: bresler@benchmarkintl.com

 

 

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What The Heck is M&A?

Mergers and acquisitions (M&A) involve the consolidation of ownership of companies through financial transactions. They serve as vital components of business strategies, allowing companies to innovate, evolve, and sometimes even survive. You may hear the terms "mergers" and "acquisitions" used interchangeably, but they are two fundamentally different types of transactions. Both processes are comprised of several phases, and both can take several months to years to complete. Some of the world’s largest and most successful companies grew to become what they are today through M&A activity.   

The motivations behind M&A deals can be:

  • Creation of synergy for lower cost of capital
  • Improved performance and accelerated growth
  • Achievement of economies of scale
  • Increased market share
  • Diversification of products
  • Expansion of geographic markets
  • Strategic realignment and technological advancement
  • Diversification of risk
  • The opportunity of an undervalued target
  • Tax advantages

Mergers

A merger occurs when two companies join forces to do business as a single new entity, combining ownership and operations. In these situations, the stock of both companies is surrendered and new company stock is issued in its place. Stockholders of both companies must approve the transaction and consolidation of the businesses creates a new entity. Mergers can be structured in various ways:

  • Horizontal Merger - The union of two companies in direct competition that share similar products or services and markets.
  • Vertical Merger - Occurs between either a customer and a company, or a supplier and company, with complementary offerings.
  • Congeneric or Concentric Merger - When two companies that serve the same consumer in different ways join forces as one company.
  • Market-Extension Merger - Joining of two companies that sell the same products but do so in different markets.
  • Product-Extension Merger - Takes place between two companies that sell different but related products in the same market.
  • Conglomerate Merger - The merger of two non-competing companies that have no shared or common business areas.

 

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Acquisitions

An acquisition occurs when one business purchases and takes over another one using cash, stock, or both, and establishes itself as the new owner. Once the buyer absorbs the business, the purchased company ceases to exist and their stock ceases to be traded. A simple acquisition often means that the acquirer obtains the majority stake in the purchased business and does not change its name or alter its legal structure. And sometimes a target company does not wish to be purchased. This is known as a hostile acquisition or takeover. In this situation, the acquiring company approaches the shareholders of the target company, bypassing the board of directors or executives. The target company may be acquired without the consent of upper management as long as the shareholders approve the transaction.

Management Acquisitions 

Also referred to as a management-led buyout (MBO), the executives of an organization partner with a financier to buy a controlling stake in another business, making it private. These types of deals are often financed with debt, and must be approved by shareholders.

Tender Offers

A tender offer is when one business goes straight to the other company's shareholders and offers to purchase the outstanding stock of the business at a specific price. It is common for tender offers to result in mergers.

Acquisition of Assets 

This occurs when one company acquires the assets of another company upon approval from its shareholders. This is common during bankruptcy proceedings, allowing for other businesses to bid on assets of the bankrupt firm, which is then liquidated upon the final transfer of assets.

Reverse Merger

There is also another acquisition type known as a reverse merger. This enables a private company with strong prospects to buy a publicly listed shell company with limited assets and without legitimate operations. Together they become a new public company with tradable shares.

Contact Us

M&A deals are some of the oldest and most reliable growth strategies in business. But they do require quite a bit of groundwork and complex valuation processes. In fact, it is not uncommon for M&A transactions to fail. If you are considering a merger or acquisition for your company, please reach out to our M&A advisory team at Benchmark International to get award-winning guidance and plan the next steps for your future and the growth of your company. We are experts at getting the most value for a business in a sale and we can help you decide if a merger or acquisition is right for you.

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5 Ways To Determine It's Time To Explore Your Company's Exit Options

As a business owner, you will someday reach the point when it is time to start thinking about your exit strategy. But how do you know when that point is? Below are five key questions you can ask yourself to help determine if you are ready to begin planning your exit.

1. How is the business performing?
Typically, a good time to sell your company is when it’s performing well and it has a bright future. This is when you can garner high valuations for the business and sell for more money. At the same time, a sale can also save a business that is struggling. You need to assess the health of your company, consider the state of the market for your sector, and decide if the time is right. Keep in mind that it takes time to sell a company, so you will want to factor the timing into your decision.

2. How invested are you?
As you already know, running a business takes hard work and dedication, which can sometimes lead to feelings of being burnt out. Ask yourself honestly how much of your passion is still there. Are you willing to continue to invest in the business? Are you still dedicated to helping it grow? Is your level of commitment what is needed for the best interest of the company, or are you beginning to feel checked out? Be pragmatic about the fact that sometimes a change in ownership can be just what the business needed to reach the next level. This might require checking your emotions at the door and embracing the idea that if you love something, you should set it free.

 

Ready to explore your exit and growth options?
3. What is your financial situation?
If you are planning to fully retire after your exit, you need to have the appropriate financial standing in order to either maintain your current lifestyle, live a little larger, or be prepared to scale back somewhat. Because the timing of a sale of a business is so important, you will want to consider how you can take advantage of the right timing to get the maximum value so that it makes for a more prosperous exit for you. Your financial standing is also important if you plan on investing in or starting another business. Do you have the means to do so? And how can selling your existing business contribute to your financial situation to make the next big thing possible? Again, this is where timing and maximum value are critical.

4. Are buyers already interested?
Some businesses are always in demand and may get approached by buyers even if the owner is not interested in selling. And sometimes your business can serve a specific need for an acquirer, such as a competitor, for example. Maybe you didn’t think you were ready to sell. But if people come sniffing around, it may be worth taking an acquisition into serious consideration. Businesses that demonstrate solid growth in recent years will sell faster and for more money. It might just be the right time and you had not realized it. Or maybe even a merger can be beneficial for both the company and your bottom line. Some transactions can be arranged so that you retain a stake in the business but do not need to be as hands on in the daily operation, giving you somewhat of a head start on your retirement without having to go all in when you are not quite ready.

5. Have you talked to an expert?
Are you struggling to answer some of these questions? Talking to an exit-planning expert like an M&A advisor can help you sort things out. Maybe you need help with growing your business, or you have no idea what your options are. Maybe you just need help with insights into the market for the timing of a sale. Reach out to the award-winning team at Benchmark International to start the conversation. Whether you just want to dip a toe in the retirement pool, or you’re ready to dive completely into a sale, we can offer you valuable and even eye-opening perspectives, along with compassion and understanding about how emotional the exit planning process can be.

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Valuing Companies – 7 Pointers From 30 Years’ Experience in the UK

Nick Hulme (Managing Director, Manchester UK) summarises his recent article, ‘7 Pointers from 30 Years’ Experience in the UK’, in this short blog.

1 - It’s Not Just About the Numbers!
Although the normal formula for valuing a company involves multiplying ‘earnings’ by a chosen ‘multiple’, a company is only worth what a buyer is prepared to pay for it.


The numbers are important, of course, but there may be more to the opportunity than the numbers show. Advisers need to take a ‘bird’s eye view’ and focus on those factors that will drive the highest value with the right buyer, not just on the numbers.


They should constantly focus their conversations and analyses on the opportunity, despite the maze of numbers that fly around.

2 – ‘Multiples’ are a Minefield
Desktop research, comparisons to quoted P/E ratios and the considered views of trusted advisers can create a myriad of distortions as to what might be the correct multiple for a company.


It’s easy to see how factors such as growth, a great management team, high margins and, nowadays, tech-enablement will not only deliver the best multiples but add to that the impact of both competitive tension and structure. Any first-time seller could quickly have their heading spinning.


Benchmark International’s Valuation Matrix is a great tool for showing clients a range of valuation scenarios based on different multiples and views of earnings. This is used to educate clients from the start, and to hand-hold them to making the right decisions when the time comes. It is normally updated throughout the process.

3 – There’s More to Earnings than Reported Profits
Getting a real understanding of underlying earnings will be far more important to any buyer than what’s recorded in the company’s annual accounts.


The term we use in the UK for a fair assessment of sustainable adjusted earnings is ‘Maintainable Earnings’. This will often take account of the adjustment of shareholder salaries to market rates and the elimination of true one-off costs.


Care needs to be taken when adding back depreciation. If there is a significant cash cost to a business of replacing its assets annually, a buyer will factor this cost into its assessment of maintainable earnings if adding-back depreciation.


The terms ‘Adjusted EBITDA’ (earnings before interest, tax, depreciation and amortisation) and ‘Historical EBITDA’ are often used interchangeably with Maintainable Earnings. I much prefer the latter as it’s a better reflection of the numbers and the story behind them, and is not laden with reference to the past.  


4 – You Can’t Add the Value of Company Assets to the Valuation
If assets are truly ‘surplus’ to the company’s operations then perhaps they can be added to the valuation, but if they are fundamental to the company’s ability to generate its earnings, adding them to the valuation would be double counting. As would be attaching a value to ‘goodwill’. Buyers tend not to be too fond of this!


The most common ‘surplus asset’ we deal with in the UK is what we refer to as ‘free cash’, the opposite of which is debt. It’s much easier for clients to understand why ‘free cash’ can be added to the valuation than it is for them to understand why ‘debt’ needs to be deducted. There are a couple of easy ways to explain to clients in the article itself.

5 – Complex Deal Structures Can Cloud Valuations
A buyer can make what looks to be a great offer but understanding how the deal is structured - when and how the money is paid – makes all the difference.


The most common types of ‘structure’ in the UK are vendor loan (or defcon, where some of the consideration is paid over time), earn-out (where future payments are made depending on performance) and retained shareholdings (where the seller might keep a stake in the company or in its new owner).


‘Structure’ is generally used to bridge the gap between seller and buyer views of valuation and a buyer’s ability to fund a deal. It’s rare to see offers for companies that don’t include at least some element of structure, so issues such as buyer credit status, interest and security are key.

6 - Beware Valuations Based on Net Asset Value (NAV)
On rare occasions, particularly with companies where expensive assets are fundamental to their operations, the value of the company’s ‘net assets’ in the accounts is higher than a fair valuation derived using the normal formula. This can create an illusion of higher valuation for some clients, especially when some experts produce articles listing three, four or more ways of valuing a company.


This does not mean sellers can find the valuation basis that gives the highest valuation and expect to be able to market their company on that basis. Whatever the size of a company’s overall net assets value, its market value will almost always be more closely linked to earnings and cash flow than the size of its balance sheet. That’s not to say we don’t do deals based on net asset valuations plus ‘something for goodwill’, but they are rare.

7 – Clients Often Know Enough Already
Sellers will normally know enough about their own company to make an informed assessment of how their company might be valued in their market, so advisers should hone-in on these instincts.

Any questions, please read the full article here.

 

Author
Nick Hulme
Managing Director
Benchmark International

T: +44 (0) 161 359 4400
E: Hulme@benchmarkintl.com

 

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Benchmark International Successfully Facilitated the Transaction Between Apex Training & Development Limited and Interact Training Group Limited

Benchmark International is delighted to announce the transaction between training and development provider, Apex and Rockpool Investments-backed Interact Training Group.

Established in 1993, Apex is a multi-award-winning training technology business, providing learning solutions that specialise in service, sales, account management, negotiation, management, coaching, and leadership. The business has offices in Falkirk, Plymouth, London and Dubai.

 

Ready to explore your exit and growth options?

 

Interact Training Group is a family owned business that was founded in 1994 to help organisations identify performance improvements and create interventions to drive those improvements. Rockpool invested in Interact Training Group through a management buy-in in March 2018 and has looked to drive both organic and acquisitive growth for the business.

The acquisition will allow Interact Training Group to continue its plans to build a UK-based technology training group.

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Benchmark International Has Successfully Facilitated the Transaction Between Becker Communications, Inc. DBA BCI Integrated Solutions and Midwest Alarm Company, Inc.

Benchmark International has successfully facilitated the transaction between Becker Communications, Inc. DBA BCI Integrated Solutions and Midwest Alarm Company, Inc.

