The impact of the various lock-downs necessitated by the pandemic has directly affected the financial performance of the vast majority of businesses across the globe, both small and large.

Whilst certain M&A deals have continued on their charted timelines, others have seen an acceleration whilst some re-negotiation, and even stoppages, as a consequence of the impact in both buyer and seller positions. Funded deals feeling the most impact as they have in some instances experienced delays as bankers and financiers attend to more pressing matters in the moment.

The question foremost in most seller’s minds is that of value and how, in cases of a drop in performance, this might impact the value of their transactions.

In the same way that a company producing hand sanitiser cannot expect to achieve a valuation based on a short-term explosion of results, companies impacted negatively will not be unduly penalised if the effects are short term.

Normalisations are a fundamental element of negotiation in any M&A transaction where the objective is to determine maintainable earnings by ringfencing non-recurring income and expenses that might otherwise not reflect in the income statement under new ownership.

It would be naïve to suggest that these non-recurring expenses or even losses directly attributable to the effects of the COVID pandemic can simply be written out, but negotiations are bound to include provisions for such abnormalities. One can expect deal structures to include deferred compensation - or earn out provisions - that will be triggered when the business demonstrates a return to prior performance and a resilience to the COVID impacts.

At Benchmark International, we have gone as far as to suggest to some clients they create a COVID-19 income statement line item in which to capture the additional expenses/ losses that will arise due to this once-off event, a list of examples is below;

• Lost Productivity
• New IT infrastructure
• Bad debts
• Increased provisions imposed by auditors
• Underprovided items now expensed (i.e. leave)
• Divisional shutdowns
• Impairments
• Bridge financing
• Retrenchments
• Fixed costs (like rent which is possibly redundant for a period) to be made to be variable
• Additional safety and hygiene costs
• Forex losses or gains

With proper records of these types of expenses, it is possible to defend the adding back of expenses to earnings for the purpose of acquirer valuation in the future.

There is great need all around us. During COVID-19 and this time of social distancing, many local businesses are considering ways of how to give back and do their part to support their local communities and businesses.

Benchmark International founders Steven Keane and Gregory Jackson showed their support to the community by purchasing 400 pizza pies over a two-day span from their favorite pizza place - Grimaldi’s Pizzeria in Tampa, FL to be able to feed the healthcare professionals at Tampa General Hospital (TGH).

Steven Keane and Greg Jackson hand-delivered the pizzas this past Tuesday and Wednesday to provide food to the frontline healthcare workers who are selflessly working each day to provide help and comfort to thousands of in-need patients.

As a team, Benchmark International and Grimaldi’s Pizzeria was able to set a few new Grimaldis records.

The records consisted of the following:
• The most pizzas to be in the oven at any one time
• The largest single order – 200 pizzas in one order
• The largest single order two days in a row – Totaling 400 pizzas

Benchmark International was honored to be able to provide this contribution to their local community and also the healthcare workers at Tampa General Hospital (TGH) and would like to thank Jeff, Rick and the Grimaldi’s team who work so hard to help make this happen.

Globally, Q1 2020 saw private equity have a robust start to the year. According to data from Mergermarket’s Global and Regional M&A Report 1Q20, global buyout activity remained at the same value as Q1 2019. This was reflected in Europe, with the continent having a strong start to the year due to ‘high profile defensive consolidation and continued private equity investment’, which equated to a 30.2% increase in deal value over Q1 2019.

Of course, this was before the pandemic, with a fall in activity in March and with the primary market for leverage loans shut down, the private equity market is unlikely to reach the levels of the start of the year in the months to come.

But how resilient is the private equity market anticipated to be?

If we look back to the recession of 2008, it does not paint a promising picture, as trust was completely lost in private equity firms. In 2007, buyouts represented 27% of overall M&A value in the US and Europe, which then dropped to 14% in 2009, due to lack of trust. Similarly, in 2019, over 25% of global deals involved a private equity firm, which does no bode well for buyouts in 2021. However, the current crisis is very different in nature to 2008 and buyout activity should remain resilient due to the record amounts of dry powder financial institutions have at their disposal.

European private equity demonstrates this with private equity activity as late as mid-March, with KKR announcing a 5bn USD takeover of recycling firm Viridor.

