Members of the Benchmark International team, completed the St. Jude 5K Walk/Run this past weekend in Tampa, FL to support ending childhood cancer.READ MORE >>
When companies seek to enhance their margins and better serve their customers while reducing the cost of providing services, they outsource non-revenue producing functions to outside business services providers, known as business process outsourcing (BPO) companies. In the area of recruiting, it is a form of BPO, commonly referred to as Recruitment Process Outsourcing (RPO).
The business process outsourcing industry is valued at nearly $1 trillion USD. The United States leads the market with 40% share worth more than $400 billion, followed by Europe and the Middle East with a market valued at $300 billion. The global RPO market is valued at around $5 billion.
Technology has greatly expanded the capabilities in this sector, as it is not uncommon for companies to have virtual contact centers where employees work from their homes, or to have offshore centers where support staff works from another country or continent. It is less efficient for companies to have functions performed in-house that require overhead costs. This is a major driver of growth in the BPO industry and represents a relatively still-untapped opportunity in many countries that use little outsourcing.
There are also several other benefits that companies gain by outsourcing services.
- It frees up the time and energy of internal resources to focus on bigger picture strategic goals.
- There is no time or cost associated with training new staff members.
- It offers access to regulatory experts to ensure compliance in an increasingly regulated world.
- There is no employer liability.
- Administrative services can be paid for when they are needed, as opposed to employing someone full time and having them be under-utilized.
- The interviewing and hiring processes can be avoided, saving additional time and money.
- Employers do not need to pay benefits, leave or holidays for outsourced staff.
- It also opens up the opportunity for smaller companies to carve out more market share by increasing their global reach.
Office Administration Outsourcing
A large and growing segment of this outsourcing is office administration. Essentially any company in operation has administrative tasks that must be accomplished to keep the day-to-day operations running smoothly. Administrative functions that are often outsourced include payroll, accounting, human resources, data management, employee benefits, insurance claims management, and client support.
RPO companies emerged from traditional recruiting needs, but are designed to work differently. All or part of a company’s recruitment processes is assigned to an external service provider. RPO services differ from that of staffing companies in that they do not simply find candidates to fill job openings. They focus on the overall improvement of a company’s recruiting process as more of a strategic, consultative partner. They study factors such as turnover rates, technology, scalability, and how much time it takes to fill a position.
Many companies choose RPOs to improve recruitment efficiency, reduce cost, make hiring more scalable, improve the quality of hires, meet the talent needs of short-term projects, and improve workforce analytics and planning.
The industry sectors with the largest market shares are technology, telecom, finance, insurance, healthcare, biotech, pharmaceuticals, and medical equipment.
BPO M&A Activity
As the use of BPO services becomes more common around the world, the M&A activity surrounding them increases, with a large concentration in the middle market. There is a tendency for customers to prefer fewer vendors with more diverse service offerings, motivating BPOs to use M&A to diversify to increase customer wallet share.
In this highly competitive market, BPO companies typically acquire target companies in order to gain:
- More capabilities for broader service offerings
- Exposure to higher growth end-market verticals
- Broader geographic reach to offer more global services
- Economies of scale to lower proportion of fixed costs
RPO M&A Activity
RPO companies are becoming increasingly globalized as a result of mergers and acquisitions. To be successful in this growing market, RPO providers have found different ways to distinguish themselves.
- They specialize across geographic regions, vertical markets, related jobs, and buyer segments.
- They offer value-added and technology-based services, such as analytics and mobile recruiting.
For an M&A deal to be successful, sellers should conduct an all-encompassing assessment of their value proposition and how it ultimately aligns with the buyers’ interests.
M&A Due Diligence
Conducting due diligence for a merger or acquisition is always a time-consuming undertaking, and this is especially true when the target is a BPO company. Location analysis of the target company should be performed for any potential acquisition to help form an accurate purchase price and avoid costly post-closing issues. It assesses site location, economic development, competition, real estate markets, workforce issues, saturation levels, historical attrition rates, recruitment, and retention viability. Partnering with a specialty company broker who has this type of experience is advised.
If you are ready to take the next step with your business, whether it is selling, expanding, or retiring, contact our M&A specialists today. Our expertise, global connections, and proprietary technologies are here to guide you to a prosperous future.READ MORE >>
Benchmark International facilitated the transaction of Gene Larew Lures, LLC in Tulsa, Oklahoma to PRADCO Outdoor Brands.
Gene Larew Lures, an Oklahoma-based company, was purchased by owner Chris Lindenberg in 2006. The company became a market leader with the Gene Larew brand synonymous with bass baits, the Bobby Garland brand, and the Crappie Pro brand.
Benchmark International proved its value by 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.
Owner Chris Lindenberg commented, “I retained the services of Benchmark to help market my company to the public and had very positive results with the right fit with the buyer and a satisfied client.”
Deal Associate, Amy Alonso commented, “Benchmark International added value by negotiating this deal. We saw throughout the entire process that the buyer, PRADCO Outdoor Brands, was a perfect fit who stood to benefit greatly from the manufacturing experience, industry knowledge, and fishing expertise 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 in a swift and expedited manner. We wish Gene Larew Lures and PRADCO Outdoor Brands the best of luck in their future endeavors.”READ MORE >>
Benchmark International facilitated the transaction of Hair Are Us, LLC, a Los Angeles based hair extension brand. They ship worldwide and are well-known in the industry as one of the leading hair experts of human hair extension. They specialize in various extensions, including Indian Wavy, Brazilian Curly, and Kinky Straight.
In addition to a quality product and superior brand, the company has a strong social media following with over 347,000 followers on Instagram and over 5,500 followers on both Twitter and Facebook.
Hair Are Us is a Los Angeles limited liability company established in 2011 by Ashley Williams and Khat Abdur-Rabbani. They started as a mobile business but quickly found success and grew rapidly into an online store and three locations with a fully operating warehouse. Given this success, the company engaged Benchmark International’s help in finding a partner to help take the company to the next level. With the assistance of Benchmark International, Hair Are Us found the right collaborator and agreed to bring on an equity partner in August 2019.
Transaction Director at Benchmark International, Luis Vinals commented, “We are excited to have facilitated the sale of Hair Are Us, LLC a company that designs and retails custom hair extensions and wigs through an online portal and storefront to a private investor. The company serves both individual clients and hair salons, has a national presence within the hair care industry, and serves a number of celebrities. Understanding the intangible assets of the business, such as its social media following of over 300,000 followers was a key aspect that our team heavily focused on. This is a testament to our team’s ability to adapt and apply new innovative skillsets to the successful sale of our clients’ businesses.”READ MORE >>
Benchmark International is pleased to announce the transaction between Counterpoint Trading 439 (Pty) Ltd (Counterpoint) and Shave and Gibson Packaging (Pty) Ltd (S&G).
Counterpoint is a leading manufacturer of food paper packaging products and industrial wipes, founded 14 years ago in Hammarsdale, Kwa-Zulu Natal. The company leverages long-standing and vital relationships with several leading retailers, wholesalers, and distributors and boasts a strong reputation for quality products and reliable service.
S&G, founded in 1981 by brothers-in-law Alan Gibson and Neville Shave, is recognized as one of South Africa’s largest privately-owned packaging and printing businesses, employing over in 500 staff. The business operates through its national infrastructure with its headquarters and manufacturing facilities strategically located in Mobeni, Durban. Further auxiliary sales and warehousing facilities are operated in both Cape Town and Johannesburg.
“We believe that Counterpoint will add significant value to S&G through the addition of further products which are required by our own customers. As people, we share similar values and corporate beliefs and we are confident that this partnership will be a major success in the years to come. Counterpoint will continue to manufacture their products from their existing factory and trade independently under their own name. We are confident that this will be a fruitful partnership, and we welcome Wim and Ruben and their team into the S&G Group of companies,” said Simon Downes, S&G Group Chairman.
On working with Benchmark International, Ruben Van Wambeke, shareholder and director of Counterpoint said “Having Benchmark International walking us step by step through this process was ultimately the key to success. Benchmarks’ ability to realign our perspective is what brought this JV to fruition.”
“The anti-plastic revolution has generated a rise in demand for environmentally friendly packaging alternatives. Strengthened by joining forces with S&G, the innovative paper packaging manufacturer, is well-positioned to capture this market. Having worked closely with the shareholders, we’re pleased with the incredibly strategic match and successful conclusion.” Says Benchmark International’s Transaction Associate Director, Raquel Naicker.
Energized by what the deal portends for the South African M&A industry, Andre Bresler the Managing Director at Benchmark International, added Shave and Gibson’s motivation for this transaction to extend product lines and partner with strong entrepreneurs is a recurring theme emerging in our industry, we are delighted for both parties as the agreed synergies will enable Counterpoint to capitalize on the growth opportunities that motivated them to explore a transaction in the first place.
Benchmark International would like to thank all parties involved and wish them all the very best of luck for the future.READ MORE >>
As the world calls more and more for renewable energy sources to replace carbon-burning fossil fuels, the industries of solar and hydroelectric power offer important alternatives, as well as opportunities for mergers and acquisitions.
Solar power converts energy from the sun into thermal or electrical energy. It is one of the cleanest and most abundant renewable energy sources available. In recent decades, the cost of solar power has decreased substantially.
Hydroelectric power uses turbine-driven generators to convert the energy of moving water into mechanical energy. As one of the oldest methods of creating power, today it is one of the most largely used forms of clean, renewable energy. Because the use of hydropower relies on flowing bodies of water, its use varies based on geographical locations and circumstances.
As the world seeks to turn to cleaner sources of energy, major corporations are also doing so as part of a larger growth strategy. For example, oil giant Shell has a plan to become the world’s largest power company AND cut its carbon footprint in half by the year 2050. To achieve this goal, a majority of the energy capacity added to its portfolio must be derived from renewable power sources.
Solar Power M&A
There are several factors that are proven to create opportunities for M&A in the solar energy market. Solar is still a relatively young industry, which opens up the opportunity for many newcomers to enter the industry and consolidate to grow in scale.
- In Africa, there is an abundance of access to solar power, but there are obstacles to financing. By 2050, Africa is expected to grow from 1.1 billion to 2 billion people, with a total economic output of $15 trillion. This money can be targeted to infrastructure, energy and transportation, and global investors are taking note.