BCI Integrated Solutions is a Florida-based company celebrating 20 years in service. They offer integrated solutions in security, audiovisual, fire & life safety, data & network cabling, and healthcare communications. The company mainly services markets in the following sectors: corporate, education, entertainment, healthcare, hospitality, sports venues, and housing.

Grant Becker, President of BCI Integrated Solutions commented, “Benchmark International’s team was great to work with. From on-boarding through close, there was always someone to talk with that was extremely knowledgeable and had my best interest in mind. I would highly recommend Benchmark International for anyone selling their business.”

Ready to explore your exit and growth options?

Midwest Alarm Company, Inc. is based in Sioux Falls, South Dakota, and they are experts in life safety integration solutions. The company works primarily with contractors, building owners, property managers, and facilities directors to design and implement reliable life safety solutions. They are the largest notifier distributor in North America and have seven locations location the Midwest.

Regarding the transaction, Transaction Director Leo VanderSchuur at Benchmark International commented, “We are glad to have helped BCI secure a buyer and deal that achieved their objectives. It was a pleasure supporting their team throughout the transaction. We wish both businesses ongoing success and continued profitable growth.”

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2020 Outlook For The Global Agriculture Sector

Geopolitical Factors

Mergers and acquisitions activity in the agriculture sector was bustling with billion-dollar deals in the years of 2017 and 2018. An M&A slowdown occurred in 2019 and spilled into 2020, largely due to uncertainty caused by global politics.

The trade war between the world’s two largest economies, the United States and China, has lowered confidence and caused global repercussions. This dispute is slowly moving in a more positive direction, as the two nations reached a “phase one” deal in January of this year. Under this deal, China pledged to boost U.S. imports of agricultural products and manufactured goods by $200 billion over the next two years, and the U.S. agreed to cut in half some of the tariffs it had imposed on China. A "phase two" deal has been mentioned but timing and expectations remain unclear. Industry experts do anticipate large U.S. farms to experience 9.3 percent growth and income over 2019. 

Brexit is another factor that is impacting the agriculture sector under implications of a trade deal between the European Union and the United Kingdom. Prime Minister Boris Johnson has declared a goal to finalize a deal by the end of 2020. E.U. negotiators suggest that it is not enough time to secure the kind of complete deal needed.

Ag-Tech Opportunities

Even with the uncertainties that remain in 2020, there are significant opportunities for disruption and transformation within the agriculture sector. These opportunities are being driven by a shift towards a more high-tech industry that is expected to bolster agricultural capital investment.

  • Farmers are increasingly using apps to regularly monitor crops.
  • More localized weather data is helping farmers to better prepare for planting and harvesting times.
  • Social media is allowing farmers to better communicate directly with their customers, as studies show that 40 percent of all farmers are on Facebook.
  • A special material called graphene is being used to gather data regarding field and soil conditions to help plants survive better.

Ready to explore your exit and growth options?

 

Automated agricultural equipment is also playing a major role in the global market amid a shortage of young, new farmers. New agricultural robots are being developed across all aspects of agriculture, such as imaging, navigation, planting, weeding, and harvesting. Drones are being used for deliveries, spraying, and crop and livestock imaging. Robotic harvesting equipment is being implemented for labor-intensive harvesting tasks. Large farms are collaborating with the companies developing these technologies to lower costs and maintain a competitive advantage. And as global demand for agricultural products grows (projected at 15 percent over the next decade), robotic automation is a key facilitator in meeting the demand. The U.S., Canada, and Mexico are all adopting various agricultural robots, giving North America the highest share of the robotic farming market.

Hemp Farming

More farmers are now growing and selling forms of hemp and hemp-derived CBD as part of their overall crop. Last year, hemp businesses that had vertically integrated their supply chains performed better than those that had not vertically integrated. In 2020, it is expected that small farmers, processors and entrepreneurs will exit the industry or seek out opportunities for consolidation and integration.

Growing Conditions

2019 saw adverse growing and harvesting conditions that resulted in a smaller supply of crops such as grains and oilseeds. There is hope that these conditions will improve in 2020.

In the U.S. alone:

  • Crop yields are expected to grow.
  • The majority of the 20 million acres that were unplanted last year will likely be planted this year, primarily corn and soybeans.
  • The USDA puts the 2020 soybean crop at 84 million acres, making it the fourth-largest soybean crop on record.
  • The production of red meat and poultry is projected to rise by more than two percent.
  • Milk production will reach a record-high 222 billion pounds and pricing is expected to continue to improve.
  • Overall livestock, poultry, and dairy exports are forecasted to reach $31.9 billion, $500 million higher than previously projected.

As long as the weather cooperates and growing conditions face fewer extremes, the world should also see similar improvements in agricultural output.

Ready to Make a Move?

We look forward to hearing from you and discussing how our M&A advisors can expertly help you grow your business, maximize its sale value, or craft your exit strategy.

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Benchmark International Successfully Facilitated the Transaction Between Pebble IT Limited and Optimity Limited

Benchmark International is delighted to announce the sale of managed IT services provider, Pebble IT, to internet service provider, Optimity.

Pebble IT offers a vast array of flexible IT services to clients deriving from a range of sectors, such as branding and design, market research, recruitment and architecture. The company has grown revenues 94% over the last five years and has key partners including Google, Microsoft, Cisco and Sophos.

 

Ready to explore your exit and growth options?

 

Optimity Limited is a leading London-based connectivity, IT, and managed services provider. Backed by FPE Capital, a growth focused private equity investor in UK mid-market companies, Optimity has transformed London’s high-speed connectivity market by providing a unique alternative to fibre connectivity and has since extended its product set into a full IT service for smart campus and workplace environments.

The acquisition will help Optimity to accelerate strong organic growth in managed services and in the provision of smart, secure and intelligent IT solutions for campus and workplace environments, and will strengthen the services Optimity provides to existing customers.

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One Certainty about this Virus – Your Taxes Will Go Up

There remain innumerable uncertainties about the spreading pandemic. However, one thing became clear over the last five days – governments are opening their coffers to stem the economic dislocations caused by the many forms of “social distancing.” With air travel curtailed, stores closing, and events cancelled, central banks and executive branches are swinging into action by lowering interest rates, creating tax moratoriums, and spending whatever it takes. When we come out on the other side of this, whether that be in several weeks or months, government coffers will be empty and longer-term healing governments will feel obliged to fund and that will continue to stress public budgets.

The only answer to that stress will be higher taxes. Fortunately, unlike the measures we are seeing now, tax increases will require legislative action and legislatures don’t move all that fast. As a result, there will be a window when business is back to normal and taxes will remain at their current historically low levels around the globe. Will this be for weeks? Months? Certainly less than a year.

So for business owners looking to sell, there may very well be a slight window of opportunity. If things deteriorate further in the near term, buyers will begin shutting down their processes and will be sitting on idle cash when we emerge. They may well be nicely poised to run through a record number of deals between the medical recovery and the tax hikes.

 

Ready to explore your exit and growth options?

There are pieces of the company sale process that are best handled with some air travel and face-to-face meetings, but the initial stages are not those. If you were already thinking about starting the process before this all began, you may want to consider starting now and being ready for this window of opportunity. It often takes a year to sell a business, and the first three to six months of that process can easily be performed remotely.

In fact, at Benchmark International, we’ve been handling the “deal preparation” phase of or engaged remotely for years. Between online data rooms, email, video conferencing, and other collaborative tools including Benchmark International’s newly-launched SISU deal suite software, we have been and remain ready to take our sell-side clients from engagement to signing letters of intent without any need for clients, buyers, or our employees to meet face-to-face.

 

Author
Clinton Johnston
Managing Partner
Benchmark International

T: +1 813 898 2350
E: Johnston@benchmarkintl.com

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Benchmark International Successfully Facilitated the Transaction Between Aventura Magazine and Palm Beach Media Group

Benchmark International has successfully facilitated the transaction between Aventura Magazine, asset of Stern Bloom Media, Inc. (“Stern Bloom”) and Palm Beach Media Group (“Palm Beach Media”).

Stern Bloom is an integrated print publishing company in Hallandale Beach, Florida. Its flagship lifestyle magazine, Aventura has established itself within South Florida as the source for entertaining editorial, exciting layouts, and high visibility for advertisers.

The Palm Beach Media Group is a wholly owned subsidiary of Hour Media. Hour Media Group headquartered in Troy, Michigan, is recognized as an influential publisher of city, regional, and custom publications. The marquee titles include: Hour Detroit, Minnesota Monthly, and Sacramento Magazine. The company has offices in Michigan, California, Florida, and Alabama. This acquisition fits well with Hour Media’s strategic growth plan.

Ready to explore your exit and growth options?

David Bloom, Partner of Stern Bloom Media, stated, “We feel that Palm Beach Media Group is the perfect organization to honor our brand and elevate our legacy far into the future.” He also commented, “Choosing to partner with Benchmark International was a great decision.”

“Aventura magazine is a 20-year success story,” said John Balardo, President of Palm Beach Media Group and its parent, Hour Media. “This acquisition represents an ideal opportunity to extend our current roster of lifestyle, design, and custom publications into the greater Miami market.”

Regarding the deal, Transaction Director Leo VanderSchuur at Benchmark International commented, “It was a pleasure to represent Stern Bloom Media in this strategic transaction. On behalf of Benchmark International, we wish both parties continued success.”

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How Long Should The Seller Stay On After The Sale

When an individual buys a business, it may be assumed that the buyer will be taking over the leadership of that company. In these cases, we most often see the seller stay on for no more than six months, and also in a part-time capacity. In the less common situation, in which the individual buyer is not coming in to run the business, we see sellers staying on for two to three years.

These time periods can involve full-time or part-time commitments. Also, they are typically graduated with the timing commitment. Most often, shifting from employment to consulting after a third or half of the total time commitment, whether that be six months or three years.

The seller should have created some expectations for the buyer at some point in the process, typically as early as when the seller provides the initial teaser to the buyer.  However, we often see our clients change their views on this matter as their going-to-market process unfolds, and we see their views shift based on the comfort level they see with a potential buyer. Therefore, any written guidance should be confirmed in discussions before preparing an offer.

The more cooperation you are expecting to receive for the seller, the more capital you should be prepared to commit in exchange for that support.  Sellers will not agree to provide employment or consulting services post-closing without compensation. In reality, for the buyer, this salary or consulting fee is actually just another deal cost. The necessary amount of money can be set aside from your pool of funds, set aside from transaction costs, or viewed as an additional portion of your purchase price (though it may not be best to characterize it as such to them since sellers may not see it that way). Remember that everyone values their time and wants to be compensated for it.

Some key factors to think about when coming up with your request/plans in this regard include:

  • What key relationships will need to be turned over from the seller to you?
  • How involved is the seller in the day-to-day operations, based on what you've seen working up to the offer, versus what you've been told?
  • What experience do you have with running a business?
  • How much experience do you have with this industry?
  • How much assistance will the second tier of management be in those early days after the closing?
  • What kind of relationships have you been able to build with the management team leading up to the offer?(Often, the answer is: none.)
  • Is the business at a crucial junction in its growth, recovery, business cycle, or financial year?
  • When the seller is not available, who will you turn to for assistance, and how will you solve the really difficult issues that may arise?

It never hurts to have this discussion with the seller prior to preparing an offer. It is a point that the seller will have a keen interest in, and coming to the correct result will be a key factor in the success of your new business.

Author
Clinton Johnston
Managing Partner
Benchmark International

T: +1 813 898 2350
E: Johnston@benchmarkintl.com

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COVID-19 Update

A MESSAGE FROM OUR CHAIRMAN

As COVID-19 continues to impact the globe, we want to ensure that our clients are fully informed on how Benchmark International is positioned and prepared to make sure that we continue to service our clients during this challenging period.

Benchmark International have been closely monitoring COVID-19 since the beginning of the year and have been complying with local government-mandated screening and prevention procedures in the countries in which we operate. We understand that this is a challenging time, both with regards to COVID-19 and the current market volatility.