During the current crisis, exits may be muted – but that does not mean they will grind to a complete stop. For opportunistic buyers, there may still be targets in the coming months, particularly those in sectors immune to the current crisis, such as technology, business services and software. Companies thriving in the crisis – such as those in hygiene, home fitness, and home entertainment should also see a continued interest.

After you have poured your life into your business, there comes a time when you start pondering retirement and planning an exit strategy. Whether you want to assume a smaller role in the company, transition it to a family member, or sell outright to an investor, it is not a process to be taken lightly. Readying a business for sale is a daunting task and an emotional journey. Which is why the first thing you will want to do is partner with an experienced M&A advisory team that is going to understand your goals and your needs, and have empathy throughout the process.

Ultimately, you have two high-level goals for selling your company: for the process to run smoothly, and to get the most value possible. There are many stages that go into making these two goals attainable, and at Benchmark International, we have perfected this process down to both an art and a science. This includes selling at the right time, which is why getting started as soon as possible can be critical to the results.

Our mergers and acquisitions advisors will take a deep dive into learning everything there is to know about your company. (Chances are, we already are very knowledgeable on your industry.) We will be straightforward with you regarding our assessment and what you can do to make your business more valuable and appealing to a prospective buyer. This includes third-party research that vets your company’s reputation in the public space and how to address any concerns.

We will also use our proprietary technologies and global resources to identify the types of buyers that are right for your business, and then create a plan to effectively market your company to these buyers. This gives you a huge advantage as a seller. There are many steps that go into these processes that we can later detail for you to a greater extent should you decide to sell. And don’t worry—everything is handled with the utmost confidentiality and you can rest assured that any buyer is going to be closely vetted. We will never ask you to meet with a potential acquirer that is not suitable and that we don’t believe is in your best interest.

Another important undertaking that our experts at Benchmark International will handle is the due diligence for buyers. Obviously, they are going to want to know a great deal about your company. Buyers also expect to see scrupulous recordkeeping regarding financials, legal issues, and items such as contracts. Our team is here to help you compile the proper documentation, and we can even create a Virtual Data Room to store it securely and conveniently. This includes ensuring the protection of your intellectual property such as trademarks, copyrights, trade secrets, and the like.

We will coordinate all meetings and discussions between you and a buyer, always protecting confidentiality. When a buyer makes an offer for your company, we will present it with honesty as to whether we feel the offer is appropriately valued. We are committed to ensuring that you get everything that you deserve.

When you decide to move forward with an offer, your dedicated deal team will handle all of the negotiations following your instructions at all times. This includes structuring the sale clearly so that all parties involved know their roles moving ahead with the transition of the business. We handle all contracts with full compliance and proper documentation. Not a single piece of paper or communication will go to a buyer without you seeing it first. You can also expect regular contact at all times until an acquisition is complete.

Selling a company is a complicated endeavor and needs to be handled with expertise in order to achieve the right results. Having the right team in place can make all the difference in the success of your exit.

So, the answer to the question, “Now what?” is quite simple: contact us.

Our award-winning M&A analysts are waiting for your call to talk about how Benchmark International can help you sell your company for its maximum value. Reach out to us today and we can embark on this exciting journey together.

Suntech Electrical Contractors, Inc. (Suntech), a Florida company that engaged Benchmark International to market and facilitate the transaction of the business with investors Stanoy Tassev and Rocco Reffie.

Suntech was founded in 2003 by Tom Czajkowski. Suntech is a full-service electrical contractor specializing in large commercial projects. The company provides hardwire electrical services and improves electrical efficiency for a wide variety of industries. Suntech also provides electrical code compliance services.

Regarding Benchmark International’s services, Mr. Czajkowski shared, “From the initial meeting with Benchmark [International] and through the entire process of preparing all the documentation, keeping me informed of progress, reviewing the letters of intent and the final closing, I was confident I was receiving excellent advice and guidance. Thank you to the Benchmark [International] team.”

According to updated state filings, officers of the company are now Mr. Tassev as President and Treasurer, Mr. Czajkowski as Vice President, and Mr. Reffie as Secretary. With backgrounds in electric power and services, the Suntech investment provides Mr. Tassev and Mr. Reffie expansion in the electrical contracting space.