- In the United States, the government makes it an attractive venture for companies to get into solar power through tax breaks, which translates to growth. In fact, in the U.S., solar power deals have already surpassed the $10 billion mark.
- In Europe, companies view M&A as a strategy to enter the U.S. market.
Other opportunities for M&A in the solar energy sector surround installation and manufacturing. As the industry evolves, installers grow in size, brand, and geographical reach and gain market share through consolidation. Regarding manufacturers, the outsourcing of panel production and assembly can motivate solar companies to sell those capabilities as an outsourcing strategy.
The solar power industry is quite a global market. In order to successfully complete cross-border transactions in this space, companies should wisely enlist the expertise and network of a globally connected M&A advisory firm.
Hydroelectric Power M&A
Hydropower may be a much older technology than other forms of renewable energy, yet there are still plenty of opportunities for the development of new facilities or expansion of existing infrastructure. Some of the positive aspects of hydroelectric power projects include their low operating costs, clean power generation, and lengthy service lives. On the downside, the regulatory approval process can be drawn out, and these projects call for significant early capital spending.
As in most industries, investment in hydropower is based on the project's risks and projection of future revenue. For developers to gain access to capital, they need to identify the revenue streams that will service debt (energy projects typically have several revenue streams), offer a return on investment, and have a plan to minimize regulatory and construction risks. It is typical for banks and other investors to only invest in new projects when there is certainty in the power purchase agreement.
The earlier investors are brought into the project, the more careful developers must be with regard to the terms offered. Investors may ask for ownership share or control that is excessive. Enlist the counsel of an experienced advisor to determine whether a proposal is fair. You may need more funding down the line, so the transaction must be flexible enough for more investors to get involved. The earlier you partner with an M&A advisor, the better you can plan the project’s future, and the more risks you can avoid in the long run.
Even the most encouraging and favorable hydroelectric projects can fall apart due to perceived risks. Any risks must be identified and addressed by developers as early as possible.Many issues can be environmental in nature. Research into the project’s impacts on local fisheries and species must be thoroughly conducted, and early communication with public officials is key.
Any energy M&A transaction calls for a specialized level of expertise to ensure that the deal is done right. Finding a highly experienced global firm is in your best interest. If you desire to be on the sell-side of a deal, contact our M&A advisors at Benchmark International to begin the process of finding the perfect fit and solution for you, your family, and your company.READ MORE >>
At Benchmark International, we work exclusively on the sell-side, so we would love to say, “The way to do a re-trade is to never do a re-trade.” However, when you have completed countless deals, there are times when we are tied so closely into those deals that we know the terms of the original offer do not stand up to the target company’s actual position following due diligence. In other words, we will admit when there is a legitimate reason to re-trade a deal term, including the price.
Our experience also tells us that these instances are rare when sellers have been through our process, and there is a right way and wrong way to do it if you want the deal to close. We encourage you to avoid blown deal costs by following these simple steps:
Step 1: Discuss it with us first. Yes, we are going to push back. Yes, we are going to support our client. But we will also be able to keep the deal on track by doing the following:
- In a best-case scenario, clarifying a misconception on your part that moots your need to re-trade
- Giving you a read on how our client will react
- Suggesting the best means of communicating the issue so that the reaction you receive best matches the severity of the actual change
- Providing our client our open and honest view of the change and the reasons for it before he or she has had a day or two to lock themselves into a position that may be based on less than the clearest picture possible
- Delving into our resources to convert what starts as a win-lose scenario to something closer to a win-not-lose-too-much scenario
Step 2: Have your data lined up. Very often we see re-trades supported by vague concepts and no numbers. These cause extra problems. If the amount of the re-trade can come over on the left side of the page with a numerical breakdown of the reasons for the re-trade on the right side of the page, and the seller can see that the two balance one another out—even if just figuratively—we are all in a much better position to get to the closing.
Step 3: Don’t wait. When you find something in diligence that looks like it is building to be the source of a re-trade, don’t save it all up and then dump it on the sell-side at the last minute. Conditioning the recipient of bad news is always the best way to get the most appropriate response to that news.
Step 4: Don’t overreach. Even in our smallest deals, we are not operating in a Turkish bazaar. There is no need to ask for $500,000 when you need $250,000. That type of negotiation works well in one-off trades but not when you are trying to build a relationship that is expected to hit additional bumps before the deal closes and likely needs some level of ongoing trust after closing.
Step 5: Be open to creative solutions. Regardless of how meaningful the problem is and how large a fix you need, your solution may not be the only acceptable one. It may not even be the best one for you. There are many ways to change a deal to address an unforeseen risk and provide the protection you need to offset that risk. The key to getting the transaction closed is often finding the amount of offset you need using the method of offset the seller can accept.
Benchmark International works hard with its client to avoid the need for re-trades. We collect extensive data on our clients prior to going to market. We run a very process-driven data room and often pre-populate it. We encourage our clients to get in front of disclosing detracting factors to avoid any surprises. We comb through every financial statement and tax return our clients can produce. In some countries, we are able to verify returns against official tax transcripts. Unlike many other brokers, we will even put known issues into our Confidential Information Memorandums. We attempt to place our clients with experienced M&A legal advisors. We understand—and make every effort to ensure our clients understand— that hiding an issue is not going to get them a better deal, may cost them a very good deal, and will never make it through due diligence.READ MORE >>
In the latest report published by Experian regarding UK & ROI deal activity in the first half of 2019, trends have shown that the private equity market has continued to play an active role in M&A activity. While there was an 8% decline in the volume of deals funded by private equity compared to last year, 2018 was a particularly fertile year in the industry and PE houses have still been notably active in the market.
Here is a summary of private equity trends by region:
There was a private equity element in around 19% of all London deals, up from 17% in H1 2018.
Private equity In London has been increasingly active so far this year and, at the top end, six of the ten biggest deals of the year to date featured a private equity buyer. This included a consortium comprising Kirkbi (the Danish family investment vehicle that controls Lego), Canadian pension fund CPPIB and private equity house Blackstone, who agreed to acquire Merlin Entertainments, the leisure business behind Madame Tussauds and Legoland.
Elsewhere, satellite communications firm Inmarsat agreed to be acquired by a consortium including Apax Partners and Warburg Pincus in a £2.7bn deal, as well as TDR Capital’s £1.9bn deal to purchase BCA Marketplace, the company behind WeBuyAnyCar.READ MORE >>
The first half of 2019 has been strong for the Irish M&A market, according to William Fry’s Mid-Year M&A Review for 2019 in association with Mergermarket. While overall deal volume has dropped, value is up, while private equity and overseas investments have also been significant.
Findings in the report include:
Private equity is a major contributor to Irish M&A – Private equity deal value totalled €1.8bn in the first six months of 2019, a 74% increase from H1 2018, with private equity firms accounting for three quarters of overall deal value in H1 2019. Deal volume has also risen from 19 deals to 21 deals.
Likely contributors to this activity include the fact that Ireland will be the only English-speaking country in the EU once the UK leaves, an attractive prospect for North American companies looking to acquire in the EU. Mature private equity firms are also interested in Irish companies, buoyed by Ireland’s steady GDP growth, as this presents Irish companies as attractive deal targets. As well, with the $1.8tn of dry powder that private equity firms have access to, they are now looking to younger markets like Ireland to deploy this capital.
To add to this, the Irish government is making moves to support private equity investment in the country, approving the drafting of the Investment Limited Partnership Bill that aims to make the jurisdiction more attractive to fund managers.READ MORE >>
Benchmark International facilitated the sale of Vintage Park VIP Lounge One, LLC d/b/a Barcelona Restaurant & Lounge in Houston, Texas. It has been acquired by private investor Holssam El-Assal.
Vintage Park VIP Lounge One, LLC d/b/a Barcelona Restaurant & Lounge, was founded by Mark Evans in 2014, at Vintage Park, one of Houston’s premier destinations for shopping and dining.
Benchmark International proved its value in finding a buyer with experience in the upscale dining industry through its proprietary multi-medium marketing strategies. In addition, Benchmark International incorporated several campaigns with local, regional, and national associations.
READ MORE >>
Owner Mark Evans commented, “Benchmark International’s team was able to accurately represent my business to the market and find a buyer that could continue providing the level of service our clients desire. Most importantly, they valued the confidentiality of the transaction deeply to not disturb any on-going operations. They were involved every step of the way and were able to deliver on their promise of bringing in a buyer that would take care of our team post-close.”
Deal Associate, Amy Alonso commented, “Benchmark International added value by negotiating this deal. We saw throughout the entire process that the buyer, Holssam, wanted to become involved with the restaurant and be a hands-on operator. 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 in a swift and expedited manner. We wish Holssam and Mark the best of luck in their future endeavors.”
Benchmark International has advised on the transaction between cloud-based CRM developer, BrightOffice, and ClearCourse Partnership, a group of technology companies, for an undisclosed sum.
BrightOffice was founded in 2004 and has developed a customisable, cloud-based software platform through which it delivers specialised CRM products for around 300 clients across a variety of sectors.
ClearCourse is a growing partnership of innovative technology companies providing membership and payments software platforms to groups, organisations and small businesses. A highly acquisitive company, BrightOffice marks ClearCourse’s 14th acquisition since October 2018 and the second CRM purchase after it acquired not-for-profit CRM Protech earlier this month.
ClearCourse has the financial backing of Aquiline Capital Partners, a New York and London-based private equity firm with AUM of approximately $3.5bn.READ MORE >>
Mergers and acquisitions in global government contracting (specifically the technology, aerospace, defense, and government services industries) is a market that tends to remain stable and ripe with opportunity. This sector offers many positive qualities such as revenue transparency and predictability. Strategic buyers seek products, services, sales channels, and geographical presences that broaden capabilities and make them more competitive. Companies with advanced technologies are in an especially advantageous position for acquisition.
Yet, even in an environment that consistently sees a strong flow of defense M&A deals, there is a heightened level of risk with plenty of opportunity for errors and setbacks. The business of government contracting is highly regulated and can be extremely complex, with a great deal of challenges. It is also subject to the effects of government spending budgets—and budget cuts.
Governments enforce intricate legal and regulatory requirements. Failure to adhere to these requirements can result in government actions that include contract termination, suspension, debarment, damages and penalties. Suspension and debarment, which means that a company can no longer conduct business with the government, can be a result of unfair trade practices, fraud, commission of crimes, and even a lack of business integrity or honesty. There is also a great deal of emphasis placed on conflicts of interest.