Our offices across North America, Europe and Africa remain operational, although to protect the health and welfare of our Team Members we have implemented a work from home policy, during which time there will be no interruption to the service agreements with our clients. Our business continuity plan and heavy investment in technology ensures that during this period we are able to offer our sell-side clients and potential acquirers uninterrupted access to our Team Members, video conferencing and digital platforms.

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Entrepreneurs’ Relief – What’s the Big Deal?

As a business owner looking to sell the worst has been confirmed by Rishi Sunak in his Budget – or has it?

Before the Budget, it was rumoured that Entrepreneurs’ Relief was going to be abolished completely, yet instead it has been reduced from £10m to £1m.

 

Do you have an exit or growth strategy in place?

 

Previously, Entrepreneurs’ Relief reduced the rate of capital gains tax (CGT) from 20% to 10% on the first £10m of gains from disposals of qualifying business assets, with that being reduced to £1m in the Budget. Following this, the higher rate is 20%, which is still a lot less than personal tax. It’s also a lot less than if a seller sold the assets of a business, as they could pay 19% corporation tax, followed by up to 38.1% dividend tax.

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7 Quick Tips About Growing Your Business

1. Build the Right Team
Creating growth for your company is achieved by having certain goals, and meeting those goals starts with having the right team in place to get it done. Seek out self-starters and highly motivated people who are not afraid to pitch unique ideas or put in extra effort to make things happen. Positive attitudes are important—and contagious. When both your leadership and your staff share your goals and passion for the business, it increases your chances for growth.

2. Be Agile
You want your company to be able to adapt and change course quickly based on changes to the market. If you can extend your business model to meet current trends, you will find more opportunities for growth. The more flexible your business is, the faster you can test different approaches and ideas. Plus, you will be able to move on more quickly if something is not working.

3. Know the Data
The idea of analyzing data may sound boring, but data is knowledge and knowledge is power. Use a customer management system. Take a close look at both existing and potential customers to understand their behavior. How long does it take to convert customers? What causes them to leave? What do they love about you? What is getting their attention? What is your competition doing? The premise is quite simple: when you know what is working, you can do more of it. And you can stop wasting time and resources on what isn’t working.

4. Keep It Simple
It is proven that complexity hinders growth and performance in a business. Stay focused on what you do best and keep those processes streamlined for efficiency. If you are trying to do to many things, it makes it hard to be really good at any one thing. Coming up with ideas outside your area of expertise just to make a few extra bucks is more likely to cost you in the long run.

 

Ready to explore your exit and growth options?

 


5. Don’t Underestimate the Power of Marketing
You may have the most incredible product or service, but it doesn’t matter how great it is if people do not know about it. There are many great ideas out there that fail because of a lack of proper marketing support. And some ideas are mediocre but succeed thanks to effective marketing. Many make the mistake of viewing marketing as a nonessential expense. It is worth it to enlist the help of professionals, even if only on a small scale.

6. Continue to Improve
In an ever-changing world, you have to keep up with innovation to remain relevant. Challenge yourself and your team to constantly find ways to get better at every aspect of your business. Think about how you can improve customer relationships. Consider updating technologies to be more efficient. Look at processes to see how they can be done better. It doesn’t matter what it is…if you can do it better, then do it.

7. Form a Strategic Partnership
The right strategic partnership or merger can be a major game changer for the growth of your business because it can help you reach more customers quickly. It can also help to balance weaknesses and strengths. You should look for companies that are similar to your own, but can provide you with beneficial aspects that you may be lacking. Consulting an experienced mergers and acquisitions advisory firm can help you find the right businesses for you to consider.

Let’s Talk
At Benchmark International, our experienced team of analysts is ready to help you with effective strategies to grow your business or sell it for the highest value. Even if you’re not sure about selling at this time, starting the conversation can be beneficial to you in the long run.

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Fail to Prepare, Prepare to Fail – A Brexit Planning Guide for Businesses

Following the UK officially leaving the EU on the 31st January, the UK is in a transition period until the end of 2020, where the government will aim to secure a trade deal before the deadline. During this period, essentially nothing will change, but it provides business owners with much-needed time to prepare their businesses for Brexit. The below discusses areas that will be affected by Brexit, and what business owners can do to prepare.

 

Trade

It’s unclear at the moment to what extent rules will change for importing and exporting in the EU, as this is one of the key negotiation points between the UK and EU during the transition period. Regardless of what is decided, rules for importing and exporting to the EU will change after the transition period. Therefore, you will need to make sure that you have all the licences, permits and approvals required, understand the implications of changes at UK borders, and check how much you will need to pay in VAT and rates. It’s important to make sure you review these for the purposes of your own business, but generally to prepare for changes you should:

 

Make Sure you have a UK EORI Number

This is a 12-digit number that you will need to move goods in or out of the UK. You might also need an EU EORI number if you are responsible for landing the goods in the EU country of destination and making the customs declaration.

 

Feel like it's time to slow down?

 

Consider Adjusting your Contract Terms

Post-Brexit, trade could incur additional costs. You might decide to absorb these costs, or you might decide to change customer contracts – if this is the case, make sure you communicate this to your customers before any changes.

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Benchmark International Has Successfully Facilitated the Transaction of Professional Development Psycle (PTY) LTD T/A Dale Carnegie Training

Benchmark International has successfully facilitated the transaction of Professional Development Psycle (PTY) LTD t/a Dale Carnegie Training.

Dale Carnegie & Associates is a global training organisation established in the USA in 1912 by the company’s namesake Mr. Dale Carnegie; a prolific author and public speaker, widely considered to be the greatest pioneer of the self-development field. The company now operates as a franchise in over 76 countries around the world.

Our client, Professional Development Psycle (PTY) LTD & Professional Development Psycle KZN (PTY) LTD t/a Dale Carnegie Training are a Southern African franchisee, offering Dale Carnegie certified training to a blue-chip client base. At its core, the company gives individuals the critical skills needed to live, lead, sell and present successfully. In so doing, these individuals take command of their personal and work lives and are more intentional in how they influence relationships, becoming more effective at home and work.

The buyer is a private equity company with a strong focus on transformation through social up lifting, including education and training. Dale Carnegie’s effective training methodology underpins the dynamic South African training team which will continue to form part of the company’s ongoing success. 

Is transformation important to your business?

The CEO of Dale Carnegie Training Gauteng & Kwa-Zulu Natal, Mr. Neville De Lucia said, “With zero experience in buying or selling businesses, it was nice to know that there was someone in my corner that could give me guidance. Being in the soft skills business, I tend to emphasise the personal side of the relationship. This is great if it serves you, but not so good if the hard data is what needs to be emphasised. Benchmark guided us on how to leverage the softer issues and coached us on the harder, more data driven decisions that needed to be made. This was overall a win-win engagement. The transition process is more meaningful between us as incumbents and the new owners as a result of how the negotiations had taken place between the parties involved.” 

Benchmark International Transaction Director, Johann Haasbroek commented, “The deal concluded represents a great result for our client. Not only have we secured a private equity buyer that has a vested interest and passion for people training and transformation space ,but at the same time provided the client with an exit strategy that enables them to take up a new international opportunity within the same franchise group of companies.” 

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Why You Should Consider Buying A Business After Retirement

I had the opportunity to meet Linda and Frank this week at a networking event. What I heard from Linda was a reoccurring theme, “Frank has been driving me crazy since he retired in October. He needs to find a job.”

As M&A professionals, we often see people who retire from a career and decide that they can only play so much golf and need something to occupy their time. Buying an existing business is often a good solution because you can control the size of the company and have a flexible schedule to still enjoy traveling, golfing, and fishing.

Many businesses start from a passion that allows the owner to monetize one of their loves. For example, a restaurant is often founded by a person that’s passionate about cooking. Given the age of retirees, it’s often hard to start a business from scratch due to the limitation of our great resource, time. However, being able to purchase an existing business will provide the retiree with a continuous income and often allows the retiree to recoup their investment somewhat quicker than a startup.

Often, people fall into their career and then babies come so people stay in a stable career that provides for their family and family’s future. Once couples are empty nesters and have saved a nest egg for retirement, they can leave their stable career and chase their passion. We see retirees purchasing companies that they have an interest in learning but never had the opportunity to explore or know-how to get started. When an established business is purchased, the seller is available to be retained for a training period or as a consultant to help the purchaser learn the ins and outs of the business, beyond the due diligence period.

We often hear ‘use it or lose it.’ Many people are concerned that if they do not use their brain during retirement that they will become less sharp then they were during their prime career days. Retirees are seeking to buy businesses to keep various skills sharp. Whether that’s business, interpersonal, or specialized skills, owning a business will allow you to continue to challenge your mind.

A business is also an investment that can provide a good return depending on your goals. Many people prefer to bet on themselves instead of the stock market. Purchasing a business during retirement might cause a retiree to receive a return on their investment and cash flow for day-to-day needs.

Owning a business in retirement often helps with legacy planning. Many times, the business is a family business and there is a plan to pass the ownership on to the next generation. If this is one of your goals, purchasing a business in retirement might be a great option.

 

Author
Kendall Stafford
Managing Partner
Benchmark International

T: +1 512 347 2000
E: Stafford@BenchmarkIntl.com

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The Anatomy Of A Letter Of Intent

In the exciting and jargon filled word of mergers and acquisitions, you may often find reference being made to a letter of intent. But what exactly is a letter of intent (LOI)? Given the importance of an LOI it is crucial to answering this question, as well as other common questions we come across when dealing with LOIs.

What is an LOI?
The best way to describe an LOI is to think of it as a roadmap to a transaction. An LOI typically outlines the terms and conditions of an offer from a buyer to a seller. Expressed otherwise, an LOI is a written expression of a buyer’s intention to purchase the business of a seller and together with its terms to the seller indicates the buyer’s intention for the transaction.

What is the difference between a binding and non-binding LOI?
Unlike most contracts, the terms of an LOI are typically non-binding unless the parties agree that the whole or certain parts of an LOI are binding.

It is therefore important for sellers to remember that the terms contained in the LOI may not always be the terms that the buyer and the seller settle on (assuming, of course, the parties agree that the terms are not wholly or partially binding).

What are the common terms of an LOI?
While each LOI will be different, certain recurring themes appear. The most common ones are:

1. The parties
Although this seems obvious, it is critical that the correct parties are cited. Large corporations tend to have various subsidiaries and affiliated companies, and it is important for both parties to understand who exactly they are dealing with.

2. Structure of the transaction
This part of an LOI will describe how the transaction will be concluded. Is the transaction a purchase of the shares, a sale of assets, or a combination of both? Depending on the jurisdiction in which the transaction takes place, the structure will have to be carefully considered to ensure that parties are aware of how exactly ownership will change.

3. Consideration
The consideration is the payment that the seller will receive from the buyer. There are various ways in which to structure consideration. For example, the buyer can agree to pay a portion upfront with the remaining portion being paid subject to certain conditions being met once ownership changes.

4. Purchase price adjustments
Purchase price adjustments are used to adjust the purchase price for movements in working capital accounts (such as accounts receivable, inventory, and accounts payable) between the execution of the LOI and the transaction being finalised.

5. Conditions to closing
This part of the LOI will include the expectations and obligations of the buyer and seller, which are specific to them. For example, a buyer may need to get approval from regulatory bodies prior to concluding a transaction.

6. Confidentiality and non-disclosure clauses
Following the signature of an LOI, a buyer will typically receive sensitive information from a seller regarding its business. In addition, a seller may receive sensitive information from a buyer. It is crucial to agree on what information may be disclosed, to whom the information may be disclosed (such as accountants and legal counsels) and for what period the information needs to remain confidential.

7. Exclusivity
LOI’s typically include an exclusivity provision in terms of which the buyer asks the seller not to negotiate with other prospects for a pre-determined time period. As a seller, it is within your best interests to ensure that the exclusivity period is as short as necessary and that the terms are well defined.

What are the benefits of an LOI?
A properly drafted LOI will address key terms, remove ambiguity and thereby benefit both the buyer and the seller as it often reduces the amount of time and costs spent on revisiting negotiating.