Nick Woodyard, Transaction Associate at Benchmark International was engaged throughout the transaction, from client on boarding all the way through to the successful closing. Nick commented, “The Suntech team was very focused. They moved quickly throughout the process, which led to a timely closing. We wish both parties all the best in their new partnership.”

As a business owner, you already know that running a company is not a simple task. But growing that business does not have to seem quite as hard as you might think. There are many steps you can take to drive growth without making yourself crazy.

Acquire Other Companies
A quick way to create growth is to identify competitors or businesses in other industries that are complementary to yours and purchase them. An experienced M&A advisory firm can help you easily identify potential opportunities to look at that are worth your time and money.

Know the Competition
Take a close look at who your competition is and what they are doing. Are they doing anything differently? Is it working? What message are they putting out there? What are their weaknesses and how can you take advantage of them? How can you stand out better than them? There are online platforms that can help you uncover the digital advertising strategy of any company. You should also sign up to receive their mass emails and follow them on social media. If you find something that is clearly working for your competitor, it should work for you, too. This strategy does not mean copying whatever they do, just gaining inspiration for your own strategies and being fully aware of what you are up against.

Focus on the Customer
You can use a customer management system (CMS) to track your business’s interaction with existing and potential customers and in turn improve relationships overall. There are many types of CMS software that you can choose from to manage multiple channels. This includes creating an email database to stay directly in touch with customers. Having a CMS can also help you create a customer loyalty program to increase sales. It is far easier and cheaper to retain existing customers than it is to obtain new ones. Offering a clear incentive to choose your company can be a significant method of boosting your sales.

Go Global
Consider expanding your business internationally as a way to generate growth. By moving into new geographic markets, you can take your existing offerings and scale them to other countries if it makes sense for your type of business. Initially, it can seem costly do to so, but it can also pay off in a major way. If this type of expansion is not physically or logistically possible, you can employ digital global B2B platforms to expand your borders without having to actually go to another country.

Consider Franchising
If you are looking to quickly grow a well-managed and thriving business, a franchise model is a way to accomplish this. Yes, franchise costs can be pricey, and the process can be rather complicated. But if you have the marketing savvy and your company qualifies for franchising, you can drive growth quite rapidly.

Look Into Licensing
If it’s applicable to your type of business, licensing is one of the fastest and most effortless methods of growing a company. By licensing intellectual property such as patents, trademarks, or copyrights to others, you can immediately draw on the existing systems built by other companies and get a percentage of the profits sold under your license, which can add up rather quickly.

Expand Your Offerings
What other types of services or products can your business provide? In what other ways can you create value for your clients or customers? Do you have the right team members in place to maximize these opportunities? It can be very helpful to take a step back and look at your business in a different light. Just make sure that you can focus on any new venture without distracting from your core competencies or spreading you or your staff too thin.

Create a Strategic Alliance
Merging with another company is a solid way to reach more customers in a shorter timeframe. You just have to make sure that the partnership makes sense, so you will need to identify businesses that either complement or are similar to your own. Working with an M&A expert can help you recognize the right opportunities and take the proper steps to ensuring the merger is a success.

Let’s Discuss Your Business
Reach out to our M&A aficionados at Benchmark International to talk about how we can help you grow or sell your company. Our unique perspectives can give you a serious advantage in the low to middle markets and help you craft a highly prosperous future.

The United States federal government has released the application for the $349 billion in forgivable loans that small U.S. businesses (under 500 employees) may obtain under the recent CARES Act. These federally guaranteed loans are designed to help businesses continue to pay employees during the COVID-19 pandemic. There are two types of loans available: Paycheck Protection Loans (PPP) and Economic Injury Disaster Loans (EIDL). While you can apply for both loans, you cannot use funds from each loan for the same expenses. The PPP loans give 2.5 times your monthly payroll expenses, up to $10 million. The EIDL loans provide up to $2 million for working capital needs such as payroll and fixed debt. Because there is a cap on this round of funding, you should not wait to apply if you need one of these loans.

What Sellers Need to Know

If the loans are used for qualified payroll costs, rent, utilities, and interest on mortgage and other debt obligations, they should be forgiven. They have a maturity of two years, and the interest rate is 0.5%. Terms are the same for all borrowers.