With so many possible risks, careful planning is imperative when considering a transaction in this space. It is recommended that sellers engage M&A experts with a strong reputation, transaction experience in their sector, and strong connections within the global buyer community.
It is also recommended that sellers prepare for a sale from the perspective of the buyer.
- Determine areas of exposure. Due diligence is always important in determining an accurate valuation of a company, and this is even more so in the case of government contractors. It demands a meticulous level of scrutiny. The company’s level of compliance can directly impact the valuation. Often, many contracting companies also run commercial businesses and have less strict compliance programs versus pure government contractors, yet carry the same risks.
- Assess risk and successor liability. Serious risk mitigation strategies are necessary when it comes to proper recordkeeping regarding compliance, including cyber-security and socio-economic topics, as well as a lack of negative factors such as prior suspensions or debarments, tax violations, investigations, and claims. Additionally, what is the exit strategy that is in place, and how can it improve the quality of buyer conversations and increase valuation?
- File regulatory notices and approvals. Be prepared for the filing of government notices, regulatory approval prerequisites, and post-M&A integration. These filings should be identified in the agreement, and the parties should preemptively agree to a process for securing government approvals.
Other important considerations regarding government contracts mergers and acquisitions that any seller should anticipate include:
- Analysis of existing and prospective government contracts held by the entity to be acquired and assignment of contracts to the buyer
- Any potential socio-economic impacts as a result of the transaction
- The transfer of facility and top-secret clearances, as well as intellectual property rights
- Assessment of conflicts of interest that could exclude the buyer from future contracts
- Whether the target company is compliant with specific government regulations
- Any existing subcontracts and teaming agreements
- Past performance of the target company and its impact on the buyer’s ability to win other government contracts
Foreign transactions may face additional challenges in completing M&A transactions in the government-contracting sector. These include more stringent due diligence processes, export law compliance, security clearances, cultural differences, and foreign investment scrutiny. This applies even further regarding higher risk regions, such as Africa.
In the case of cross-border deals, there are key concerns as to:
- Whether the seller is considered an inverted domestic corporation and no longer eligible for future government contracts
- If there should be inclusion of a board of directors as part of a mitigation plan to allow continuation of the seller’s facility clearance
Proper due diligence can identify risks in a transaction, create accurate representation and certifications, confirm that the adequate disclosures and indemnifications are obtained, and secure necessary government approvals, resulting in a successful and profitable acquisition.
If you are interested in making a move in this sector, please consult with our international M&A specialists, as we have the desired experience in transactions involving government contractors and companies that support them.READ MORE >>
The inverted yield curve is a situation that occurs when the interest rates on short-term bonds are higher than the interest rates paid by long-term bonds. It basically means that there is enough concern about the near-future markets that people move their money into less risky long-term investments. Any time this scenario arises, investors get nervous because it typically warns of a recession.
Short-term vs. Long-term Bonds
In thriving economies, bondholders demand a higher yield (profit) for longer-term bonds versus short-term bonds.
- Short-term bonds mature in less than five years and carry a lower interest rate risk. These funds do not yield large returns. They give investors a safe way to earn higher yields than they would with extremely low-risk investments and do not require money to be tied up for a long period of time.
- With long-term bonds, there is a much longer maturity period and people are required to invest their money for greater lengths of time. While these types of bonds yield higher returns, there is also an increased risk that higher inflation could reduce the value of payments, and that higher interest rates could cause the bond's price to drop. A longer-term bond also carries a higher risk of default.Basically, the longer it takes to be repaid, the greater the risk that inflation will swallow your investment.
- Most investors choose to have a mix of both short- and long-term bonds.
Government debt securities are known as Treasury bonds or T-bonds. These types of bonds are considered to be virtually risk-free. They earn fixed interest until they mature (a period of 10-30 years). Once they mature, the owner is also paid the face value of the bond. Treasury bonds make interest payments semiannually and the income earned is only taxed federally.
The Inverted Yield Curve
Treasury bonds help to form the yield curve, which includes the full range of investments offered by the United States government and diagrams yields by maturity. It usually curves upward, with longer-term bonds having a higher yield. The yield curve becomes inverted when long-term bonds are in high demand and the rates are shown to be lower than those of shorter-term bonds.Essentially, in this scenario, investors expect that they will make more money by holding onto a longer-term bond than a short-term one.
The yield curve inversion can also point toward expectations by investors that the Federal Reserve will cut short-term interest rates in an effort to boost the economy.
A Predictor of Recessions
Although it can happen months or years before a recession begins (usually an average of 18-22 months), the inversion of the yield curve has been a consistent predictor of every recession since the 1960s. For that reason, any time it happens, there is heightened anxiety and anticipation of slowed economic growth.
The last time the yield curve inverted was in 2007, prior to the financial crisis and recession of 2008, which was the worst recession since the Great Depression. The yield curve also inverted prior to the recessions of 2001, 1991, and 1981.
In this latest case, the yield curve first inverted in December of 2018, and inverted even further in March of 2019. Then, the 10-year yield hit a three-year low of 1.65% on August 12, 2019.On August 15, the yield on the 30-year bond closed below 2% for the very first time in history. Fears of the ongoing economic effects of the trade war between the United States and China are fueling the market concerns around the world.
The science of forecasting financial futures is never a 100% certainty, and while the inverted yield curve has proven to be a reliable indicator of things to come, it does not necessarily guarantee that a recession will happen. As of August 2019, the Federal Reserve has said that there is only around a 35% chance of a recession.
What It Means for M&A
An inverted yield curve can have implications for mergers and acquisitions, especially if you are aiming to grow your company.
For example, let’s say that part of your growth strategy requires funding for building expansion or new equipment. Under an inverted yield curve, short-term interest rates become higher than long-term interest rates. Some businesses may find this to be good news because they can lock in a good rate for the long term.
It may be impossible to predict financial futures, but enlisting the help of experience M&A advisors can help you formulate growth and risk management strategies for your company that make the most of available capital for expansion and lower your risk in all yield-curve situations.
Are you ready to make a move? Call our M&A experts at Benchmark International to start the conversation about your growth strategies and future opportunities.READ MORE >>
At Benchmark International, we see hundreds of letters of intent (LOI), term sheets, and heads of terms every year. And though the title of the document changes from location to location, we see acquirers making the same mistakes across the globe. These mistakes cause delays, lead to good LOIs not being signed, and lead to LOIs being signed but then resulting in nothing more than blown deal costs (and angry sellers). We would like to offer a little advice from the sell-side about how to make your offers come across in the best possible light.
1. Do not include an automatic extension to the exclusivity period.
When there are no conditions on an extension other than your sole discretion, our clients see that for exactly what it is. Unless either (a) they have some veto right over any extension or (b) it kicks in only if certain material and tangible milestones have been hit, extensions cause our clients to get a bit suspicious of the other terms in the LOI. Its one of the easiest clauses for an M&A novice to understand so if they feel weary of that clause, you can imagine the effect it has on their reading of the more complex sections.
2. Do include a sources and uses of funds table.
Missing the table is problematic for a few reasons. Our clients often have a hard time following the complexity of a structured offer and the table can clear up some things for them. In addition, when the client is rolling over an interest and you are using the target company (or newco) to undertake the acquisition debt, a clear picture of the debt is necessary to ensure the rollover is correctly valued and, more importantly, for us to best explain to our clients the magic of leverage. Our clients tend to be less comfortable with debt than you are. When they learn later in the process that the company will be taking on large amounts of debt, it serves no one's interests for them to feel they have been left out in the dark or that they are suddenly facing a riskier proposition than they thought—even when they are not going to retain any interest in the business.
3. Do not get too specific on the net working capital when the closing date is not yet known.
Our clients' business' have seasonality. Most of them don't have the same working capital in June that they have in October. With a two, three or even four-month window for the closing date, setting the target at the time of LOI is a recipe for disaster. Most acquirers have an adequate enough understanding of our client's business at the time of presenting an LOI to allow them to set the balance sheet line items to be included in the definition. But setting an amount causes extra pains both when trying to get the LOI signed and later if the closing date moves.
4. Put the total purchase price in the first paragraph.
Sellers look for the headline number. Why not put your best foot forward? Starting off with a nice sentence or short paragraph outlining the total benefit to be received by the sellers is a great way to get the momentum rolling for the offer. It is surprising how many acquirers do not put their best foot forward in this way.
5. Avoid being too specific on indemnification and other legal terms.
Sellers like our clients do not want to engage legal counsel at the time your LOI arrives. When an LOI comes in with the baskets, caps, timing limitations of indemnification and the list of the fundamental reps, our clients either (a) feel inclined to engage legal counsel—which slows everything—or (b) later hear from their counsel that they should not have agreed to such terms in the LOI, prior to engaging counsel. These extra details create a lose-lose proposition.
6. Send the offer to the broker first, not the client.
The error rate on sellers reading LOIs in the dark is astronomically high. Let us give your offer a read and come back to you with anything we think our client will misunderstand. As this is such an emotional and important process for sellers like ours, it can be difficult to get them unstuck from a misreading of your offer. It's best to do whatever is possible to get them started in the right frame of mind and we can (and are motivated to) help you ensure that happens. After we have had a chance to give it a once-over with our professional eye and provide some feedback, feel free to send it directly to the seller if that is important to you.READ MORE >>
The financial industry is an ever-evolving industry dealing with constant regulatory adjustments, scrutiny, competition, etc. The financial industry is also one of the first industries to look toward for a current health report on an economy as well. Numerous factors impact the financial sector, such as changing customer behaviors, macroeconomic cycles, data protection legislation, political climate, etc.
M&A activity in the banking and finance industry has been on the rise in the last few years. This trend looks to continue as we head towards the end of 2019, and begin to take a peek around the corner in 2020.
Key Industry Trends
Look for M&A activity in the finance industry to continue to place a major focus on improving technology, product offerings, and overall customer satisfaction.
- At the base of much of the M&A activity, we currently see a technology arms race in the finance industry. Banks and financial institutions have identified a strong need to enhance their technological features, and this has become a focal point for M&A activity in this industry.
- One interesting factor to watch for as we move forward is the continued entrance of non-traditional players into the finance industry, commonly referred to as fintech. The fintech group is an emerging group that heavily utilizes technology to deliver financial services, unlike their more-traditional counterparts. Fintech disruptors are the technologically innovated companies that are competing head to head with the traditional financial methods we have grown accustomed to for years. As this relates to M&A activity in the finance industry, one might assume a combination of financial services and technology would make for an attractive acquisition or merger opportunity.