Many business owners will only sell a business once in their lifetime. When dealing with such a monumental event, a little more preparation today is certainly worth added value tomorrow. Advice from seasoned professionals can provide you with savings in costs and time in helping you sell your business. At Benchmark International, we are proud to provide world-class mergers and acquisitions services.


Author

John Lousber
Transaction Associate
Benchmark International

T: +27 (0) 21 300 2055
E: loubser@benchmarkintl.com

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Benchmark International Successfully Facilitated the Transaction between Dempsey, Dilling & Associates and Thomas & Hutton

Benchmark International successfully facilitated the transaction between Dempsey, Dilling, & Associates to Thomas & Hutton. 

Thomas & Hutton (T&H), a Southeast-based, privately-held, professional consulting and engineering firm, is pleased to announce the addition of Smyrna, Tennessee-based Dempsey, Dilling & Associates (DDA) to the team. With offices in Georgia, South Carolina, North Carolina, and Nashville, Tennessee, T&H’s addition of DDA will increase its presence throughout middle Tennessee. The combination was effective February 1 and DDA will operate under the Thomas & Hutton brand. Smyrna and Nashville office locations will combine in representing the T&H Nashville region, and will be well positioned to provide more municipal services in Tennessee.

On growing the Nashville region, Regional Director Travis Todd says, “Our team in Nashville has been steadily growing since our opening three years ago. We’ve been fortunate to work on quality projects with top tier clients all over Middle Tennessee. The addition of DDA only serves to make us even stronger in the region with additional resources and expertise to continue serving our clients well.”

Jerome Dempsey, PE, serving in his new role as a T&H Principal with a primary focus on client service in Tennessee, states, “It was evident from the beginning of our discussions that T&H embraced the same philosophy as DDA in providing quality based professional services to clients, while also focusing on the community and personal growth of its employees. Our combined expertise will provide a broader range of professional services to our clients, while maintaining the personal client relationships. We are thrilled to be part of Thomas & Hutton and can’t wait to see what the future holds for our new combined team.”

Ready to explore your exit and growth options?

During its 74-year history, Thomas & Hutton has provided water and wastewater services across the southeast. The addition of DDA’s expertise provides the growing company additional skilled workforce and strengthens the services offered by T&H’s Water & Wastewater department, especially in the surface water treatment arena.

Formed in 2004, DDA provides consulting engineering services for municipalities and utility districts throughout Tennessee. These services cover the full spectrum of needs for municipalities, including water, wastewater, stormwater drainage, roadway, recreational facilities, municipal buildings, bridge replacements, GIS/GPS mapping, and environmental related projects.

Brad Dilling, PE, serving as a T&H Principal and Project Manager/Group Leader says, “We are extremely excited about the synergy between our companies, our people, and our cultures. The Nashville area is rapidly growing, and we see this partnership opportunity as one that will help meet and exceed our clients’ needs throughout Middle Tennessee.”

Thomas & Hutton operates in nine regions across four states. An established and well-respected leader in providing professional consulting and comprehensive engineering and related services, Thomas & Hutton looks forward to continuing its legacy of providing engineering and design solutions to a diverse group of public and private clients.

With the addition of the DDA team, Thomas & Hutton CEO Samuel McCachern states, “On behalf of T&H, we are excited about our growing team. Jerome and Brad have a successful practice built on long-term relationships. Together, our combined relationships and expertise will add value and benefit to our clients as we continue to expand service capabilities in markets throughout the southeastern United States.

Tyrus O’Neill, Managing Partner at Benchmark International added, “Everyone here at Benchmark International was very excited to see this deal close. Thomas & Hutton is a great reputable firm which aligns well with Dempsey, Dilling & Associates. Jerome and Brad will be in good hands moving forward, and we wish the best for all parties involved in the deal.”

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Benchmark International Successfully Facilitated the Transaction Between Industrial Applications to Rogers & Morgan

Benchmark International successfully facilitated the transaction between Industrial Applications to Rogers & Morgan in Knoxville, Tennessee. 

Industrial Applications (“IA”), is a Knoxville-based sole proprietorship with a rich history dating back to 1938 when it was first established by G.W. Sutton, a retired engineer. The current form of IA is a specialized steam distributor focusing on equipment distribution, systems integration, ground support and engineering conservation control. IA offers a wide variety of products including steam traps, pumps, control valves, process valves, meters, coils, skid mounted process systems, as well as consulting and troubleshooting for independent contracts and services.

Benchmark International worked alongside Bob and Joy Sutton, the third-generation owners of IA, to plan and execute a successful acquisition process. The buyer, Rogers & Morgan, was identified as a prominent organization and a strong candidate for a synergistic acquisition.

Ready to explore your exit and growth options?

Rogers & Morgan is a manufacturers representative firm specializing in engineered equipment for air. The company has a proud tradition of servicing the greater Tennessee, Virginia, and Kentucky area since 1956. Rogers & Morgan focuses on best-in-class customer service and solving low-pressure air problems with quality products by applying expertise and experience in the field.   

Bob Sutton, owner of IA stated about the transaction, “I would like to send a special thank you to the deal team at Benchmark International. I was skeptical when starting the process but they really found me a unicorn of a buyer that is a perfect fit for my company. We’re excited to start the next chapter and look forward to working with Rogers & Morgan.”

Tyrus O’Neill, Managing Partner at Benchmark International added, “Bob and Joy were wonderful clients and the team couldn’t be happier to see this deal close. The buyer aligns well with the organization and their values. We are happy to see this result for Bob and Joy but will miss having them as clients.”

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How to get the Most out of your M&A Adviser

You’re selling your business and thinking about hiring an M&A adviser, but you’re unsure of the best way to get the most out of them, and what exactly they can do for you.

The below discusses how to get the most out of your M&A adviser, ensuring the most successful exit strategy for you.

 

Do you have an exit or growth strategy in place?

 

Communicate your goals.

Sellers each have their own goals of what they want to get out of their exit strategy, whether that be achieving maximum value, ensuring staff remain, or ensuring they remain with the company post-sale. Make sure that these are communicated with your M&A adviser to get the most out of them, as they can tailor the process to your needs.

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Benchmark International Successfully Facilitated the Acquisition of Local Bulk Haulage (PTY) LTD by Leopard Line Haul (PTY) LTD Trading as Elite Line Haul

Benchmark International is pleased to have successfully facilitated the acquisition of Local Bulk Haulage (PTY) Ltd by Leopard Line Haul (PTY) Ltd trading as Elite Line Haul.

Founded in 1995 by Peter Scholtz and Len Pretorius, Local Bulk Haulage (PTY) Ltd is a logistics company delivering specialised primary chemicals and liquid bulk commodities from the point of supply to the end-user effectively and efficiently. LBH has grown into a significant asset over the years servicing an enviable customer based comprised of blue-chip chemical and commodity entities.

Elite Line Haul, a subsidiary of Elite Truck Hire, is an innovative logistics company servicing clients across South Africa. As an established Level 2 B-B BEE Contributor, Elite Line Haul specialises in both short-term and long-term local distribution and line haul contracts. Over the years the company has developed a strong presence in the transport industry, operating from its headquarters in Elandsfontein, and ancillary branches in Durban, Cape Town and Port Elizabeth.

Is transformation important to your business?

The transaction was strategic in nature and represents Elite’s diversification into liquid bulk haulage. As a consequence of the transaction, Elite Line Haul will now boast the largest fleet of Volvo trucks and trailers in South Africa.  

Commenting on this, Andre Bresler of Benchmark International South Africa said: “On behalf of everyone at Benchmark International, we would like to wish both parties every success for the future.”

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Force Majeure is Coming and if You’re Selling Your Business That is Bad

Force ma·jeure /ˌfôrs mäˈZHər/ (1) "superior force", (2) unforeseeable circumstances that prevent someone from fulfilling a contract.

Airlines are suspending flights and changing rules for refunding tickets. Cruise ships companies are in tailspins. Cargo ports are operating with reduced staff and reduced hours. Entire cities are being quarantined. The Coronavirus may or may not become a major global health issue. But the probability that the disease will have an impact on global business is far higher, if not approaching a certainty. This is safe to say not because there is a high probability that the virus will impact your company’s travel or suppliers or daily operations but rather because of the dreaded force majeure provision lurking in so many of your company’s contracts. These clauses are known as the “canary in the coal mine” when it comes to large-scale black-swan type macroeconomic downturns as parties typically rush to invoke them well in advance of any actual calamity striking. One of the unfortunate lessons from 9-11 was that lawyers are not shy about advising their clients to invoke the clause to escape performance obligations on unfavorable contracts. Of course, any contract that is unfavorable to them (whoever “them” is) is probably favorable to your business.

As a reminder, here is an example of a simple force majeure clause:

For this Agreement, an “Event of Force Majeure” means any circumstance not within the reasonable control of the Party affected, but only if and to the extent that (i) such circumstance, despite the exercise of reasonable diligence and the observance of Good Industry Practice, cannot be, or be caused to be, prevented, avoided or removed by such Party, and (ii) such circumstance materially and adversely affects the ability of the Party to perform its obligations under this Agreement, and such Party has taken all reasonable precautions, due care, and reasonable alternative measures to avoid the effect of such event on the Party’s ability to perform its obligations under this Agreement and to mitigate the consequences thereof.

The definitions commonly provide examples of the types of circumstances that qualify earthquakes, war, acts of God, change in laws, civil disorder, and even labor strikes. One aspect of the clause that allows it to be used well in advance of any actual natural event such as the arrival of an epidemic is that the definition commonly includes political acts as well as natural acts. As a result, the declaration of an area as one warranting extreme caution might qualify a government order to reduce the number of flights to an area or the number of visas it grants to people going or coming from an affected area (or quarantining travelers) might qualify.

Furthermore, it seems everyone has a global supply chain. So, any of these events happening “over there” might seem remote from your business. However, for anyone with a contract that wants to avoid the Butterfly Effect can be a siren song.

* * *

At this point, you are probably asking, “But surely people don’t write this term into their contract in a way that allows them to be abused, right?” Well, this clause is kind of an atom bomb. As one does when dealing with atom bombs, contracts are designed to prevent their use and mitigate their effects. The overarching check on the amazing power of the force majeure provision is that it only relieves the party’s performance while the circumstances remain in effect. It’s temporary. Parties won’t abuse it because it just gives them a short-term benefit and then they have to face the music.

So, in the ordinary course of your business, you have to deal with the fact that force majeure clauses may face lean times even when your local environment is perfectly normal. Parts may not be provided on time. Your call center might go dark. Your IT support may not be available. And anyone of your suppliers or customers may have the same problem. As an example, a company that collects fees for collecting, cleaning, and reissuing linens to other local businesses and uses an in-house local manufacturing facility in area with no odd circumstances occurring. Let’s say Miami at present (if there is such a company) may suddenly be hit with the clause because they service cruise ships and hotels or because their raw materials come from Egypt or parts of their detergent is manufactured in Germany from elements mined in the Philippines.

Businesses can survive a three-month or six-month calamity such as this in the ordinary course of their lifespan, so people don’t usually think twice about the wording of a force majeure clause. But your business is going up for sale. And when you go up for sale, everyone looks at your last 12 months' financial performance. The ­last thing you want is a hole that has to be explained. Even if your broker can come up with addbacks to create pro forma financials to show what “would have” happened absent the event of force majeure and how rosy that alternative reality would have been, it is better to not have to do this. More importantly, it points out weaknesses in your business. Buyer favorites include you are beholden to a single source of supply, you have too much customer concentration, your business lacks redundancies, your perfect line of decades of growth and healthy margins now appears more vulnerable than it did before. Whether they believe it or not buyers latch on to these things to justify their valuations and their lenders latch on to them to constrain the debt available to get the deal done (and thus impact purchase price).

We still find buyers asking to see clients’ financials from 2007-2010. Looking back more than five years is (or should I say “was”) unprecedented in M&A, much less looking back over a decade. But it is common at this point and we see little signs that that is ending. But that was the last force majeure type event most of our clients suffered and buyers want to see how the businesses weathered it…And they aren’t asking in hopes of finding some reason to raise the value of their offers.