There is no reason why taking one of these loans should impact the value of your exit. We encourage you to immediately look into whether this loan makes sense for your business, with one caveat: if you are currently under letter-of-intent or nearing that stage, you should consult with your potential acquirer prior to applying for the loan.

Every business is different and a loan may not be right for your company based on other issues, but please do not needlessly delay or assume that, because you are selling, you should not apply. In fact, when it comes to selling your business, acquirers may actually look favorably upon the securing of a CARES Act loan. Here’s why.

• If the loan enables you to keep a higher employee headcount, it is an asset because when life begins to return to normal, good labor may be in short supply.
• If it helps you to avoid drawing on other debt, it can protect your balance sheet from impact and keep your interest payments down.
• It will aid in clearly establishing and defending the quarantine-related add-backs to your adjusted EBITDA when the time comes.
• It should help to paint a better picture of the quality of the management team, demonstrating that you took rapid action to preserve the health of the business and the welfare of the employees.
• It is likely to foster employee loyalty, the absence of which is always a concern for buyers.
• You will be in a better position to take advantage of business opportunities when quarantines end and help you get your growth curve back to where it should have been.

What You Will Need

The loan application is brief and your current lender should be able to assist you in completing the form. If your lender is not qualified to participate in this program, please contact our experts at Benchmark International and we will share the names of qualified lenders that regularly provide SBA loans to our clients’ acquirers.

You will need some financial and tax data. In the event you do not have access to that data, it may have already been shared with your Benchmark International deal team. Feel free to enlist us in using our virtual tools to help you gather and share (with your lender only) any relevant data we have. Even if we don’t have the data, our virtual tools could be of assistance in the timely filing of your application. For example, we can make documents available in virtual data rooms and arrange teleconferences with your partners and/or lenders if needed.

What Will the Buyer Think and How Will This Be Handled at Closing?

There are no personal guarantees required for these forgivable loans, so in a stock deal, there will be no effect. As a seller, you may request a covenant from the buyer stating that they will comply with all actions necessary to have the loan forgiven. There is presently no recourse back to the seller due to the lack of a personal guarantee.

In an asset deal, all employees are terminated, so you as a seller should still be able to get forgiveness for all compensation, rent, etc., paid up until the closing. If you had borrowed more money, you would have to repay it plus the ratable portion of the 0.5% on that overage. Either way, if a deal is fairly far along, you should discuss results with your lender when applying.

For most sellers, the requirements to get the loan forgiven will be met prior to close. You should document where the loan funds are directed so that you can make the buyer comfortable in diligence that you met the criteria in the statute, especially for stock deals, as this will be something acquirers will likely be looking at for years to come. 

As long as you as the seller assume any risk in the purchase agreement for any pre-closing mistakes, the buyer should not view a CARES small business loan as a detriment. One exception may be in stock deals in which the buyer was planning on taking loans after buying the business. If you have taken the loan and saved the buyer all that payroll expense, the buyer may wish they could have saved that payroll expense post-close instead. However, this is for a window of only a couple of months when both seller and buyer would have been eligible.

Keep in mind, the alternative to a CARES loan is to draw on your line of credit and that must be repaid in full at closing.Unless falling under certain specific NAICS codes, only companies with less than 500 employees qualify for a CARES loan. The definition of “company” includes affiliates, so if a buyer together with its affiliates has more than 500 employees after making the acquisition, then there is a complication. The loans up to the closing date can be forgiven and those that were going to be used afterwards must be repaid at the 0.5% interest rate. This could be like many government set-asides where once a contract is awarded the company no longer must qualify as an 8(a) business. Even with the less attractive option, the downside is minimal.

On the plus side, if the buyer has more than 500 employees, they could not have gotten the loan so they will not be upset that the loan was “used up” by the seller. They may even get to “inherit” the benefit as discussed above. 

The loan only covers up to eight weeks of payroll plus 25% of that amount, and it only looks at payroll up to $100,000 annualized for each employee. So the most a company can get for any one employee is $19,230.77.

If employee headcount is cut OR payroll is reduced before forgiveness is sought, a portion of the loan will not be forgiven. February 15th is the start date for assessing headcount and payroll and this can be restored by June 30th in order to get full forgiveness. So, in an asset deal, this could be an issue, but remember the interest rate is 0.5%. So if you take a loan this week and close sale as an asset deal within eight weeks, all you need to do in the worst possible case is pay back the principal and 0.077% interest.