- Customer service remains a high priority for all banks and financial institutions. However, customer service can theoretically split into two parts: The first part involves people and relationships, which smaller banks tend to tout as an advantage over larger banks. The second part is more strategic, involving product offerings that will better keep customers satisfied. Larger banks tend to win out with more product offerings over their smaller counterparts based on economies of scale, and access to significantly more resources. M&A opportunities allowing a bank to enhance its product offerings is an attractive feature as well as acquiring talent and relationships through acquisition. For smaller banks and financial institutions that find it harder to keep up, being acquired by a larger bank may be an attractive strategy to explore as we look toward the future.
Debt Financing and Interest Rates
Lastly, M&A transactions typically involve some form of debt financing, which a lot of times will make up the majority of the cash at close. Interest, which is the cost to borrow money, can severely impact an M&A transaction from a funding perspective, and certainly an economy for that matter. Though they are trending higher, interest rates remain reasonable for the time being, and not far above historical standards.
It appears a significant portion of private equity firms are financing a large percentage of their M&A transactions with nonbank debt. In comparison, other groups are using cash reserves, which end up lowering the dependency on debt financing. A movement in valuations, rates, and funding could cause a shift either way in M&A activity, though for now, the environment appears stable. Should interest rates continue to rise, eventually causing equity market volatility, one would assume this would force buyers to focus on consolidating their strategic positions more than pursuing opportunistic acquisitions.
READ MORE >>
"There's lots of bad reasons to start a company. But there's only one good legitimate reason, and I think you know what it is; it's to change the world." - Phil Libin
Happy World Entrepreneurs' Day to all the innovators and business owners out there who are changing the world and making a difference! At Benchmark International, we're here to help you explore your business strategies and deliver desired results, so your company can continue to help others everyday. Check out our latest workshops and see if you'd like your business to be featured in the upcoming events we will be attending.
Join us in Columbus, Ohio, for a one-to-one Valuation Workshop tailored to help you understand the current value of your company. Sign up here.
AVCJ Private Equity & Venture Forum
On November 12th, 2019, Benchmark International will be attending the AVCJ Private Equity & Venture Forum in Hong Kong. If you are interested in being featured at this event,
We Are Ready When You Are.
It's never too late to explore your company's growth strategy and exit plan. The experts at Benchmark International are here to help with unique growth strategies for your company and begin your exit planning process.
Benchmark International is a leading worldwide M&A advisory firm that specializes in the lower to middle markets. On the company's Facebook page, you will find regularly updated news and information regarding the organization and its involvement in the world, as well as relevant topics and insightful articles regarding different industries, topics in M&A, and additional useful information for entrepreneurs, business owners, business buyers, and anyone eager to learn more about M&A.
M&A Leadership Council
The M&A Leadership Council is a global alliance of companies and experts in everything related to mergers & acquisitions, including best practices, training and certification, resources, and information about M&A companies. Their Facebook page offers a nice compilation of content that is relevant to people working in M&A, as well as CEOs and business owners, and it keeps followers updated on interesting events.
The Middle Market
This M&A-focused page offers breaking news, in-depth commentary, and helpful analysis about deal making in the burgeoning middle market. It is frequently updated with information regarding current deals that are being made or have been made, and articles that focus on other happenings in certain industries, as well as M&A events.
This popular publication caters specifically to entrepreneurs and topics relevant to them, offering tips, tools, and insider news to help businesses grow. Here you will find occasional articles regarding M&A news and insights mixed in with a wealth of other quality information that is relevant to business leaders.
Institute for Mergers, Acquisitions & Alliances
IMAA is a global, non-profit M&A think tank and educational provider. They offer M&A trainings and workshops for executives worldwide, and offer the only globally oriented M&A Certificate Program. Their Facebook page is frequently updated with information and coverage regarding their events, as well as news and opinions on M&A from around the world.
Harvard Business Review
Founded in 1922, Harvard Business Review promotes smart management thinking for business professionals worldwide through reliable insights and best practices, with the ultimate goal of making leadership more effective. Their Facebook content spans a myriad of business-related topics and news, including happenings in the world of M&A.
With a mission to power investor success, Morningstar is a top provider of independent investment research in North America, Europe, Australia, and Asia. It provides data and research insights on a range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data, and their Facebook page reflects these related topics.
For 20 years, Investopedia has provided educational information on complex financial concepts, investing, and money management. While not exclusive to M&A, on their Facebook page you will find a variety of topics covered that are relevant to businesses of all types, stocks and the economy, including articles that delve into mergers, acquisitions, trends, and historical transactions.
The self-proclaimed "home of all things money" network is a leading business and financial news organization that reports stories from around the world. Here you can access real-time market coverage and news related to careers, entrepreneurship, leadership, personal finance, and mergers and acquisitions.
Seeking Alpha is a substantial worldwide investing online community, and their Facebook page is a great extension of their online presence. The platform connects millions of investors and money managers every day regarding news and investment ideas. They handpick articles and podcasts from the world's top market blogs, money managers, financial experts, and investment newsletters, publishing approximately 250 articles daily.
Contact one of our analysts if you are ready to start a conversation about M&A for your business.
Benchmark International is delighted to announce the sale of the group of Rocara companies, Rocara Limited and Rocara Ireland, to global chemical manufacturing and distribution company, OQEMA, for an undisclosed sum.
Rocara, with operations in Belfast and Dublin, provides a wide range of general and speciality chemicals, solvents and surfactants. Since its foundation in 2006 the group of companies has been a driving force in the chemical distribution and manufacturing market in the Republic of Ireland and Northern Ireland, representing global manufacturers.
With headquarters in Mönchengladbach, Germany, and a base in Oxfordshire, OQEMA is a global chemical manufacturing and distribution company. It is one of the five largest chemical distributors in Germany and one of the top ten in Europe with almost 1,100 employees currently working for OQEMA at 40 locations in 20 countries.
This is a major strategic acquisition for the companies, providing an opportunity for customers across both businesses to benefit from existing supplier relationships and giving OQEMA a significant footprint in Northern Ireland and the Republic of Ireland, completing its portfolio of UK companies to drive growth in Europe.READ MORE >>
Our seller clients know that we see quite a few offers come through every week, month, and year and they expect us to provide our input on the timeframes that are “market.” As this is a buyer-seller neutral point and a strong set of mutual expectations is productive to achieving a closing, we want to give you an idea as to what is happening on our side of the table.
Nobody is getting deals closed in less than 90 days.
Even well-funded, experienced buyers seem to require 90 to 120 days get from letter of intent (LOI) execution to close in the middle and lower-middle markets.
A request for more than 120 days is exorbitant.
A third of a year is a long time to be off the market for an owner who is committed to selling their business.When the time comes, there may well be good reason to extend exclusivity but we know that our clients more often than not regret any grant of 120 days or thereabouts. We can work with them to set up specific grounds for extending exclusivity beyond 90 days where a situation warrants it, but blanket grants of 120 days, or even 90 days with a 30-day automatic extension, are something we highly discourage our clients from accepting.
Diligence should start quickly.
We encourage acquirers to use the offer letter to inform the seller about diligence timings, especially when the initial diligence list will be sent and, if possible, when the initial diligence visit will start. All too often, we see LOIs signed followed by a long pause in activity and that drastically alters our clients’ attitudes toward the buyer and the offer. We encourage or clients to have this expectation set at the time of signing and expect that there will not be a pause but rather an aggressive start, even if that start only covers a portion of the scope of the overall diligence effort. When this happens, we see diligence lists arriving within a week of signing and the first onsite (or the next face-to-face meeting) within three weeks of signing.
First drafts do not wait until the diligence is complete.
We understand that acquirers may not want to incur the cost of engaging counsel based solely on the information in the Confidential Information Memorandum and a meeting or two. But we also understand that waiting two months to engage counsel and get first drafts out does not lead to a high close rate. We all know that drafts can be sent “pending finalization of due diligence.” Our successful deal closings have the first drafts coming out within a month of LOI signing. Our clients know that if they have not seen a draft by then, the deal is not likely to close.
The seller can really mess up the timeline.
Failure to provide prompt and complete responses to diligence requests, abnormal reservation of disclosure of “sensitive” issues until later in the process, going on vacation, or simply the lack of organized files are all things we have discussed with our clients prior to going to market (and again when the LOIs start to arrive). They know that they can be the problem when it comes to timing.
But if the seller does not mess up the timing…
Our clients know that time kills all deals. And they know that if they have been prompt and thorough, and the LOI signing date is approaching triple-digit days in the rearview mirror, things are not going well. Our statistics show that few deals die in the first 100 days after signing and few deals close more than 100 days after signing. This is something we share with our clients—both to set their expectations and to motivate them to be prompt and complete.
Questions should be responded to within three business days.
We instruct our clients that deals require momentum to close. Precisely when they are most exhausted by the process is when they must reply in an even more expedient manner. Being realistic, we feel that the seller owes the buyer responses to every question within three business days, even if the response is, “We are working on it. It’s been a bit difficult to get our hands on that data.” Similarly, we believe the acquirer should respond to the seller’s questions, and send their follow up questions, within three business days. Allowing sellers to feel that anything that has not yielded a follow up within those three days has a “soft close” around it and goes an immeasurable distance in keeping sellers motivated, focused, and responsive.READ MORE >>
It has been very interesting to follow the changes in market norms for indemnification over the last two decades. As due diligence has escalated dramatically, especially in the U.S. lower-mid markets, over that time, indemnification terms have moved in equal measure in the opposite direction. It seems that acquirers believe that an ounce of prevention is worth a pound of cure. While this has significantly increased the time between signing a letter of intent and closing, it has also made the negotiation of the purchase agreements a bit simpler. First-time sellers—always attentive to post-closing liabilities—seem to be much more comfortable with the current market terms for indemnification than they did with those in practice at the turn of the millennium.
While Benchmark International does not provide legal advice to its clients (or to acquirers), we do rely on our viewing of hundreds of purchase agreements per year to offer our seller clients a perspective on what we see as the norms for their market. While this is a moving target, our insights have remained fairly constant for the last three or four years as follows:
- We see indemnification for any item other than a fundamental representation being capped at between 10 and 20% of the non-contingent portion of the purchase price.