All the better to have the next event of force majeure occur after your sale rather than before.

Author
Clinton Johnston
Managing Partner
Benchmark International

T: +1 813 898 2350
E: Johnston@benchmarkintl.com

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Effects Of Coronavirus On Business Owners And The Economy

As the coronavirus known as COVID-19 spreads to more regions around the world, it is making a major impact on world and local economies. The virus, which originated in Wuhan, China, has already disrupted global travel and supply chains and affected businesses of all sizes in both China and abroad.

The true impacts of the virus for companies will depend upon how far and wide the outbreak spreads and its duration. If the spread is limited and relatively short-lived, the damage to many businesses could be somewhat minor and recoverable. The types of businesses that analysts warn will feel the worst impacts are hospitality chains, airlines, transportation groups, retailers and makers of luxury goods, as people postpone travel plans and avoid shopping centers. Hospitality businesses such as restaurants and hotels will also face the largest challenge at making up losses later in the year.

Supply Chain Impacts
How long factories in China remain closed is also another important aspect of the situation because of how it is affecting global supply chains, as a great deal of the world’s products are made in Chinese factories. Some industries could begin to run out of parts and miss their revenue targets, such as auto manufacturers and smartphone makers. Smaller businesses that import products from China, such as Amazon third-party sellers, could also face a shortage if factories do not begin to reopen.

Business owners should be proactively assessing their supply chains and mapping out strategies to maintain resources and address vulnerabilities. Do you have a backup plan? Is it possible to source materials locally? Getting ahead of the problem can be worthwhile if it is feasible. Once the virus is no longer an issue, factories are expected to recover and offset lost production. What that ultimately means for business owners depends on their type of business and how much of their inventory has been impacted. Companies that plan for strategic, operational and financial agility in response to future global risks will be more likely to react and recover.

On a somewhat positive note, the number of new cases of COVID-19 in China now appears to be declining, signaling hope that circumstances may be able to improve. Chinese scientists believe that the outbreak will be under control by the end of April.

 

Ready to explore your exit and growth options?

In the United States
The virus has stoked fears on Wall Street has caused markets to fall at near-record levels. Outlooks for revenue growth in 2020 are down. According to a survey by the American Chamber of Commerce in the country of China, nearly half of U.S. businesses based there are expected to lose revenues if the effects of the coronavirus outbreak persist after April 30th. The U.S. House and Senate are working on funding to respond to the virus. Part of this funding may include interest-free loans to small businesses hurt by an outbreak.

There is no expert consensus as to whether COVID-19 could cause the U.S. economy to fall into a recession. Any optimism is partially due to the strength of the economy, the role of the Federal Reserve Board to provide support, and the ability to contain the virus. Meanwhile, the virus’s trajectory remains unpredictable. The Centers for Disease Control issued containment guidance to businesses. And the major stock market indexes continue to react and enter correction territory as investors try to sort out what it could all mean for business owners in the long run.

Around the World
As for the rest of the world, the impacts remain contingent upon how much the virus spreads and how effectively it can be contained. It has reached more than 40 nations so far. Currently in Europe and Asia, many companies are asking employees to work from home or take leave and are assessing their emergency plans to prevent or limit an outbreak. Hospitality companies face the biggest obstacle in this sense because the vast majority of their employees cannot do their jobs from home. In Italy, entire towns are on lockdown and tens of thousands of people are quarantined. In Japan, all schools nationwide are being asked to close for one month to help contain the spread of the virus. In South Korea, confirmed cases are rising. In Iran, cases have also risen and many schools, public offices and businesses have closed. And Saudi Arabia is closing holy Islamic sites to foreigners.

M&A Deals
The impacts on M&A activity remain unclear. If the virus causes a decline in profits for businesses, it could affect M&A. Buyers may lower offers in reaction to market changes, while sellers are likely to expect their original prices. This disparity could reduce transaction volume. For now, it remains a matter of wait and see.

Contact Us
If you are ready to make a move with your company, please reach out to our M&A experts at Benchmark International to discuss how we can help you achieve your goals.

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Benchmark International Has Successfully Facilitated the Transaction of Aquatic Foods (PTY) LTD and National Foods (PTY) LTD to Econo Foods Holdings (PTY) LTD

Aquatic Foods (PTY) LTD was established in 1996 to service leading restaurants, hotels, caterers and wholesalers by supplying live, fresh and frozen seafood on demand. After securing a broad customer base in South Africa and earning a reputation as a reliable and sustainable supplier, Aquatic Foods (PTY) LTD made the decision to expand their product offering to existing customers, using their established distribution network.

This led to the incorporation of National Foods (PTY) LTD in 2012, which distributes chilled and frozen products such as meat, dairy and pastry products.

Aquatic Foods (PTY) LTD and National Foods (PTY) LTD have successfully established themselves as a leading food services organization with a majority market share in the Western Cape. The company’s modern cold storage facilities and sophisticated stock control system enable it to hold significant inventory, thereby reducing stock risks and ensuring reliable and consistent delivery of high-quality products.

Michael Niese, founder and shareholder of both Aquatic Foods and National Foods, commented on the transaction saying, “Considering the transaction size and the respective intricacies thereof it was concluded exceptionally well without any difficulties. This I attribute to the skill and productivity of Benchmark International and the spirit of Econo Foods.”

The acquirer, Econo Foods (PTY) LTD boasts a nationwide chain of 18 outlets specializing in frozen and chilled food products. With over 100 refrigerated trucks operating among their five distribution centers, they successfully supply the wholesale and foodservice trades with frozen, chilled, and grocery lines throughout the Free State, Gauteng, Northern Cape, North West, and Lesotho regions.

Pleased with the outcome, Henk Smith of Econo Foods (PTY) LTD said “It was a pleasure to work with the Benchmark International team.”

Tiaan Smit, Transaction Director at Benchmark International added, “Throughout the process, both our client and the acquirer were exceptionally responsive, thorough, and professional, resulting in discussions progressing quickly and delivering a fantastic and timely result for both parties. I am delighted that our client was able to monetize the great business he has built while handing the keys over to an organization that will carry on his legacy as Econo Foods grows the business to the next level.”

On behalf of everyone at Benchmark International, we would like to wish all parties every success for the future.

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Benchmark International’s Myth-Busting Guide to M&A

For even the most experienced business people, selling a business can be a new phenomenon as it is something that most people do just once. From this, myths about the M&A process are created, which come to be believed as facts.

The below discusses the most common myths when selling a business, and the truth behind them.

Ready to explore your exit and growth options?

 

The asking price is what I will receive.

As with buying a home it’s unlikely the price that you put it on the market for is what you will get, whether that be when you receive the initial offer, or when the surveys have been undertaken. When selling a business, the same can happen – buyers will view the asking price as subject to negotiation. After this, the buyer may then try to negotiate again once they have performed their due diligence on the company.

At Benchmark International, offers are on a ‘Bids Invited’ basis. This prevents a buyer viewing the asking price as something that can be negotiated. When it comes to due diligence, the buyer may try to renegotiate the initial price agreed, but Benchmark International will negotiate with the buyer on your behalf with your best interests in mind.

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Key Steps For Successful Post-Merger Reorganization

Reorganization is an important part of a merger or acquisition integration process and should be done properly to ensure a shared vision and a smooth transition in the desired timeframe. Unfortunately, research shows that it is not uncommon for this process to take longer than expected because the integration plan was not appropriately focused on the culture, the people, the leadership, and the ultimate goals. Business leaders that employ a solid integration strategy during M&A are more likely to achieve their desired outcomes.

According to research:

  • A mere 16% of merger reorganizations fulfill their objectives in the planned time
  • 41% take longer than expected
  • In 10% of cases, the reorganization harms the newly-formed business

Create a Profit and Loss Statement

First, think about the benefits, costs, and timing of the reorganization. Costs will include employees, advisors, and consultants, but costs will also be incurred in the form of disruption to the business. The last thing you want is for the company’s performance to suffer and for key staff to leave. Setting detailed business targets for reorganization based on the length of the transaction process and its impacts can make a significant difference in the productivity and growth of the company.

Know Your Strengths and Weaknesses

The due diligence process of an M&A deal will reveal a great deal about the business’s strengths and weaknesses, but it is important to make sure no stone goes unturned. You can get a more complete picture by talking to current and former employees, and simply searching the Internet for third party research to see what anyone would read about you when looking up your company. Both internal and external perspectives are important. Armed with these insights, you can then create a plan regarding which areas need your focus based on whether it is a merger or a full buyout. In the case of a merger, both sides will need to have the same informed view of strengths and weaknesses in order to address any issues, streamline the process, reduce costs if necessary, and essentially improve performance.

 

Ready to explore your exit and growth options?

 

Create a Reorganization Team

Designate a team of representatives from various levels of management and departments to handle communication and ensure that the needs of each department are heard throughout the transition. This will help employees feel included, minimizing the risk of losing key talent. It will also help you avoid overlooking key details, will help to keep the process more orderly, and will help you address any issues quickly.

Evaluate Your Options

When creating a reorganization plan, consider all of the possibilities within both companies’ methodologies. Any solution is going to have pros and cons, so you will need to assess which alternative is best for your business and achieving your vision. In order to create synergy, you will need to examine both of the organizations’ structures, business processes, management, staff, culture, capabilities, technology, safety processes, and anything else that makes the day-to-day operations run. In a merger, you are ultimately faced with creating a shared culture, and this means ensuring that every aspect of the business is aligned to make this possible. People are people, and if they are not informed of a clear plan and their role in it, it is nearly guaranteed that it will lead to confusion. Figure out the best way to allocate tasks and processes by communicating with the new leadership team about all of the possible options and determining the best structure together.

Get the Previous Steps Right

You have worked so hard to build your business. Reorganization is complicated and you owe it to yourself, your stakeholders, and your staff to get the process right. Of course, you should anticipate hurdles to crop up along the way. Sometimes in M&A deals, certain information does not become available until late in the process. Nearing the end of a deal, you should reassess all the previous steps outlined above to verify that they are solid and decide if anything needs to be modified. This does not mean you need to turn everything on its head if you uncover an issue. By encouraging leadership to inform you of any snags in the new company and addressing them quickly, you can get ahead of major problems.

Enlist an M&A Expert

Please contact our world-class team at Benchmark International to discuss how the right merger or acquisition could benefit your business.

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Benchmark International Facilitated the Transaction between Angelo Superior Services, Inc. to Affordable Services West Corp

Benchmark International facilitated the transaction between Angelo Superior Services, Inc. to Affordable Services West Corp.

Superior Services, Inc., is a Texas-based corporation established in 2002 by Monty Greathouse.  Over the past eighteen years, Superior Services has grown from a plumbing start-up to a plumbing and HVAC entity.  The company became an established entity with an exceptional reputation for high-quality work and has shaped the plumbing and HVAC landscape of San Angelo, Texas and the surrounding region.

Benchmark International proved its value in finding a buyer with experience in the industry through its proprietary multi-medium marketing strategies.  In addition, Benchmark International incorporated several campaigns with local, regional and national associations.

Monty Greathouse, President of Angelo Superior Services, Inc. mentioned, “Benchmark International’s team delivered on finding a buyer for my business that would carry-on the high level of service that our customers have come to expect as well as taking care of my team after the sale.”

Scott Spencer, President of Affordable Services Corp added in reference to working with Benchmark International, “I recently acquired a business in San Angelo, Texas and was assisted by Amy Alonso at Benchmark.  I found her to be very responsive and diligent with all inquiries and requests and would recommend their services.  Often times the Broker plays the mediator during the entire process to help both parties get through all the obstacles. I highly recommend Amy.”