Similarly, if you take the loan and then shut the business down, terminating everyone within eight weeks, all you must do is pay back the same amount as above, the principal and the 7.7 bips. This is a worst-case scenario. 

On the upside, if you do not close in the eight weeks following taking the loan and don’t otherwise cut headcount or payroll over that time, at the end of those 8 weeks, you simply send a request for forgiveness to the lender along with proof that headcount and payroll were maintained for that eight weeks.

The application is brief and key information can be found using the following links:

Program Overview 

https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp

Application 

https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

Additional Details for Borrowers 

https://home.treasury.gov/system/files/136/PPP%20Borrower%20Information%20Fact%20Sheet.pdf

Benchmark International Successfully Facilitated the Transaction between Seltech, Inc. and Hatfield and Company.

Seltech specializes in engineering and industrial equipment sales. They specifically focus on instrumentation and process control, environmental monitoring, and filtration systems.  Seltech began in Tulsa, Oklahoma as a manufacturer’s representative firm and became a region wide wholesale provider of engineering and industrial equipment.

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.

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

Throughout and following any M&A transaction, the retention of key staff members is critical to the long-term success of the business. When the structure and culture of a company changes, it is not uncommon for employees to feel uneasy and tempted to explore their options. Companies that practice comprehensive retention efforts are more likely to retain the majority of their senior staff. By getting employees engaged early in the process, it can help mitigate communication problems and promote a more inclusive experience. Additionally, the likelihood that your key staff will remain with the business will aid in your company valuation.

Know Your VIPs

Every company has their most valuable players, and keeping them is crucial for the business’s success. Know who they are at every level of management and how the changes to the business will impact their roles. Consider what you can do to avoid redundancy and ensure that their talent and knowledge will still be in a position to be valued. The earlier you do this, the better. A merger or acquisition can turn everything in an organization upside down. Have your best people tasked with challenges and opportunities. Give them the chance to use their talents and be part of the process in a productive way that works for their individual success as well as the success of the company. Be sure that your assessment extends beyond your leadership team. Look at all levels of the company to see where hidden gems may find an opportunity to shine.

Build Trust Though Communication

Communication is always key to running a successful operation, but it is absolutely paramount during the M&A process. Mergers and acquisitions can make people feel insecure about their jobs. While you never want to reveal information too soon, you will benefit greatly from gaining your employees’ trust by communicating with them about what is happening now and down the road, and what their role in the process will be. Key employees need to understand that their jobs are safe. Share your goals, your strategies, your vision and how you plan to go about running the show moving forward. Talking to them will go a long way in creating and maintaining loyalty to your company. If employees sense that something is afoot and feel like secrets are being kept, they are more likely to feel betrayed and even hostile about the process. 

Think Beyond the Bonus

Retention bonuses for key talent are normal during M&A transactions. They are proven to be effective in the short term, but money does not necessarily make people feel inspired, engaged, or even secure. If someone is “checked out,” they are likely to leave for any amount of pay increase, however small. People who are truly invested in their careers want to be assured that the company is making good decisions, creating a strong culture, and working towards a goal they can support. While money talks, having talent feel enthusiastic about the future can be priceless—and contagious.

Avoid Culture Clash

When a business is acquired or merges with another, there is an inevitable convergence of cultures. Whether the convergence goes good or bad lies in the due diligence process. If you assess what you are dealing with ahead of time, you can anticipate how the cultures will meld. This includes having leadership and top talent working together through the evolution. They drive the culture and should be part of any changes to it. They will also play a critical role in the hiring of any new talent post M&A, and ensuring that the new hires will be conducive to the overall culture of the organization. If they feel empowered to be part of the future, it will go a long way in giving them a deeper understanding of the business and promoting its success in the future. 

Let’s Do This

Your award-winning M&A advisory team at Benchmark International is dedicated to fulfilling your goals as a business owner. Whether you are looking to buy, sell or grow a company, we have the experience, resources, and connections that give you the upper hand and make great things happen. We look forward to speaking with you soon.   