- Acquirers are still alternating between both baskets and true deductibles. These are typically agreed at between one and two percent of the non-contingent portion of the purchase price with baskets being at the higher end and deductibles being at the lower end. These de minimis carve-outs are applied to fundamental representations in about half of all deals.
- The obligations for everything but fundamental representations survive for between 12 and 24 months, with 18 months coming on strong as the mode.
- Fundamental representations are almost always capped at the entire purchase price and survive for very long periods such as seven years, until the expiration of the applicable statute of limitations, or indefinitely. This survival period is one deal point for which we would say there is no market norm at the moment.
- The representations classified as fundamental have not changed much over the years: organization, capitalization, authority, no conflict, ownership of assets, brokers, environmental, tax, and ERISA.
- Fraud continues to be treated like the fundamental representations.
- We still see a few acquirers attempting to leave out the provision encapsulating the indemnification as the exclusive remedy. And we still see sellers’ counsel never allowing that to be absent in the final draft. Leaving it out of a first draft has become so rare that it is almost seen as painting outside the lines, poor sportsmanship, or the like by our clients’ counsel.
The global waste management industry is expected to grow at a compound annual growth rate (CAGR) of 6% leading to 2025, with industry experts anticipating an overall value of $530 billion. An increase in environmental awareness, an increasing population, and a rise in urbanisation are all key to growth in the industry. Furthermore, implementation of stringent government norms towards dumping is anticipated to lead to further growth over the coming years.
Where uncollected waste and dumping are impacting on health directly, this is expected to be another key factor leading to growth in the market. However, a lack of awareness and investment in developing countries is expected to hinder growth inthe industry inthose regions. With that being said, the general consensus is that the positive factors in the industry will exceed any negatives, hence the projected CAGR of 6%. Furthermore, emerging economies in Asia-Pacific, Latin America, Middle East, and Africa are contributing to growth in the industry through the implementation of solid waste management solutions, which will spread awareness in those regions and increase the number of regions developing them in the near future.
Europe is expected to dominate the waste management market share over the coming years, owing to increases in favourable government initiatives, along with high-end technology adoption by management services. However, Asia is the region that is expected to drive the demand for waste management services, due to the presence of densely populated countries such as China and India where an increase in urban penetration is being witnessed. Moreover, as with Europe, government initiatives in the region are expected to increase the demand for waste management services.
Key Industry Factors
- In 1960 the United Nations found that the global urban population was just 34% revealing plenty of potential growth, last year that figure stood at 55%. Furthermore, estimates by the World Health Organization predict the figure to increase by approximately 1.84% every year until 2020, at a rate of about 1.63% per annum from 2020 to 2025, and around 1.44% per annum from 2025 to 2030. Naturally, as the urban population increases, the amount of waste being produced will also increase – in-fact the amount of municipal solid waste (MSW), a crucial by-product of urban lifestyle, is growing at an even higher rate than that of urbanisation.
- The World Bank found that in 2016, the world’s largest cities generated 2 billion tonnes of solid waste, which amounts to a footprint of 0.74 kilograms per person, per day. With rapid global urbanisation, annual waste is expected to increase by 70% from 2016’s figure to 3.4 billion tonnes in 2050.
- Increasing levels of environmental awareness regarding factors such as renewable waste management systems or rising carbon dioxide emissions are expected to lead to further growth opportunities in the industry. Businesses in the industry have been pivotal in ensuring as much MSW as possible is recycled and are conducting programs for non-hazardous industrial waste management to reduce pollution and mitigate environmental hazards. Moreover, untreated waste and dumping affect health directly and indirectly by spreading infectious diseases, thereby boosting the demand for waste management services.
There are plenty of factors that give us reason to be confident about the future of the waste management industry. With no sign of urbanisation slowing down, waste management will continue to be an integral part of the global economy.
Acquiring an existing business can offer great advantages over starting a new business from scratch, especially if the target business is thriving and holds more opportunities for growth. When considering the purchase of a company, you should take certain steps so that you can be confident that you are minimizing your risk and making a smart move. Use this comprehensive checklist to help you ask the right questions and guide you through the process.
☐ Is the Target Company Financially Healthy?
This is a question you must ask yourself before considering anything else about the business. You will want to carefully comb through the business's financial statements for the past five years (at least) to identify if anything appears out of the ordinary and to assess how the numbers compare with standard performance in that sector. Also, request to see the tax returns for the same years. This will help you determine whether the owner has put personal expenses through the company books and give you a more complete picture of the company's actual value. You also will want to know if you will be taking on any existing debt, and exactly how much.
☐ Will You Be Able to Generate Cash Flow?
It is crucial that you know whether you will be able to generate cash flow immediately upon purchasing the business. If not, are you in a position to carry the business until that time comes? No matter how attractive the company may seem, you must ensure that you are not getting in over your head. Take a thorough look at sales records to assess past and future performance. You must also find out if any existing clients or customers are planning to part ways and what you can do to retain their business.
☐ Does the Company Have a Good Reputation?
Doing a quick Google search can reveal quite a bit about a business. You will want to see how the company is perceived in the world. Does it have a lot of negative reviews or bad press? Are there any customer complaints, and do you know how they were handled? Get a comprehensive look at the business's reputation because you are going to need to see if you have work to do in order to turn it around. This could include a complete rebranding and marketing effort, which costs money.
☐ Have You Done Your Homework on the Staff?
When you acquire an existing business, you are also acquiring its management team and employees. You should know the skill levels and proficiencies of any staff you will be inheriting, and whether you are going to be faced with the task of replacing key staff members. Do all team members plan to stay with the company? Have they been made any promises by previous ownership that you will now be expected to fulfill? Is anyone retiring or planning to go on extended leave? Is anyone disgruntled about the sale? When you know the answers to these questions, you'll be best prepared to address any issues.
☐ What is the State of the Inventory?
If inventory is applicable to the business in question, everything should be itemized and given a carefully determined value. Will any inventory lose value with time, or only have a value at certain times of the year? Will it be adequately stocked for when you take over the company? When you are investing in a company, you're going to want to have everything you need on hand to generate revenue from its operation.
☐ What is the State of the Physical Property?
First things first: you need to know if the business owns the property on which it resides or if there is a lease agreement in place. Then seek out answers to the following questions. What are the details of the lease and the reputation of the landlord? How much is the rent, and is it due to increase? Is the property in good condition, or is it in need of repair? If the business owns the property, what are the real estate taxes? Is the property able to accommodate any planned growth? Is it legally zoned? Is the location appropriate? Are you going to need to make changes, or find a new location altogether? This is an area where you cannot be too thorough.
☐ Do You Have All the Legal Documents and Contracts?
This is another critical step in purchasing a business. You are going to need to have every last piece of paperwork that pertains to that business. This includes business licenses, copyright agreements, patents, trademarks, import and export permits, mining rights, real estate documents, etc. Basically, if something relates to the business in any way, you should have documentation of it. If the current owner has not kept good records, there is your first sign that you might want to think twice about moving forward with the acquisition.
☐ What is the Condition of the Business's Equipment?
You should assess the condition of all office equipment, furniture, machinery, and vehicles used for the business. What is owned and what is leased? What are the items' lease or purchase details, and are there maintenance agreements in place? You should assess the condition of all equipment to determine if anything will need to be replaced because this will be a factor in the purchase price of the business.
☐ Are You Familiar With the Business's Suppliers?
This is important because suppliers can have a significant impact on how reliable your business is able to run. You want to ensure that they are established and committed to providing superior quality and service. Find out if they fill orders on time and meet their obligations. Look into any contracts that are in place, so you understand the relationship. You also will want to ask if there are any expected price increases or factors that may impact the existing arrangement.
☐ Contact Benchmark International
If you are looking to buy a business, we represent highly motivated sellers in the lower-middle and middle market that may be the perfect fit for you. Contact one of our experts to discuss how we can help with target company searches.READ MORE >>
On the 12th November 2019 Benchmark International will be attending the AVCJ Private Equity & Venture Forum at the Four Seasons Hotel in Hong Kong.
The AVCJ Forum is widely recognised as the private equity industry’s ‘must attend’ event in Asia, and one of the industry’s leading events globally. It is both the world’s largest Asia-focused private equity conference, and the largest gathering of institutional investors/private equity LPs in Asia. It involves insightful presentations, thought-provoking discussions and networking opportunities with over 1,150 senior professionals.
Benchmark International is the only corporate financier to exhibit at the event, helping to promote its exclusive opportunities on a worldwide level.
Do you want to be featured and showcased in front of leading dealmakers? Naturally, we present only a select number of companies for each event, so we would encourage you to contact us now to ensure your business is included.READ MORE >>
The global print market is shrinking in volume but growing in value. Output measured in billions of A4 prints was 49,973 back in 2014 but is forecast to decline very slightly to 49,654 by 2024. In value terms, print output is expected to grow from a total of $767.4 billion in 2014 to $862.7 billion in 2024 – a CAGR of 1.18%.
The role and dynamics of the print industry are changing, with the main factor being the impact of the internet and mobile connectivity on the way both businesses and individuals communicate and access information. This affects every segment of the traditional printing business, changing expectations of what is acceptable to speed, relevance, and degree of interactivity of data, irrespective of the medium used.
As we work exclusively in the mid and lower-mid markets, we see many deals succeed, and some wither. In an effort to have more of the former and less of the latter, we would like to share our core philosophies with the belief that helping you understand them will make working with us a more rewarding experience.
1. Time kills all deals.
Prudent and deliberate action are certainly also key aspects of getting deals closed but, in our experience, neither buyers nor sellers are inclined to be under-prudent or lacking deliberateness. Rather, unexplained and avoidable delays tend to stack up between the first meeting and the closing. Each delay shaves off a small percentage from the probability of closing. There are enough legitimate delays in the M&A process. When we see one that can be avoided, we will step in and attempt to get the ball rolling once again.
2. Transparency is the best antiseptic.
We’ve seen too many deals die because one side or the other has hidden something until it is too late. Long before you meet our clients, we will have already guided them on the value of releasing the troubling issues they might have at the earliest opportunity. Hopefully, you will already have seen some of this in our Confidential Information Memorandums. We lean forward into these issues because we believe that the sooner they are addressed, the more solutions there are, and the less likely anyone is to feel hoodwinked. We hope you’ll feel the same way with your own challenges (for example, lining up debt financing) as well as any you may see with our clients.