Deal Associate, Amy Alonso commented, “Benchmark International added value by negotiating this deal.  We saw throughout the entire process that the buyer, Affordable Services West Corp, was a perfect fit who stood to benefit greatly from the experience, industry knowledge and high-quality service that they would gain from the existing owner. With this knowledge, the team was able to negotiate a deal that would allow for the existing owner to successfully transition the business to a capable buyer.  We wish Angelo Superior Services and Affordable Services West Corp the best of luck in their future endeavors.”

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Benchmark International has Successfully Facilitated the Transaction Between Veolia Water Technologies UK and Biochemica Water Ltd

Benchmark International has advised water technology expert, Veolia Water Technologies UK (VWT UK), on the acquisition of water and wastewater treatment specialist, Biochemica Water.

VWT UK provides the complete range of services required to design, deliver, maintain, and upgrade water and wastewater treatment facilities and systems for industrial clients and public authorities. By optimising both processes and monitoring, VWT UK helps clients reduce their water footprint whilst generating considerable savings in energy and chemical consumption.

Biochemica Water is a national water and wastewater treatment specialist. Its key service areas include Legionella control, monitoring and management services, wastewater treatment, boiler water treatment, cooling water treatment and chemical supply. The company’s unique Total Water Management approach – encompassing influent and effluent process requirements – accurately diagnoses water and wastewater operating issues and delivers the most appropriate and cost-effective solutions.

Ready to explore your exit and growth options?

The move will see the organisation become one of the UK’s leading end-to-end suppliers to the municipal and industrial sectors – one of the few genuinely able to provide a complete technologies and services solution.

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UK Budget Predictions – What Should we Expect to Happen to Entrepreneurs’ Relief?

Following the cabinet reshuffle last week seeing Sajid Javid resign, there was speculation as to whether his successor, Rishi Sunak, would deliver the budget on time. However, it has now been confirmed that the budget will go ahead on the 11th March, giving the new chancellor just three weeks to fine tune his budget.

It is expected that Sunak will rewrite some of Javid’s budget, relaxing some constraints, although he is under pressure from the government to tax the wealthy to cater towards additional spending.

One of the pledges the government made during its election campaign was to reform Entrepreneurs' Relief over concerns it is overly generous to the wealthy and has been criticised due to its unexpected cost to the treasury and failure to meet its policy objectives.

As a brief overview, the policy reduces the rate of Capital Gains Tax from 20% to 10% on the first £10m of gains from disposals of qualifying business assets – which can save up to £1m.

The good news for business owners is the policy is unlikely to be eliminated as the Conservative Party’s policy was to ‘review and reform’ and the relief has always been conceived as a key incentive to entrepreneurs, and encouraging enterprise has always been a priority for UK policy makers. As well, when Entrepreneurs' Relief was first introduced, it replaced business assets taper relief which itself replaced retirement relief, therefore it is likely that a similar relief will be introduced in Entrepreneurs’ Relief stead.

Despite the above speculation, we will not know until the budget is delivered the extent of the reforms. While the simplest way to protect against any changes would be to secure an unconditional exchange of contracts ahead of budget day, if an exit strategy has not already been considered and with only three weeks to go, this is becoming increasingly unlikely. Therefore, any business looking to take advantage of the current Entrepreneurs’ Relief rate should seek specialist professional advice as soon as possible and consider exit options in advance of the 11th March.

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2020 Global Outlook For The Marketing Sector

In a world of billions of connected smart devices, digital technology has essentially revolutionized the global marketing industry. From social media to content marketing, the market is massive and poised for continued growth.

The traditional ad agency model now includes a major focus on digital marketing, and digital marketing agencies continue to become more prevalent and provide a wider range of strategic services and specialized areas. And more and more companies outside of the advertising and marketing industry are also developing their own in-house digital marketing arms. 

In 2019, the global digital marketing market size was $300-310 billion. It is expected to grow to $360-380 billion in 2020.

On a global scale, the market size per region is:

  • $110-130 billion for North America
  • $120-130 billion for Asia Pacific
  • $48-52 billion for Europe
  • $6-10 billion for the Middle East/Asia

Online videos and mobile ad spending account for a large portion of the digital advertising space and continue to drive digital marketing spending, especially in Europe and North America. Digital out-of-home media is becoming more personalized and contextually relevant through targeted ad delivery, and location-aware and bandwidth-aware tech tools. And with the increasing emergence of 5G technology in 2020, phone streaming will reach incredible speeds and higher quality, opening up new possibilities for marketers. 

Content Marketing

2020 will be a big year for content marketing in several different forms. User-generated content will be in demand as the majority of consumers report that they find the opinion of users to be more influential than content promoted by the actual brand. This content includes anything from social media posts and blogs to web pages and testimonials.

Another huge component of content marketing is video content creation. More consumers are expecting to see video content from their favorite brands. Video also keeps audiences engaged for more time versus other types of content. Live streaming is also a growing trend, as consumers are reporting that they would prefer to watch live video than read a blog post.

 

Ready to explore your exit and growth options?

 

Social Media

Marketers are forecasted to spend $112 billion on social media advertising in 2020. 

Globally, North America continues to dominate ad spending in this digital marketing sector, with the retail industry as the leading ad spender in the United States. While search remains a preference of retail marketers, video, social media, and other display formats are growing in demand to increase brand visibility. Digital ad spending in the Asia Pacific region has surpassed that of Europe, with growth driven by China due to increasing investments on technology and digital platforms. The automobile, consumer goods, and telecom sectors are the leading marketing spenders in the country.

Print

Digital marketing has had a large impact on the commercial print side of the industry. This is causing service providers to offer more innovative value-added services such as data management and e-publishing. The demand for print services is largely driven by the retail, financial, publishing, and food and beverage sectors, especially for on-demand print materials, packaging, and other promotional materials. Additionally, increased digitalization and eco-friendly practices (such as using soy ink vs. petroleum-based ink) have lessened the printing industry's impact on the environment. Increased digitization will continue to result in more e-versions of print, such as annual reports and catalogs, and use of more online targeting channels such as email.

Direct Mail

The size of the global direct mail market is expected to reach $94–98 billion in 2020. The use of direct mail remains high in developed regions such as North America and Europe due to comprehensive customer database maintenance. At the same time, the increased use of e-mail and mobile marketing is lessening the demand for printed direct mail materials. In smaller markets that have lower Internet penetration, such as parts of Latin America and the Middle East, the direct mail sector remains strong with demand being driven by retail, travel, and real estate. To remain competitive, direct mail providers are offering e-mail marketing and other digital marketing services at lower prices.

Loyalty Programs

The global market for loyalty programs continues to grow due to increasing e-commerce, smartphone use, and online shopping customer behavior. The retail, financial, consumer, and food and beverage industries drive the demand for loyalty services, digital rewards programs, analytics, and business intel used for customization.

Mergers & Acquisitions

M&A activity regarding digital marketing and advertising agencies has high potential due to growth and high fragmentation within the industry. Traditional ad agencies and private equity firms target companies that offer solid growth opportunities. As digital advertising revenues increase, so does the global demand for more online content in an ever-connected world. Digital capabilities and relationships are a priority for traditional agencies and their holding companies as they have a need to grow their digital revenue and expand their portfolios.

Thinking About Selling?

At Benchmark International, our award-winning team of M&A experts would love to hear from you and discuss how we can help you grow your business or sell your company for maximum value. Feel free to contact us at your convenience.

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The Value Of An M&A Advisory Firm

When selling a lower to middle-market company, enlisting the guidance of an experienced mergers and acquisitions advisory firm can make a world of difference in the transaction’s outcome for several important reasons.

  • Having an M&A advisory firm act as an intermediary in a transaction increases the chances that a deal will be closed successfully. In fact, some buyers are willing to pay more for a business when an M&A firm is involved because they know there is a higher chance of closing.

According to a large study by the University of Alabama, private sellers receive between 6% and 25% higher acquisition premiums when they retain M&A advisors.

  • When you work with an M&A firm, it demonstrates to buyers that you are truly committed to the sale process and that your valuation expectations have been properly vetted. 
  • Having an M&A team in your corner will save you a great deal of time and effort regarding complicated tasks such as due diligence, company valuation, and data management. Even simple transactions require a burdensome amount of due diligence regarding real estate, software, employment, benefits, accounting and legal issues. There are also many standard pre-closing tasks that must be completed in a timely manner and can affect the success of a transaction.
  • M&A experts already know all the possible deal breakers and how to avoid them, giving you a major advantage in the market and protecting you from pitfalls.

Ready to explore your exit and growth options?

 

  • You will attract a greater number of serious buyers because you have access to the M&A firm’s global connections. And when you have drawn the interest of several buyers, you are more likely to get more for your company. If you sell your business on your own, experienced buyers know they can get away with offering you a lower price.
  • A truly effective M&A firm will use proprietary technologies and databases to review the market for matches regarding the size, industry and geography of your company.
  • Experienced M&A advisors know how to protect your confidentiality through the entire process. Confidentiality is critical because if information is leaked, it can not only derail a sale but also have a negative effect on crafting another potential deal.
  • A quality M&A team will have the capability to build a strong marketing strategy and create materials to attract suitable and quality acquirers for your company.
  • Another important task that an M&A firm will handle is third-party research. Buyers will immediately seek out negative information on a company that is on the market. A good M&A team will create a strategy to mitigate any potential negative impacts.
  • The right M&A advisory firm will take the time to fully understand your objectives and aspirations and will be committed to making sure that the process is tailored to your needs and that you find the right fit. They will also work to keep eager buyers at arm’s length when you need more time to make decisions, understanding that selling your company is an emotional task and you deserve support and empathy along the way.

Work With the Best

Reach out to our world-renowned M&A experts at Benchmark International to discuss how we can help your business achieve its ultimate sale potential. You can trust that our objectives are aligned with yours, and that we will provide you with the most amount of information possible while protecting you from making rushed decisions. Simply put, your best interests are our best interests.

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M&A In The Global Transportation and Logistics Industry

By investing in the transportation and logistics sector, global companies open up the opportunity to advance the flow of goods throughout the world. Businesses in this industry, both domestic and international, benefit from integrated supply chain networks that connect companies and consumers through multiple transportation modes within industry subsectors.

Industry Subsectors

  • Logistics services include the management of fleets, warehousing, order fulfillment, logistics networks, inventory, supply and demand, third-party logistics, and other support services.
  • Air and express delivery provide accelerated end-to-end package delivery services, as well as infrastructure for exporters. Growth in this subsector is greatly driven by the expansion of e-commerce.
  • Freight rail moves high volumes of heavy cargo and products long distances via rail network.  
  • Maritime includes carriers, ports, terminals, and labor involved in the transportation of cargo and passengers via water.  
  • Trucking  moves cargo over the road by motor vehicles over short and medium distances. 

The transportation and logistics industry is consistently a highly fragmented sector. This is largely due to the fact that most fleets are small and there are few barriers to entry when it comes to starting a small fleet. Another major factor is that larger carriers have difficulty retaining drivers and achieving organic growth. Owners are always looking to gain efficiencies, optimize routes and spread fixed costs across more operations. In order to do so, they must create greater scale. It is common in the transportation and logistics sector for acquisition strategies to revolve around broadening service offerings, branching out the customer base, and expanding geographical reach. 

 

Is transformation important to your business?

 

Economic and Industry Factors

Burgeoning economies drive demand in the transportation and logistics industry. More freight demand stems from strong consumer confidence and upward surges in manufacturing, resulting in more loads and vehicles on roads. When this climate is met with driver shortages, it increases transportation costs, which can reduce margins.  

The Impact of Amazon.com

Amazon has greatly raised global consumer expectations when it comes to rapid fulfillment. This demand has shifted distribution patterns, pushing companies to move warehouses closer to customers. Getting products to consumers faster increases the number of touch-points along the freight network.

Automation Technologies

The introduction and evolution of new technologies in the transportation and logistics industry are addressing over-the-road challenges such as driver shortages. Long-haul robotic trucks are being developed and tested. Driverless and remotely piloted deliveries are being incepted, such as aerial delivery drones. Experts expect it to be a very long period of time before these advancements face more mainstream use, but someday in the future, the possibilities they hold will be very real.