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

The motivations behind M&A deals can be:

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

Mergers

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

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

Acquisitions

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

Management Acquisitions 

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

Tender Offers

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

Acquisition of Assets 

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

Reverse Merger

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

Contact Us

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Any questions, please read the full article here.

Author
Nick Hulme
Managing Director
Benchmark International

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

More often than not, the topic "asset vs share sale" has been discussed and debated at length. Although there are some aspects to consider, that could be beneficial to both parties and solely for the benefit of the other. Below are a few aspects to consider when deciding on a share/asset sale:

Sale of shares transaction:

In layman's terms, a buyer would be acquiring the incorporated business. This would include the assets and liabilities, goodwill, and inherent aspects of the business that would not have been capitalised.

The valuing of any business can prove to be a particularly complicated exercise. There are various aspects to consider as well as some key financial indicators. There may be sound reasons as to why specific objectives were not met in the past, but it is important that the buyer is aware of these permutations and understands the reasoning behind it. Likewise, a buyer would also be able to see opportunity/value in certain revenue streams, whereby the seller has been unable to secure orders in the past due to a variety of reasons. In a South African environment, Black Economic Empowerment status, vendor registration with key customers, integrated systems and technology, etc. are all aspects considered as intangibles and have been proven very difficult to value.  These are often subject to interpretation and most of the time the buyer would find reasons to reduce the company's value, purely because of personal interpretations and assumptions made.

In many cases, all shareholders are not always amenable to selling their share portion, as they might have alternative motives or plans for the business. To reach a successful outcome, it is important that all key stakeholders reach a consensus from the onset of the overall strategy and growth plan that they would like to achieve. The Articles of Association and/or the Shareholder Agreement may restrict shareholders from selling their shares.

Third party approval of the transaction is sometimes required, and this can often prove problematic and delay or even completely nullify the deal. An example would be a Landlord that often proves difficult when it comes to transferring the lease to a new owner. Their lawyers may require the buyer to come up with large deposits, provide personal guarantees, agree to a higher rental or require the new tenant to extend the lease term. This could prove detrimental to the transaction and there is a fine line to balancing the objectives of the respective parties.

From a seller's point of view:

• The sale: A share sale would be regarded as the simplest way in disposing of a business. Subject to any arrangement/warranty commitment agreed between the buyer and seller during an agreed period, the seller would be relieved from his/her obligation.
• Time: The seller may want to expedite the sale, however a purchaser will take his time when deciding on an acquisition. They would want to examine as much information as possible, extending the length of time to complete the transaction. Sale of share transactions typically takes longer to complete than the sale of asset transactions.

Furthermore, the buyer's legal team and advisors will insist on various protections for their client and would want the seller to provide warranties, guarantees and indemnities to limit any risk on behalf of the purchaser. The negotiating of these terms can also contribute to further delays in the successful completion of the transaction.

• Personal sureties: Over the years, the seller may have offered personal sureties to various parties.

When selling a business, these parties will generally not want to release or waive any sureties that are in place or transfer them to the new owner. These loans/liabilities will generally have to be cleared by the seller if he wants to be relieved of his/her responsibilities under the personal surety

If the seller fails to remove himself as a surety, he/she will put themselves in an onerous position and is exposed to risk in the sense that he/she has no control of the business, once sold.

• Professional fees: Share sales are more expensive when it comes to professional fees as there is usually more work involved, during the due diligence phase and the legal process.

From a buyer's point of view:

• Tax advantages: Should there be an accumulated loss existing in the company, those losses can usually be carried forward to be written off against future tax liabilities.
• Risk: Buying shares is a lot riskier for the buyer as they would be taking on all the business liabilities, and the true nature/cost of some of the liabilities may not be fully apparent until a year or two down the line. There could also be liabilities that the buyer had not discovered during the due diligence process.
• Transfer: Generally, customers and suppliers' relationships would transfer over seamlessly. The business continues operating without any major interruptions and by acquiring the shares, the buyers become owners of the assets (tangible & intangible) and associated liabilities.

Asset sale transaction:

As mentioned earlier, the buyer would prefer an asset sale as opposed to a share sale. This is purely because the buyer would have identified the key assets to produce future income, not take ownership of any associated liabilities, and would limit their exposure to unidentified liabilities held against the company.