3. The emotional must be covered as well as the financial.
This may be somewhat unique to our clients as our process appeals to a certain owner type. As you probably know, we specialize in closely-held and owner-operated businesses. Nowhere is it more true that “every business is a family business.” Our clients have typically had 20- to 30-year relationships with their businesses and often equate the sale process to sending their son or daughter off to college. When we work with acquirers that understand the effects of this fact pattern, we see a much higher level of success. In fact, we have built our teams, our process, and our engagements around it. We will be more than happy to help you deal with this interesting aspect of our clients. Please just ask.
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Benchmark International has successfully facilitated the transaction of RoseMill Packaging Resources, LLC to Conner Industries, Inc.
RoseMill Packaging Resources, LLC (“RoseMill”) is a custom packaging company located in Lewisburg, TN. Established in 2006, RoseMill specializes in the manufacturing and assembly of packaging materials for finished goods. They offer corrugate pallets, corrugate assembly, foam assembly, and additional packaging and warehousing resources.
Now former owners Mike Rose, VP of Sales, and Spencer Miller, VP of Operations, will continue in their roles as they help transition and integrate RoseMill into the Conner family.
In reference to the transaction, Mike Rose commented, “From the onset of discussions with Benchmark, we expressed our desire to find a good fit for the acquisition of RoseMill. We wanted to ensure job security for our employees as well as a continued high level of service, quality, and innovation for our customers. The Benchmark Nashville office was able to find the perfect company, Conner Industries, that had the same desires as us for the long-term success of the RoseMill facility. We are happy to be a part of the Conner Industries family and thank Benchmark Nashville for their efforts in helping us close this transaction.”
Conner Industries, Inc (“Conner”), is headquartered in Ft. Worth, TX, and is a leading provider of industrial wood and packaging solutions in the United States. Conner specializes in supplying cut lumber (softwoods, hardwoods, and panel products) needed for pallets, crates, and skid parts, as well as fully assembled custom pallets, crates, and industrial containers.
Conner has 10+ locations across the Midwestern and Southeastern US and serves customers nationwide.
CEO of Conner Industries, David Dixon stated, “As a buyer, I enjoyed working with Robert at Benchmark who helped keep the deal on track despite some of the matters that we were faced with. He worked diligently to help explain the matters to both sides and worked with both the buyer and the seller on viable solutions.”
Director from Benchmark International, Robert West, added, “Working with Mike and Spencer was very rewarding around. Our entire team was very heavily invested in a successful outcome for RoseMill from the time we were engaged. What we found in Conner is not only a great deal economically for our client, but a great cultural fit to ensure the legacy of RoseMill continues on. We’re excited for Mike, Spencer, and Conner Industries, and look forward to hearing of their future successes.”
The year was 1999. The world was transforming thanks to new technologies, and society was bracing for what Y2K and the millennium bug might bring. The popularity of the Internet was skyrocketing, and home computers were becoming a necessity rather than a luxury. Napster, Blackberry, Tivo, and Bluetooth were introduced. The "Melissa" E-mail Virus infected millions of computers and caused more than $80 million in damage globally. The Euro currency was established in 11 countries. The cost of a gallon of gas was $1.22. Bill Gates became the wealthiest man on earth, and Jeff Bezos was named Time Person of the Year. But what about the world of mergers and acquisitions twenty years ago?
1999 M&A in Review
The year 1999 was known as the year of the hostile deal. Strategic refocusing of companies was at an all-time high. Companies were motivated to act quickly to fend off larger rivals. The philosophy was that the bigger a company became, the more dominant it would be in the market.
- Total worldwide mergers and acquisitions grew from $286.9 billion in 1991 to $3.2 trillion in 1999, with a total of 24,436 transactions that year.
- Also in 1999, worldwide hostile deals reached more than $473 billion in dollar volume representing more than 14% of all announced worldwide deal value.
- There were 9,192 M&A transactions valued at $1.4 trillion in the U.S alone, including 15 hostile deals valued at $112.7 billion.
- Deals valued at over a billion dollars increased from 13 in 1991 to 194 in 1999.
- There were 47 transactions valued at more than $10 billion worldwide in 1999.
Making M&A History
Several of the biggest M&A deals in history took place in the years 1999 and 2000.
- Vodafone AirTouch of Britain negotiated the hostile $183 billion merger of Mannesmann of Germany. This all-stock transaction set a record for a corporate takeover.
- Also in 1999, Exxon and Mobil merged to become an energy industry superpower.
- In January of 2000, America Online's announced the $165 billion purchase of Time Warner.
- The same year, Pfizer acquired Warner-Lambert for $90 million, creating the second-largest drug company in the world.
These four deals are among the world's largest mergers of all time.
Tech & Communications Revolution
The years of the mid to late 1990s were an economic game-changer. The tech and communications revolution certainly had a major impact on M&A activity. It stimulated the globalization of markets by improving cross-border communications and transactions, and it enhanced capabilities in modeling cash flows and structuring transaction scenarios. It also resulted in a boom in new business launches and the reimagining of established businesses.
1999 was the height of the Information Age, and the dot-com tech bubble was fatter than ever. Markets were booming. Dot-com startups were going public. Online shopping was becoming an actual thing. People were quitting their jobs to engage in full-time day trading and personal investing. We saw the rising popularity of online companies such as eBay, Amazon, Yahoo!, AOL, Match.com, and WebMD.
Of course, the bubble burst, leading to the early 2000s recession. Many online companies went under, and other major corporations lost a large portion of their market cap. Pets.com lost a whopping $1.75 trillion in value only nine months after its IPO.
Unfortunately, the dot-com crash also led to the telecoms market crash of 2001. Telecom providers over-invested in their networks, and mobile phone companies overspent on 3G licenses. The high levels of infrastructure investments were out of proportion to cash flow, and increased competition led many telecoms providers to slash prices for services, especially in the European market. Within one year, 100,000 jobs were lost in telecoms support and development across Europe.
Now vs. Then
The recession in the early 2000s cooled M&A activity for obvious reasons. The good news is that 2019 has actually been the most dynamic year for M&A activity since the year 2000, driven by a surge in North American deals. CEO confidence is on the rise, and investors are showing a willingness to take risks.READ MORE >>
Benchmark International is pleased to announce the transaction between Exeter-based school stationery supplier, Flipfile, and Wick-based stationery supplier, BDS Office.READ MORE >>
You’ve decided to sell your company, but when is the right time to tell your employees? And what is the right way to tell them? The conversation may not be easy, but if you follow a few simple guidelines, you can ensure that you handle it to the best of your ability.
Have a Plan
You should already have an exit strategy in place when you are selling your business, but that is your own personal exit plan. You should also think about how the process will affect employees. Develop a clear timeline of how you expect the deal to progress and when you will meet with your staff about it. You do not want to come across as confused and unsure about the process. The more confident you are in explaining it, the more confident they will be about it being a good plan for them as well. You may also want to consider when to introduce the new owner. By having the staff meet the new boss, you can dispel a great deal of anxiety. The best time to do this is AFTER the deal is done, in the event that the deal falls through. Otherwise, you are introducing them to someone irrelevant, adding confusion and instability.
Wait Until the Deal is Done
It can be tempting to share your plans with employees early in the process. But if you disclose your plans too soon, you are opening yourself up to risks that can tank a deal. Employees can get scared into finding another job. Vendors and clients can get nervous and jump ship. These are all scenarios that are not in your best interest, as the health of your business is an essential aspect of a sale. By waiting until a deal is in place, you can avoid telling your employees false information when things are still subject to change.
Depending on the size of your business, you will likely want to inform key management before telling anyone else in the organization. They are going to need to fully understand the transition because you are going to need their support. They can help you maintain clarity when employees go to them with questions. If management is clear on what is going to happen, they can keep employees calm and properly informed.
Once you’ve made the announcement, you must remain proactive in answering employees’ questions. It can also be important that they hear any news directly from you versus rumors around the water cooler.
Provide Written Communication
By creating a document that outlines pertinent points about the deal and the transition, employees can reference it following the announcement if they do not recall something. It also provides them with something concrete so that you are not leaving details up to their imagination.
Do Not Overpromise
Once you sell the company, you will no longer have control over what happens in the day-to-day business operations. It is important to express to your employees that you care about their futures and that you took the proper steps of protecting them when brokering the deal with the new owner. However, you want to avoid making promises that you will not be around to honor.READ MORE >>
Benchmark International has facilitated the sale of Lovett & Tharpe, Inc. to LTI International, LLC.
Lovett & Tharpe has been in business for more than 85 years, serving the needs of over 500 farm equipment dealers in the Southeast. Lovett & Tharpe distributes the product lines of more than 30 different manufacturers worldwide. Lovett & Tharpe operates from a 72,000 square foot warehouse in Dublin, GA.
Eddie Herrin, President of Lovett & Tharpe, stated, “The Benchmark International team facilitated the sale of my business from the earliest stages of marketing through the final agreement and completion of the deal. They acted in a courteous and professional manner and provided the insights and assistance I needed as a first-time seller. I would highly recommend Benchmark International to anyone considering the sale of their business!”
LTI companies offer procurement and distribution of specialized agricultural, industrial, hotel, construction and truck equipment, and spare parts. With over three decades of experience in procurement services and a team of seasoned industry veterans, LTI is a premier supplier to the US, Caribbean, and Latin-American marketplaces. LTI is a Georgia limited liability company with operations in Orlando, FL.
Benchmark International Director Leo Vanderschuur stated, “It was a pleasure to represent Eddie and Lovett & Tharpe in this transaction. Throughout the process, Eddie was exceptionally responsive, diligent, and professional. This acquisition represents a tremendous opportunity for both businesses and their teams to strategically accelerate the rate of profitable growth. On behalf of the numerous Benchmark International personnel that worked on this opportunity, we congratulate both teams on reaching this goal.”
Benchmark International is pleased to announce the transaction between bespoke rubber products engineer, Elastomer Engineering, and Lancashire-based manufacturer of niche rubber products for engineering and industrial applications, Dexine Leyland Rubber Technology (DLRT).
Family-owned business Elastomer Engineering has extensive expertise in polymer science and manufacturing technology, including a range of proprietary products sold into the oil & gas and defence sectors.