Data-Driven Tech

Artificial intelligence, the Internet of Things, data collection, machine learning, and blockchain are all being used within the transportation and logistics industry to gain major competitive insights and advantages, and therefore make better decisions that improve the performance of the company.

 

Ready to explore your exit and growth options?

 

Transportation and Logistics M&A

In the 21st century M&A market, transactions in the transportation and logistics industry are often driven by specific demographic, macroeconomic, and regulatory factors.

Sellers are motivated by:

  • The desire to take advantage of a strong overall M&A market
  • Volume limitations due to driver shortages, tight labor markets, aging drivers and increasing hiring costs
  • Aging ownership without a succession plan in place (usually companies with <$50 million in sales)
  • Unease about industry regulations around safety, driver hour limits and logging devices
  • The use of cross-border deals to counter negative impacts on operations, access new markets, and protect supply chains, as remaining agile in a globalized market is critical

Buyers are motivated by:

  • Leverage of economies of scale in order to maintain profitability
  • Capitalization on domestic economies with strong growth potential
  • The need to hire drivers while facing tight labor markets and rising hiring costs
  • Acquisition of smaller companies that expand service offerings
  • Use of various asset models to free up capital and invest in better equipment

A high level of activity in M&A in the transportation and logistics industry is contingent upon suitable timing in a growing economy, low interest rates, and widely available capital. It usually takes up to nine months to complete an M&A transaction, so timing and forward thinking should be considered when deciding to take your company to market.

Contact Us

Are you considering selling your company? Even if you are merely exploring the idea, our M&A specialists at Benchmark International can help you decide if and when a merger or acquisition may be right for you. We’ll work closely with you to ensure that you never have to compromise value or timing, and that you are only matched with the most suitable opportunities.

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Benchmark International’s Nick Hulme Tops North West League Table Again

Congratulations to Benchmark International’s Nick Hulme, who has been named the most active financial adviser in 2019 in Pro-Manchester’s North West and Manchester Annual Corporate Finance Review (produced in association with Experian Market IQ).

Nick topped the list in leading a total of eight deals involving North West clients, which contributed to over 60 corporate deals across Benchmark International’s offices in the UK and Ireland.

Looking for a Corporate Finance Adviser? 

This is the third year in a row Nick has been recognised as one of the North West’s top deal-doers. 

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Why You Should Spend More Time Thinking About Selling Your Company

Selling your company might be the farthest thing from your mind right now. But there are several reasons that thinking about selling now can make all the difference later, especially for lower and middle-market business owners. Proper exit planning can take years, so getting started increases your chances of selling for maximum value. It also puts you on the right track to fulfilling your aspirations and realizing your vision for the future.

1. Start Making Your Business More Valuable

Whether you want to sell this year or five years from now, you will need to take every step necessary to drive up your company valuation prior to a sale. An endeavor this important is not going to be accomplished overnight. Consider what you can do to improve the business and make it more attractive to buyers. Implement a well-defined strategy to create growth and improve profitability. Hone your marketing plan. Think about how you can make the company more efficient. An experienced M&A advisor can help you craft the right tactics to accomplish all of these goals and get your exit plan moving in the right direction.     

2. Know Your Number

Part of a smart exit plan includes knowing what your business is actually worth and at what price you will be comfortable selling it. This means you will need to know how your company stacks up in the current market in your industry and what the market conditions are expected to be in the next several years based on expert M&A knowledge and analysis.

3. Know Your Buyer

Not all buyers are the same. They can be financial, strategic, or even internal. If you take the time to figure out the right kind of investor for your company, you can spend your time and energy taking the steps to maximize the business’s value based on that type of buyer. For a financial buyer, you will need to focus on cash flow, revenues, and management. For a strategic buyer, you will want to concentrate on profits, innovation, market share, and brand strength. Finally, an internal buyer will look for things such as strong financials and balance sheets, a positive culture, and product diversity. An experienced M&A advisory firm can help you identify the right buyer for you, and give you exclusive access to prospective buyers that you will not find on your own.

 

Ready to explore your exit and growth options?

 

4. Get Your Records in Order

When the time comes to put your company on the market, you are going to need to have all of the proper documentation organized and accounted for. This includes all of the financial documentation, tax records, profit and loss statements, legal contracts and client records from the past few years. Buyers tend to place more value on businesses that can provide comprehensive records that paint the most accurate picture of the company’s health and future potential. You will want to be honest in this process. Do not try to fudge the numbers or hide issues. The buyer’s due diligence team is going to uncover anything that you attempt to cover up, which can lower the purchase price. Disclose the truth from the beginning and you’ll be in a better position to overcome any challenges, plus, the buyer will be more confident in acquiring your business.  

5. Keep Your Eye on the Business

Running a company is already a massive responsibility, and the process of selling a company is a significant undertaking all of its own. You need to remain focused on your daily operations without being so distracted by a sale that it has a negative impact on the business. Enlisting the help of M&A deal professionals to handle the sale can take the pressure off of you and keep your business on course. Remember, the process can take several years, and that is quite a bit of time for you to be unnecessarily preoccupied, putting the health of your company at stake. 

6. Have a Plan

You have worked so hard to build your business and you have earned the right to dream about your future. To get there, you have to ask yourself the right questions. Are you ready to retire? What is your target retirement age? Do you want to purchase or get involved with another business? What level of lifestyle will you need to maintain? Will someone in your family be taking the reins? Do you want to retain a small level of involvement? If you know what you expect from your future, you will be less likely to get cold feet at selling time. It’s also important that you appear confident about a sale so that buyers do not feel that you cannot be taken seriously. Knowing your vision for the future is a critical step in making your dreams a reality. As Warren Buffet once said, “Someone is sitting in the shade today because someone planted a tree a long time ago.”

Let’s Discuss Your Options

If you are thinking about selling your company, now is the time to start considering your options regarding timing, exit planning, and market value. Contact our M&A geniuses and let Benchmark International help you map out a future that is in the best interest of you, your family, and your company.

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M&A In The Global Education Industry

Around the world, the global education industry remains shaped by population growth and access to education, and driven by new technologies and service offerings.

  • Solutions for professional education, teacher development, improved online and adaptive learning, and language training (especially English) are always in demand.
  • Online learning technology and the need for corporate workforce training drives increases in corporate spending on outsourced training programs.
  • Smartphone-only Internet users are reshaping learning models.
  • Enrollment in pre-primary education continues to rise as it has proven to show positive long-term results.
  • In primary and secondary education, technology investments directly impact school expenditures.
  • Higher education is being forced to adapt in the wake of changes to jobs, skills and increasing student debt.
  • Learning Management Systems are shifting the teaching focus away from content and onto learners.
  • Newer offerings include cloud-based student information systems, digital tools and learning platforms, and data reporting and analytics.

The global education market is expected to be valued at $10 trillion USD by the
year 2030.

 

Ready to explore your exit and growth options?

 

M&A Activity

In today’s digitized society, as education becomes more globalized, it presents newforms of private, for-profit involvement. In the global education industry, less than three percent of overall education expenditure is spent on technology. This is expected to increase in the future, yet at an alarmingly slow rate, giving investors a favorable position to get in on
the market.

Mergers and acquisitions opportunities are heavily influenced by the possibilities created by new innovations in digital education, instruction, and credentialing. The global education sector’s biggest strategic performers are diverse companies that continue a shift towards digital services and away from print. Target companies within the education landscape that are in drawing investment include those that provide adaptive learning solutions and assessment products, such as software that facilitates testing and scoring. Other areas that appeal to buyers include education-market-focused infrastructure software and English language learning solutions.

Education Infrastructure Software

Modern education-focused infrastructure software has the power to transform learning environments for students and teachers both inside and outside the classroom by balancing technology across all locations. The approach is comprised of cloud computing, enhanced privacy and security, connectivity, storage, and manageability. Additionally, virtual infrastructure not only simplifies troubleshooting, but it can reduce costs for institutions by reducing overhead through the reduced impacts of having to frequently replace hardware. With support of more devices, teachers can better tailor learning experiences to students learning needs, and a more collaborative learning environment can be created.    

Global English Language Learning Market

The global English language learning market is expected to exceed $22 billion USD by the end of 2025. These programs are in growing demand due to globalization, urbanization, and an appetite for improved education and job opportunities. The escalating numbers for student enrollment in graduate schools in English-speaking countries is deemed to be a primary contributing factor to growth in this market. In higher education, universities in the United States, the United Kingdom,  Australia, and Canada require applicants to pass language tests such as the Test of English as a Foreign Language (TOEFL), Graduate Record Examination (GRE), and International English Language Testing System (IELTS). This drives students to enroll in English language training programs, leading to notable demand for them in countries (such as an India and China) where the number of graduates relocating to English-speaking countries for advanced studies continues to grow at a significant rate.

The global market for digital English language learning is comprised of both regional and international manufacturers. As the international companies expand their reach, improve quality, and lower prices, the regional firms struggle to compete. Such an intensely competitive market for innovation and service extensions increases the number of M&A transactions.

 

Feel like it's time to slow down?

 

An Industry Continuing to Evolve

Innovation in education requires capital and government funding is limited even in the wealthiest, most developed countries. Private equity and M&A can strategically create and grow companies of scale in the education sector. Larger size means more attractive acquisition opportunities, more prevalence, and more potential for transformation in the industry and its subsectors.

Advancements that are impacting and will continue to impact this industry include:

  • Artificial Intelligence, virtual reality, and unified data solutions
  • Online education
  • Robotics
  • Specialized curriculum start-up companies
  • Improved curriculum storage and peer-to-peer sharing platforms
  • International schools
  • Digital classrooms
  • Chat bots and voice enabled hardware
  • English language training
  • Enhanced admissions management and student retention
  • Global school networks
  • Improved vocational training
  • Alternate university models
  • Online program managers
  • Job training boot camps
  • Primary education mobile apps
  • Increasing availability and free access to academic publishing resources
  • STEM and coding
  • Gaming and simulation

Contact Us

If you are ready for a change, contact us at Benchmark International. We are committed to creating an impressive plan of action for your business. Schedule a call with one of our M&A advisors and start planning a more prosperous future for you and your company today.

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10 Things About Buying A Business You May Have Not Known

1. It’s Easier Than You Think
When acquiring a business nowadays, many think of this as a very strenuous and long-term process. Though it is a large investment of time and money, if you already run a successful small business, there are plenty of transferable skills.

2. Synergy Is Key
The growth of a business through acquisition is statistically faster, cheaper, and less risky than the other methods of expansion. It is of the utmost importance to ensure that the synergy is there, and when companies are choosing to acquire or merge, the desire is for the sum to be greater than its individual parts.

3. An Acquisition Can Expedite Growth In Your Current Business
Once an acquisition is done, you immediately have access to a multiplicity of new (to you) assets and employees. Many challenges come along with combining two businesses, but this can give your current company the ability to expand to new areas and cross-sell services to existing and newly acquired customers.

4. Understanding The Value Of The Employees And Management On-Hand
Many deals come with a staff who has vast knowledge about the company and the day-to-day functions of the business. It is important to get to know the staff and ensure they have the same intentions as you for the business and the direction it is trying to take.

5. The Current Owner Is Likely To Stay In The Picture
Though many of our clients are looking to retire, it is never as simple as handing the keys over. The owner built this business, and they know the ins and outs of the company. Usually, the owner signs a contract with the buyer to stay on for a required amount of time to help the new owners/managers learn the entire process. This also gives comfort to the buyer and customers about the change of ownership.

6. Cultural Fit
Selling a business can be a very emotional process for a seller. The company is their baby, and they want to ensure the success of the company and the continued employment of the employees. Commonly, money may not be the primary motivation of a seller. They are concerned with bringing in the right fit, expanding the company, and keeping true to its roots. A good buyer would acknowledge the importance of culture and seek to maintain the culture that was created and fostered by the previous owner.