A buyer would be able to write off wear and tear allowances against the assets purchased, thereby creating a favorable tax structure for the acquirer.

In terms of an asset valuation, this can also prove to be very complicated as there are a couple of methods of determining asset value, with the following methodologies applied:

• Value in use
• 2nd hand value
• Book value
• Replacement value
• Expected useful life (Overall state of assets)

A buyer would normally dictate the method to be used, however there must be a consensus between the seller and the buyer when determining a value.

A buyer would typically drive an asset value down as far as possible, but would need to substantiate this together with independent valuations, market trends and foreseeable production. Similarly, the seller would like to ensure his value is protected and supported by trade history and sound future projections.

Intangible assets such as patents, trademarks and customers lists are always difficult to value. However, when they are backed with a legal document that helps create barriers to entry or where a  service level agreements have customers tied in with long-term contracts, this assists the buyer in determining value and alleviates the seller from encouraging the buyer.

From a seller's point of view:

• Better negotiating power: As buyers prefer to buy assets, the seller can often negotiate to get a higher net benefit for himself under an asset sale than a share sale. The seller is taking on the responsibility (and cost) of clearing the liabilities and would therefore require a higher reward.
• Quicker sale: As there is less due diligence required for the buyer to perform in an asset sale, the transaction can often be completed more quickly.
• Retained assets: The seller can choose which of his assets will be sold and which will be retained.
• Taxation: Sellers will be exposed to CGT as well as withholding tax.

From a buyer's point of view:

• The due diligence process is less cumbersome and far easier; Assets still need to be thoroughly assessed and the true value of the assets needs to be determined. However, less emphasis needs to be placed on creditors, as these assets will be unencumbered, once sold.
• Tax advantages: The buyer will in many cases be able to attribute the purchase price as the base cost of the new asset, and accordingly be able to claim wear and tear allowances against a greater amount.

When the buyer purchases assets from the seller's company, they may agree on a value for the entire set of assets, however the assets could later be revalued, once recorded in the books of the acquirer.

• Loss of customers: It is important to effectively communicate to all customers the change of control and ensure there is minimal disruption to any client relationships.
• Suppliers: The same applies to suppliers, and the sale needs to be effectively communicated with each supplier to ensure that critical relationships are not hindered.
• Assets transferred: Where there are numerous individual assets - there are different routes to securing the title and can prove to be a time-consuming exercise. For example, the transfer of a licence works differently than the transfer of a lease, which works differently than the transfer of patents.

For a variety of legal, accounting and tax reasons, some deals make more sense as share deals while others make more sense as asset deals. Often, the buyer will prefer an asset sale while the seller will prefer a share sale. The decision on which route to go will be imperative and forms as the crux of the matter for every negotiation required to conclude a transaction successfully.

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

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

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

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

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

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

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

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

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

Geopolitical Factors

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

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

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

Ag-Tech Opportunities

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

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

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

Hemp Farming

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

Growing Conditions

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

In the U.S. alone:

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

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

Ready to Make a Move?

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

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

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

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

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

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

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

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

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

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

Author
Clinton Johnston
Managing Partner
Benchmark International

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Author
Clinton Johnston
Managing Director
Benchmark International

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

A MESSAGE FROM OUR CHAIRMAN

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

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

All of our offices remain operational with no interruption to the service agreements with our clients. Our business continuity plan and heavy investment in technology ensure that we can offer our sell-side clients and potential acquirers uninterrupted access to our Team Members, video conferencing, and digital platforms.

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

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

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

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

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

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

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

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

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

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

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

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

Trade

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

Make Sure you have a UK EORI Number

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

Consider Adjusting your Contract Terms

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Author
Kendall Stafford
Managing Partner
Benchmark International

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Author
John Lousber
Transaction Associate
Benchmark International

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Communicate your goals.

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

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

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

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

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

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

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

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

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

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

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

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

* * *

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

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

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

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

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

Author
Clinton Johnston
Managing Director
Benchmark International

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The asking price is what I will receive.

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

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

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

According to research:

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

Create a Profit and Loss Statement

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

Know Your Strengths and Weaknesses

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

Create a Reorganization Team

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

Evaluate Your Options

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

Get the Previous Steps Right

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

Enlist an M&A Expert

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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