DLRT is a leading manufacturer of elastomeric products and components for industrial and engineering uses. The company specialises in the design and manufacture of complex products and offers a range of rubber compounds with properties such as oil and fire resistance and vibration damping.
Working in the same sectors as Elastomer Engineering, the acquisition allows for the two companies to sell an extensive product range into these sectors.
The acquisition also provides DLRT the opportunity to acquire a portfolio of significant intellectual property, along with a wide range of specialist equipment designed for high value precision moulding. With DLRT’s assets, this constitutes greatly enhanced product development and manufacturing capabilities for both businesses.READ MORE >>
You’ve decided to sell your business. Congratulations! Whether you are retiring, looking to embark on a new business adventure, or wanting to hand off the reins and take a different role in the company, the process of selling a business can be a trying one without the correct preparation and support. Fortunately for you, you can learn from other entrepreneurs who have been in your shoes and have shared the five things that they wish they had known before selling their business.
1) Neglecting to perform pre-transaction wealth planning can result in you potentially leaving a lot of money on the table. Before you sell, consider your family members’ wishes and concerns. Communicating with family members before the sale can help ensure smooth sailing through the deal negotiations. Effective tax-planning to support family members’ needs, philanthropic plans, or creating family trusts can help increase the value gained from the transaction.
2) Don’t underestimate the importance of a good cultural fit with a buyer. While the price is always at the forefront of a sellers’ mind, cultural fit can mistakenly be pushed to the back burner. One of the many things that you have worked hard to create in your business is the employee culture. Most likely, you want to see the close-knit “family” that you have built continue when you are no longer working there. Benchmark International understands that and will help you find that partner. We remain committed along with you to your goal of finding a buyer who will carry on your legacy.
3) Skimping on your marketing materials does not pay off in the long run. With confidentiality being of the utmost importance, how can you engage buyers without them knowing who you are? Preparing a high-quality, 1-2 page teaser that provides an anonymous profile of your business is the tool used to locate a buyer confidentially. This is followed by the Information Memorandum, with an NDA that is put in place for your protection. Benchmark International will prepare these high-quality documents and put your mind at ease.
4) Sellers wish they had known how detail-oriented the process would be, how many documents would be needed, and how labor-intensive each phase would be. One of the most crucial pieces of advice that the majority of sellers wish they had known is that you need to have a team. Sellers need to continue running their business as they were before, or operations can really start to slow. The last thing you want is for the value of your company to take a nosedive because you are investing all of your time into a transaction. With the team at Benchmark International as your partner dedicated to the M&A process, you will be free to continue to focus on the growth and operations of your business. We will handle the details for you.
5) Finding a like-minded partner can give a seller a false sense of security that the transition from two companies to one will be easy. You need a trusted advisor that will help you navigate the complexities of integration, giving you insight on some of the other intangibles that need to be negotiated. Those intangibles include the details of your role after the sale, employment contracts, earnouts, etc. With Benchmark International’s vast knowledge and experience in M&A deals, we know what is usual and customary to request throughout the negotiation process and will bring more value to your transaction.
Congratulations again, this is an exciting time for you! With the right partner, it can be a smooth and profitable process as well. Benchmark International has a team of specialists that arrange these types of deals every day. We can answer your questions and help you determine what is best for you, your business, and your exit plan. A simple phone call or email to us can start the process today and move you one step closer to accomplishing your goals.
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Benchmark International’s South African office was proud to attend the unveiling of this year’s private equity survey conducted by the South African Venture Capital Association (SAVCA).
Once again, private equity in South Africa has demonstrated the robust nature of the local market by posting a significant increase in investment activity in 2018.
The survey reports the value of new and follow-on investments has reached R35.4 billion, more than double the annual average of R15.2 billion posted over the past decade.
The research has further revealed that Southern Africa’s private equity industry (comprising both government and private funds) boasted R171 billion in funds under management (FUM) as of 31 December 2018.
More pointedly, the facts allude to a significant spike in trade sales, which were the most popular transaction, equating to a value of R5.6 billion in the past calendar year.
This further solidifies the dynamic reputation of the local mid-market sector of the economy and bodes well for the near and mid-term investment cycle for South African business owners looking to grow, transform, or exit their businesses.
Additional key takeaways from the survey include:
- R171 billion in funds under management (FUM)
- R12.8 billion was raised in 2018
- 55. 5% of the funds have been earmarked for South African investments
- Real estate comprised 15% of the value of all unrealized investments at 31 December 2018, with manufacturing and retail accounting for 11.6% and 10.8%, respectively
- Average investment deal size increased to R43.3 million during 2018, from R41.5 million during 2017
To obtain the survey results, SAVCA, along with its research partner Deloitte, surveyed 47 managers, representing 82 funds, with a mandate to invest in South Africa and in other African markets.READ MORE >>
The Current Market
The lower-middle market has remained positive for sellers in 2019, thanks to an abundance of buyers that are giving sellers the leverage to demand favorable terms. Most business sectors are seeing strong profits, and the bullish optimism of large-cap investors has spilled over into lower and middle markets. This has resulted in heightened interest and aggressive valuation and buying from private equity firms.
There are several patterns have carried over into 2019 from a very active year in 2018.
• M&A activity has been especially strong in the healthcare and technology industries.
• Acquisitions remain a popular strategy for companies needing talent to keep up with growth.
• Buy-and-build strategies are proven to be working.
• Emerging markets are being attractively valued, especially in the Asia Pacific region.
• Competition for high-quality targets is intense, particularly for businesses that are owned by the rapidly growing retiring population.
• Small business confidence is strong, resulting in increased investment by owners.
What Lies Ahead
The world faces potential changes in the political landscape as the United States 2020 presidential election nears, Britain is under new leadership through the Brexit transition, and the global economy navigates significant political unknowns in the wake of trade deals and tariffs. However, the United States election takes place near the end of 2020, which could possibly stave off any significant effects on the economy until the year 2021.
While no one can ever be certain what the future holds, we still see the benefits of a strong year midway through 2019, yet the lower-middle market has the potential to become more complicated in 2020. The current bullish market is strong but is expected to lose momentum based on the average amount of time that historical highs have been proven that they can be sustained. Many experts warn of a downturn in the economy next year, predicting that a recession is looming. In contrast, some experts expect M&A activity to remain robust regardless of the economy.
Obviously, uncertainty in the marketplace can impede M&A activity. But a recession does not necessarily mean that selling will be impossible. The variables that drive lower-middle market M&A include:
• Lending capacity: The less money a buyer can borrow, the less money they may want to spend.
• Cost of capital: The cheaper a buyer can borrow, the more money they may want to spend.
• Buyer access to equity capital: Strong profits and surplus cash motivate activity.
• Supply and demand for deals: Aging populations entering retirement and business succession plans, strategic buyers focusing on growth, etc.
In the lower-middle market, buyers and lenders both tend to stay much more disciplined regarding their willingness to lend, cost at which they lend, and returns they target. Buyers will be seeking targets with stability, limited cyclical exposure, a business model with recurring revenue, and a history of performing well through a recession.
Should You Sell Now?
The good news is that there is still time before a possible slump in activity and optimism. If you are looking to sell your business, you may have another 12 to 18 months to benefit from the premiums today’s sellers are getting. Keep in mind; it does not mean that after this time is over, you will not be able to sell. Companies are always looking to grow through acquisitions, and the market is always changing. You do not need to feel completely discouraged by any economic slowdown.
Consider how long you are willing to wait to sell your business if the market were to drop. If you do not plan to sell within around five years or more, you can wait patiently for the next market rebound. But if you are determined to sell in the next couple of years, it may be wise to get serious about your exit strategy while conditions are still favorable. Think about what is right for you, your business, and your family when deciding when to make a move.
Our business acquisition experts at Benchmark International can offer exit planning advice and help you plan a solid transition for your company. We will use all the tools at our disposal to get you the maximum selling price while preserving your vision for the future. We can also help if you are looking to buy a business. Contact us today.READ MORE >>
What is private equity?
Private equity (PE) is medium to long-term finance provided in return for an equity stake in a company. The objective of the PE company is to enhance the value of a company in order to achieve a successful exit (i.e. sale).
Where do PE firms get their money?
PE firms generally invest funds they manage on behalf of groups of individuals, pension funds, and other major organisations.
What types of companies do PE firms invest in?
PE firms look for companies that can offer a lucrative exit within three to seven years. Therefore, the company has to be large enough to support investments from the PE firm and have the potential to offer large profits in a relatively short timeframe. This means that PE firms buy companies with strong growth potential, or companies that are currently undervalued because they’re in financial difficulties.
How are PE fund managers compensated?
PE fund managers receive their income via two channels – management fees and carried interest.
A management fee is paid by the limited partners (the people who provided money to invest) to the PE firm to pay for their involvement. The fee is calculated as a percentage of the assets to pay for ongoing expenses such as salaries.
Carried interest is a percentage of profits that the fund gains on the investment. This compensation helps to motivate the PE fund managers to improve the company’s performance.
What is a platform company?
A platform company is the initial acquisition made by a PE firm in a specific industry. Typically, a platform company has a strong management team to drive the company forward and a proven track record in a specific industry. This company is the foundation for subsequent companies acquired in the industry.
What is a bolt-on company?
A bolt-on company is in a trade which the PE firm has already invested and is added on to one of its platform companies. The fund will look for bolt-ons that provide competitive services, new technology or geographic footprint diversification, as well as companies that can be quickly integrated into the existing management structure. Typically, a bolt-on company is smaller than a platform company and has minimal infrastructure in terms of finance and administration.READ MORE >>
15. Decide the Company's Future
Before planning your exit strategy, you must decide the future course for your business. Do you plan to sell outright? Would you prefer that the company stay within family ownership? Do you want to retain a percentage stake in the company? Is there an employee that you would want to take over? Could a merger or an acquisition be the best move? This is a key decision to consider before embarking on your exit plan.
14. Set a Date
It's never too early to think about when you plan to retire. This need not be an exact date on the calendar, but you should establish a ballpark timeframe that you would like to put the wheels in motion for your exit. Having an idea of the timing will help you get the process started at the right time, whether it's two years from now or 20 years down the road, especially because most transactions take time.
13. Plan for Continuity
If your business will be changing hands when you retire, you should have a solid plan in place for maintaining the continuity of the company's operation. Both employees and customers alike will need to feel that the future is secure, and you should be able to reassure them through a clear strategy for the transition.