7. Businesses Can Be Relocatable
When acquiring a business, buyers are concerned with the real estate associated with the company. Many believe that some companies should be relocated for better success geographically, or to a space that has more room for development. Most businesses can do so, which buyers may be unaware of, and most sellers will entertain the idea of selling the real estate, leasing it back, or allow the buyer to break the lease altogether.

8. Funding Options
It’s often easier to fund an existing business than a startup since it already has a track record. Banks tend to offer more loan types for individuals than for established businesses. Right now, banks are lending aggressively and looking to deploy capital due to interest rates being low.

9. Time Is Of The Essence
Due Diligence is a time consuming and arduous process, so it is key to operate with a sense of urgency. Doing so inspires confidence in the seller and helps maintain excitement on both sides for the eventual transaction. Failing to maintain a sense of urgency and stick within the prescribed timeline could result in deal fatigue, a delayed closing, or even the deal coming unraveled altogether. It’s imperative to move as swiftly as possible during due diligence.

10. Using An Intermediary
The process itself is easy, but selling a business takes time and effort that business owners do not always have the time for or knowledge on. Bringing on an investment banker or business broker/intermediary can help with finding financially capable prospects, negotiating the deal, and get the deal closed without anyone finding out until the deal is done.

 

Author
Jack Chilcutt
Deal Analyst
Benchmark International

T: +1 615 924 8950
E: Jchilcutt@BenchmarkIntl.com

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Tips For Transitioning A Company's Leadership

One of the keys to creating value in lower to middle market mergers and acquisitions is the plan for successfully transitioning the leadership of the company. Maximizing value hinges largely upon a solid succession plan that empowers the new CEO to take the reigns, maintain stability, and lead the business into the future.

Finding the right person to assume leadership is important to the company in several capacities, but there are reasons that it will be personal to you as a business owner who cares greatly about the company you have worked so hard to build. The new CEO should actually care about the company and its employees. They should have a proven track record at getting things accomplished versus a history of being asleep at the wheel. And they should leave you with a high degree of confidence that they are going to do the right thing so that you are not left worrying about the fate of the company and whether you made the right call.

As a founding CEO planning your exit, there are some best practices you can follow in your process to find the right candidate and make a seamless transition in leadership and avoid a succession gone wrong.

Consider Structure and Timing
Initially, there are three important factors to determine the circumstances for the incoming CEO. Are they from inside or outside the company? Will they assume the role immediately or work alongside you for a period of time? And will you maintain a presence in the company as chairman or as an advisor? The answers to these questions will affect the transition process.

Get an Executive Search Expert
Do not underestimate the importance of enlisting the help of a quality external executive search professional. They should have proven experience that gives you the confidence that they will identify a replacement that's in the best interest of the company. They should be able to provide certain insights, find candidates that may not be currently known in the market, and prevent the costs associated with the wrong hire. An executive search firm can also save you time, take the burden off of your HR team, and ensure confidentiality through the process.

 

Ready to explore your exit and growth options?



Consider What They Face
Think about the new CEO's first year and what it may hold from a political and cultural perspective, such as a recession. Could there be problematic circumstances that will make it difficult to make leadership decisions and are they equipped to handle them adeptly based on their experience?

Meet Face-to-Face Onsite
An important part of building trust and bolstering success is having the candidate come to the company's headquarters to meet with you and get an in-person understanding of the business and its culture from your perspective and in your own words.

Foster Relationships
The vetting process can benefit from the candidate's development of relationships with the management team to enable shared experiences. A quality candidate is going to value this effort in establishing trust.

If the new CEO is someone from within the company, think about how they will assume their new role and the responsibilities that come with it. Consider the fact that they are now going to be the leader among their former peers. How will they handle this change and how will it impact their relationships?

Look for the Obvious
You surely want a new CEO with whom you have a good relationship, but the most important relationship will be between them and the management team and the employees. So their personality is going to be a big factor in their ability to succeed. How are they under pressure? What is their vision for the future? Are they comfortable with change? Are they motivated to create growth? Are their values aligned with yours? What about their ego? A candidate may look exceptional on paper and have incredible qualifications, but if he or she does not possess the right people skills for your company's culture, it should be a deal breaker.

Are You Planning Your Exit?
If you think it's time to make a move in the best interest of your company, feel free to reach out to our M&A experts at Benchmark International at any time. Our impressive strategies can be the game-changer you are seeking for your future success.

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M&A In The Ride Services And Autonomous Vehicle Industries

Two of the most transformative factors in the world of automotive and technological development have been the advent of ride-hailing platforms and autonomous vehicles. They each create various mergers and acquisitions opportunities both individually and in concert with each other in various capacities on a global scale.

Ride Service Companies

Ride services—also known as ride hailing and ride sharing—will continue to create opportunities for M&A in decades to come as their popularity around the world continues to increase. Uber, DiDi Chuxing, Gett, Grab, and Lyft are some of the leading firms in the market. As more companies emerge, the market becomes more and more fragmented. The right M&A transactions can help companies increase market share and improve service quality.

It can be relatively inexpensive to start up a ride-hailing company. After all, they depend on contract labor that does not rely on special skills or loyalty, and are powered by free mobile apps that easily bring their service to the public’s fingertips. While this makes it easy for more smaller firms to enter the space, it also creates ripe opportunity for M&A activity in an incredibly competitive industry that has been predicted to one day be dominated by only a couple of major players.

The ride hailing sector is not unlike other transportation industries, as it is subject to strict laws and regulations that can make M&A challenging, meaning that deals in this space require added due diligence.

 

Ready to explore your exit and growth options?

 

Autonomous Vehicles

A strong investment climate lies in the sector of autonomous or self-driving vehicles. Traditional auto manufacturers are investing billions of dollars and stepping up efforts to try to catch up with advancements already pioneered by the big tech companies. It is both faster and easier to acquire existing technologies than to try to reinvent the self-driving wheel. While they retain the advantage of being capable of the mass production of vehicles, it is expansion of their capabilities that is a major driver of M&A.

Companies at every level of involvement in the auto industry need to adapt their strategies, from manufacturers to suppliers to retailers. M&A is a necessary strategy for all existing industry players to maintain any foothold as newer digital companies transform the space. This includes rethinking business models and emphasizing innovation to establish themselves as a leader in the future.

Autonomous vehicles also present the possibility of major ramifications for other industries.

  • Law enforcement: With self-driving cars programmed to obey traffic laws, fewer police resources may be needed on roads and less local revenue could be earned from citations.
  • Insurance: With fewer accidents come fewer insurance claims, reducing the cost of insurance premiums.
  • Healthcare: Ideally, fewer traffic accidents can reduce reliance on emergency services.
  • Air & rail: Using autonomous vehicles for long-distance travel can mean fewer passengers on airplanes and trains.
  • Advertising: Withdrivers turned into passengers, their attention can be shifted from audio to visual, and advertising could be targeted by location.

Many companies around the world have demonstrated enthusiasm over the prospect of disrupting public transportation as we know it, and have been eager to invest in companies that are focused on bringing autonomous vehicles into this realm. This includes robotic taxis, driverless shuttles, electric car ride services, and taxis that are not equipped with steering wheels or pedals.

Countries leading the way in the development of autonomous driving technology include Norway, Singapore, the United States, Germany and Israel. 

Many challenges exist before the proliferation of autonomous vehicles on roads everywhere is a real possibility. While careful planning and programming goes into the technology that makes these vehicles both operational and safe, there are unexpected scenarios that are not easy to predict or take into account. These situations include other drivers’ errors such as going the wrong direction or making illegal maneuvers that can confuse the technology that a self-driving car relies upon. Essentially, the radar and high-resolution cameras in autonomous vehicles are able to detect and identify objects (such as a bicycle or pedestrian), but it cannot predict what those objects might do next.

These types of uncertainties, along with the strict regulatory environments surrounding self-driving vehicles, can also make the M&A market in this sector more complicated to navigate. It is prudent to consult with M&A experts regarding the opportunities in this area.

Contact Us

How can Benchmark International help you realize your dreams for your business? Give us a call and set up a meeting with one of our M&A experts. Whether you are looking to sell, grow, or formulate an exit plan, we are committed to helping you achieve what is best for you and your company.   

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Leisure Industry in M&A

The global leisure industry is comprised of restaurants, bars, hotels, casinos, sports facilities, travel agencies, tour operators and other customer-focused business segments. This industry is subject to some very specific influential factors such as geopolitics, weather conditions, natural catastrophes, fuel costs, and changing consumer habits and demands. Technology also plays a key role in how people plan their activities and choose to experience them. This presents new opportunities for growth, and at the same time, new challenges.

M&A can be used as an effective solution for vertical integration to fill gaps across the value chain and to offer more efficient global platforms in the leisure industry
and its subsectors.

Opportunities and Challenges

The impacts of new technologies can be beneficial to businesses, but they also present new obstacles. The good news is that people are never going to stop wanting to enjoy themselves. It’s just a matter of how they go about it that faces significant changes.

 

Ready to explore your exit and growth options?

 

  • Sports Venues: With large and complicated physical infrastructures, sports facilities aim to attract more fans, fill more seats, and maximize returns. Technology aids in getting fans to engage more and spend more money both in person and from their devices. The Internet offers viewers immediate access to scores, stats and updates. While this can enhance sports venues’ offerings, there is also the challenge of competing with home entertainment systems that allow consumers to create their own fan experience in the comfort of their own homes.
  • Travel Agencies and Online Booking: There was a time when booking a vacation meant picking up the phone and calling your travel agent. But today, people turn to travel booking websites and apps to plan their trips, leading to overhauled business models. Online travel agents are looking to expand, increase their geographic reach, and be more integral to their customers’ experiences. Additionally, in the world of platforms such as Expedia, Kayak and Priceline, there remains little differentiation among brands, keeping the segment ripe for consolidation.
  • The Gaming Industry: The loosening of sports-betting regulations is driving change in the gaming industry. People are increasingly able to gamble online in various capacities, and while casinos are adopting strategies to capitalize on these opportunities, there is still the prospect of less foot traffic that would have transferred to more money spent on in-house dining and other in-person gambling options. This sector is prime for consolidations and partnerships.
  • Restaurants: Once a very brick-and-mortar focused sector, new technologies allow customers to opt for food delivery companies and apps to bring dinner to them rather than dining out at a physical restaurant location.
  • The Cruise Industry: Cybersecurity is an important concern within this sector, as more people spend more time on their connected devices while they enjoy their cruise vacation. Personalized data-driven technology improves the passenger experience, but it also requires more integration so that more systems can share more information.
  • Hotels: Web platforms such as airbnb have changed how people lodge on their vacations, moving tourism traffic from concentrated urban areas to more residential neighborhoods.
  • Amusement Parks: Consumers seek out unique and immersive experiences through their tech. Theme parks are creating new partnerships to cater to these demands, and seeking out novel ways to tap into new markets. These partnerships can be less capital intensive and give businesses flexibility to adapt to changing trends.

 

Feel like it's a good time to sell?

 

Cross-Border M&A Considerations

Cross-border M&A transactions can involve several issues as political, cultural and economic environments evolve and regulations change. Certain due diligence factors should always be considered for these types of deals are expected to result in success stories.

  • Transaction framework: This involves careful evaluation of pricing (maximized value), timing, and certainty (public reputation and proof of funds)
  • Regulatory compliance: Focus on cybersecurity, foreign investment laws, national security laws, fraud, sanction violations, and money laundering
  • Antitrust and competition: This includes overlaps between brands, overlaps between operations, market concentration, and specific clearances
  • Technology and intellectual property: Thoroughly assess trademarks, domain names, IP rights, third-party licensing, existing claims, infrastructure, loyalty programs, data privacy laws, and databases

As with M&A transactions in any industry, there are several other areas that must be considered for due diligence and company valuation, including management agreements, financing, tax structures, employment issues, and other operational risks.

Contact Us

If you are thinking about selling your company, or would like to start exit planning, contact our M&A specialists at Benchmark International to start the process. We can help you understand your options and key factors for consideration, and get you on your way to a deal that works best for your vision of the future.

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