12. Use Diversity to Minimize Risk
The more diversity you have in your client and supplier bases, the more attractive and less precarious your business will be to potential buyers. They are going to need to have confidence that the business can grow, rather than falling apart if the sale results in the loss of one or two key clients.
11. Think Big Picture
It is not uncommon for a business owner to get wrapped up in the day-to-day details of running the company to the point where they lose sight of the bigger picture. It is a good idea to take a step back and consider where you want your business to be in the future, how you plan to get it there, and when your exit fits into that plan.
10. Create Your Dream Team
Having a strong management team in place is crucial to any successful exit strategy. Whoever is taking the reins is going to be a significant factor whether you are selling the business to an outside party or bequeathing it to family or an employee. It will also help you rest easier about leaving the company in someone else's hands.
9. Get Your Financials in Order
Before you can broker a sale or transfer ownership or control, you will need to organize financial statements, valuation data, and other important documents about the business. If you are planning to sell, buyers will expect to see thorough documentation about the business operations, profits, losses, projections, liabilities, contracts, real estate agreements (pretty much anything and everything regarding the company).
8. Know Your Target
If you plan to sell your company, you are obviously going to want a buyer who has the financial capacity to take on your business. But money is not the only thing that you should be seeking. You want a buyer who shares your values and your vision for the company. They also should possess the right skill set to maintain the company's success and even grow that success. You should not waste your time with a prospective buyer that doesn't have the chops to take the business in the right direction.
7. Always Listen
Even if you feel it is too soon to sell and someone is reaching out to you, it is always wise to hear him or her out. It could result in a meaningful relationship that can be beneficial in the future. They could also reveal some things about your company that you have not yet considered, sparking new ideas and opportunities in the realm of business acquisitions.
6. Devise Practical Earn-outs
If you plan on getting additional payment as part of the sale of your business based on the achievement of certain performance metrics, be realistic about setting these goals. Falling short of these targets can result in less money for you and enhanced leverage for the buyer.
5. Get Your Tech in Order
Today nearly everything is powered by technology. You use it to help you get organized, but you also run the risk of letting things fall through the cracks. Think about all the logins and passwords that give you access to things that run the business. Establish a plan to streamline your tech while keeping it secure for a transition in management. There are enterprise cyber-security management solutions that can assist with these matters.
4. Know Your Number
Have you asked yourself, "What is my business worth?" When you understand the precise valuation of your business, you will be able to ascertain the difference between a fair sale and a bad deal, and get the money you deserve. This includes a company analysis married with a market analysis. You should enlist the help of an M&A expert to determine the valuation of your business accurately. It is worth it to ensure that you get your maximum value.
3. Put it on Paper
Having the proper paperwork drawn up for legal purposes is important in the event that something were to happen to you so that you can convey your plans and wishes for the business. The task of creating this safety net will also help you plan more clearly for the future. Sometimes there are details you may overlook until you go to put it all on paper. You should outline your plan and make sure any necessary signatures are on file.
2. Assess the Market
Markets fluctuate and can change at any given time. But if you carefully evaluate your industry's outlook and growth projections, you can time your exit strategy for when you can get the most value for your company. If the outlook is not trending toward optimism, you can take the time to consider how you can bolster the value of your business and make it more desirable in the future.
1. Partner With an Advisor
Valuating and selling a company is not easy. Neither is planning an exit strategy. Seeking the help of experts such as an M&A advisory firm can take an enormous weight off of your shoulders. It can also ensure that the exit process goes smoothly, stays on track, and achieves your specific objectives for both you and the company.
Benchmark International can help you establish your exit strategy and broker the sale of your company so that you get every last penny that you are worth. Call us to get the process started. Even if you are not 100% sure that you are ready to plan your exit, we can help you devise strategies to grow your business in the meantime.READ MORE >>
While deal values and volumes are trending downwards in most regions and sectors, investors are still willing to set political and regulatory uncertainty aside to execute big, strategic transactions when opportunities arise. That suggests that activity should remain relatively robust in the months ahead, despite a more challenging deal environment.
The raw data point clearly to a decline in M&A activity across regions and most sectors in the first half of the year. Cross-border activity and the prevalence of mega-deals are also on a downward trend. Yet the picture is a little less stark than the numbers suggest.READ MORE >>
Benchmark International received a card today from Bolton Lads & Girls Club which reminded us of what a great cause the Club is to support.
The Club has four centres across Bolton, providing a safe space for young people to spend their free time and includes provisions such as sports, arts, mentoring and community outreach work.
Anybody can help the Club by arranging charity days to raise funds through to mentoring a child by providing one-to-one support.
To find out more about Bolton Lads & Girls Club and see how you can help, please follow the link below:READ MORE >>
When business owners begin the process of selling their business, they may have expectations about the sale process. These expectations can be based on what they have read, what their friends have told them, and what their own needs are. However, the reality of selling a business can be very different from the expectations.
Sellers tend to think that a buyer will appear at their doorstep ready to transact a deal when, in reality, that is not the case. The sale of a business is a very time-consuming process. M&A transactions can take anywhere from 6 months to a few years to complete, pulling a seller away from the company, which can affect the financial performance and valuation of the business. Hiring an M&A advisor can help take some of the time burdens off of the seller.
In our experience, it never surprises us who the buyer is at the end of the day. However, many sellers believe that their perfect buyer is international or a larger company. Again, this is not the reality of it. The ideal buyer may be right down the street or even a member of the seller's management team. When considering selling a business, a business owner needs to seek an advisor or sale process which will provide them with options when it comes to buyers. Not only does this drive up valuations, but it also allows the seller to choose the buyer that is the best fit for their company.
Sellers often assume that their business needs to be in the perfect shape to sell it. Sellers will typically share that they want their business to show year over year growth or a more diversified customer base. While these changes might make the business more attractive to the market, buyers buy companies for different reasons. For example, if a buyer is seeking to acquire a company to gain a relationship with a particular company, then that buyer will see a concentrated customer base as a good thing. Also, sellers will work hard to groom their business and miss out on opportunities within the open market. They work for years to grow their business, only to have the market shift and have their business not gain any additional value. The best tie to sell a business is now. We understand what's going on in the market, both from a micro and macro level, and we are not trying to predict the future.
Answer to Questions
The sale process can be very nerve-racking for sellers because of the unknowns. Sellers often expect their advisors and or buyer will be able to answer all of their questions. However, this is not the case. The sale process is just that, a process. Business owners need to go through the process to discover all the answers to their questions. Buyers are eager to get sellers comfortable with deals, integrations, and any other areas of concern for sellers. An M&A Advisor will be able to guide sellers on when they should have answers to their questions. If the answers are unknown, the M&A advisor can help guide the seller to provide comfort based on the advisor's experience.
A lot of sellers assume that the majority of deals are structured as all cash transactions. All cash transactions mean when the sale closes, the seller will receive his or her money, and the buyer gets the key to the operations, allowing the seller to leave immediately. However, this scenario is a rare occurrence. Typically, a seller is required to remain with the company for 3-5 years to help with transitioning the business. Sellers in lower middle market deals tend to be critical to their company because processes are rarely formalized, and the relationships that sellers hold are key. Given the time frame for a transaction, the buyer will want to incentivize the seller to remain motivated post-closing. To achieve this goal, the buyer will want to structure the deal so that the seller has an interest in the smooth transfer and future success of the business.
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That’s an easy answer. YES! You absolutely should hire an M&A advisor to sell your business. Here’s why.
It’s Not Easy
The process of selling a company is guaranteed to be complicated. While an accomplished attorney or accountant can help, you are going to need a true expert intermediary to handle the entire venture if you are serious about selling and getting the best possible deal.
Consider the seemingly endless amount of work that needs to be done.
• Data and documentation must be produced and organized, stretching back several years to a decade. This is going to include financials, vendors, contracts, and so much more. Do not underestimate how overwhelming the paperwork will be.
• Potential buyers will need to be identified and vetted. A good M&A advisor has access to connections and a knowledge base that you would otherwise never have, opening up an entirely new realm of potential buyers. This process will include a fair share of phone calls, emails, and face-to-face meetings, all of which add up to be very time-consuming.
• You are going to need an experienced negotiator that knows how to maximize your business value and lay the groundwork for getting you what you want. This means knowing how to push a deal forward while providing you with peace of mind that things are on the right track. This also means creating a competitive bidding landscape.
Get Peace of Mind
Selling your business is not a process that should be taken lightly. Countless decisions will need to be made. Consider the reality of what is going to be required and embrace the fact that you cannot shoulder the burden and run your company. Make sure you can sleep at night. Find an M&A advisor that will find you the right buyer, deal with the minutiae, and get the job done—all while sharing your vision for the company, as well as your exit strategy.
They Can Get You More Money
It is also important to note that an M&A advisor is more likely to get you more money. Research shows that private sellers receive significantly higher acquisition premiums when they retain advisors, in the range of six to 25%. Additional research shows that 84% of mid-market business owners who hired an M&A advisor reported that the final sale price for their business was equal to or higher than the initial sale price estimate provided. After all, they know how to value a company properly.
Another benefit of having an M&A advisor is that it shows buyers that you are a serious seller. As a result, hiring an M&A advisor can help drive up your company valuation and get you more favorable terms.
Enlisting the guidance of the wrong advisor can be disastrous. The last thing you want is to end up in negotiations with someone who does not have your wants and needs in mind at all times. Even worse, they can slow down the process and cost you a fortune. When making this decision, know what to look for:
• You want an advisor that understands you, your company, and what you expect to achieve from the sale.
• Consider their experience in your sector, as well as their geographic connections, and how that can work for your business. Global connections are especially helpful. And do they usually work with businesses that are around the same size as yours?
• They will adequately prepare you and manage your expectations.
• They will work diligently to find the RIGHT buyer, not just the easiest or the richest.
• They should be honest, and you should trust them because they have demonstrated that they are worthy of it.
• Their track record will speak for itself. A quality business acquisition advisor is going to have a proven reputation, client testimonials, credentials, and accolades.
• Also, ask if they use any proprietary technologies or databases and how it helps them gain insight into specific industries.
Take your time in evaluating potential advisors. A good firm will patiently accommodate your process. You are going to be working closely with them through a grueling journey, so you will want to feel comfortable with their team and confident that they will work around the clock to get you the most favorable results possible.