Dry powder, the amount of money private equity has at its disposal to make future investments, has gone up and up over the last ten years. The most obvious reason was the desire for institutions, which most famously include insurance companies, pension funds, and university endowments, to find yield on their troves of cash during a time when their traditional vehicle, bonds, were providing essentially zero yields.

The global fintech market was valued at $6.5 trillion in 2021 and is estimated to grow at a compound annual growth rate (CAGR) of 13.9% between 2022 and 2028 to reach $16.65 trillion.

If you are considering selling your business, you undoubtedly need to understand its value. Unfortunately, arriving at that answer can entail many different methodologies, and it often involves the familiar valuation formula of applying a multiple of Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA).

For example, if a company boasts EBITDA of $1 million, and a five times EBITDA multiple is applied, the company’s estimated value is $5 million. But how do we know what multiple applies to your business? And how do we know if the EBITDA number is even accurate? After all, EBITDA will not be the same for every business.

Sellers often focus on the purchase price when considering a sale. Most sellers aim to maximize the proceeds realized through the sale of their business. This mindset makes total sense. They are monetizing their life’s work. Many have lived frugally, diverting money into rather than out of business. As such, the sale of the company truly is the time to monetize a lifetime of effort.

Buyers who have been stretched to a valuation beyond their comfort level may be motivated to recapture some of that “excess purchase price” during the deal. Their approach to minimizing their outlay can take on several forms. In this article, I will cover a few of the most common methods used by buyers to “normalize” their outlay.

Benchmark International is pleased to announce the transaction between Topsham-based LaddersFree and AIM listed REACT, in a deal worth up to £8.5m.

Established for 20 years, LaddersFree is a commercial window cleaning business serving independent, regional, and national customers across the UK. With an established network of over 300 approved service partners, LaddersFree utilises local window cleaning companies to offer its services to all areas of mainland UK.

Since its inception, LaddersFree has grown organically. Unaudited financials for the year to 30 November 2021 show that it generated revenue of c£3m and a pre-tax profit of c£1.4m.

REACT is an industry leader in the provision of specialist cleaning, working in challenging environments such as hotels, prisons, crime scenes, and cruise ships.

This is REACT Group’s second acquisition and represents a further step in the company’s ambition to achieve its stated growth strategy. The transaction provides REACT with the opportunity to diversify its service offering through expansion into complementary markets, and to leverage existing resources to accelerate growth.

2021 was a strong market for business owners looking to sell their companies. The market remains ideal and will do so as we move into the first quarter of 2022. As we are in the middle of this year, there is no better time to consider putting your business on the market.

2021 Recap
M&A activity was moving at a record pace in 2021, thanks to economic recovery, a strong stock market, low-interest rates, rapid digitalization, more SPACs, confident boardrooms, and available debt. The U.S. had reported more than $2 trillion in M&A activity in 2021, with the year on pace to be the most active in history. Not to mention that the second quarter of 2021 was the third straight, with total global M&A value surpassing $1 trillion. That is the first time this has ever happened in three consecutive quarters. So even in the middle of the year, when things typically slow down, we are still seeing a great deal of investment, and the market is still flooded with capital.

The Global Marketing Consulting Market

The global marketing consulting market is expected to grow by $3.83 billion between 2022 and 2026, increasing at a compound annual growth rate (CAGR) of 4.75%.

Market growth is being driven by various factors, including continued education, the rising need for improved customer digital experiences, and the providing of custom-made solutions.

Because the global marketing consulting market is rather fragmented, we are seeing vendors trying to remain competitive by deploying growth strategies such as forming strategic partnerships. Over the next four years, 35% of the global market’s growth will originate from North America. 

Benchmark International is pleased to announce the sale of Leicester-based Air Projects to Witham-based EA-RS.

Air Projects is a specialist ventilation engineer working on healthcare and commercial projects from basic extraction systems to hospital theatres and laboratories. Air Projects also provides expert advice on an array of services in ventilation, fume extraction, fire damper testing and healthcare compliance.

EA-RS is a provider of intelligent, sustainable, and compliant fire and security systems in the UK. The company installs and maintains a broad range of systems covering critical infrastructures such as data centres and healthcare facilities and serves several other markets such as commercial property, education and social housing.

EA-RS has been backed by Rockpool Investments since 2021, and Air Projects is the seventh company EA-RS Group have acquired since last year.

This acquisition supports the group’s strategy to further broaden its geographic reach and to present new opportunities throughout the UK. Additionally, the transaction will expand both organisations range of services to their respective client bases, including fire damper testing for EA-RS' clients, facilitating growth and enabling synergies between all businesses within the group.

Shaun Sutton, managing director of Air Projects, said this about working with Benchmark International: “Many thanks to James, Charlotte and Roger for their expert advice and professional approach to the whole acquisition process for us. From initial marketing through the negotiations and final due diligence stages, James and Roger have remained flexible, knowledgeable and most of all calm and collected in their manner, which has made the whole process less stressful than it could have been.”

Benchmark International has been named the Best Middle Market M&A Specialists by Corporate Vision’s Corporate Excellence Awards.

Benchmark International has been named the International Mid-market (Corporate Finance) Advisory of the Year by the Gamechangers™ 2022 Global Awards. 

Benchmark International is pleased to announce that it will be sponsoring DEALSOURCING 2022 on 13^th September at the Dorint Hotel Frankfurt/Oberursel.

Dealsourcing is a key event in Germany for M&A professionals, hosting hundreds of participants including private equity firms, funding platforms, restructuring advisors, M&A advisors, and due diligence professionals, to name a few.

As the most efficient networking event of the German corporate banking and finance community, DEALSOURCING provides Benchmark International with the prime opportunity to meet the right contacts for its sell-side mandates, providing us with a unique opportunity to showcase the opportunities we represent.

As well as networking opportunities, the event also include 30 innovative workshops to enhance our opportunities to connect with the best buyers for our clients.

Do you want to be featured and showcased in front of leading dealmakers? Naturally, we present only a select number of companies for each event, so we would encourage you to contact us now to ensure your business is included.

We have been in an unprecedented bull market. I use the phrase here broadly as the public markets have been flying for over a decade, and the M&A market has seen similar levels of growth. Spurred on by aggressive monetary and fiscal policies and a relaxed regulatory environment, the S&P 500 has grown 15.47% as of the time of this writing from the bottom on March 9, 2009. Similarly, the DJIA (The Dow 30) has grown at an annual clip of 13.64% over the course of this thirteen-year bull market. Remember what the rule of 72 demonstrates- that money doubles every 6 years at 12% and in less than five years at 15%. This is a remarkable rate of growth when you consider this market has spanned nearly 1/7^th of a century.

But bull markets must end. Markets do work in cycles. Much like our natural habitats require destructive fires to seed future growth and a healthy ecosystem, so too does the market. I’m not referencing the concrete jungles we find ourselves in today, but rather our natural environments. Bear markets reintroduce a rational approach to investing that had long been sidelined in favor of momentum and emotion-based investment “theses."

Further, bear markets tend to focus investments toward the highest quality of companies, known as a flight to quality. This clearing of the playing field, separating the wheat from the chaff, will often spur innovation and future growth. So a bear market is as natural to the market dynamic as is a bull market. These countervailing forces are required for regeneration.

The bull market created trillions of dollars of dry powder for buyers to deploy in the coming years. The balance sheets of corporations, large and small, are replete with cash there to deploy in pursuit of their stated strategic goals. The best of markets tends to flood the M&A market with excess buyers, many of which lack the track record, experience, credibility, and true access to funding required to transact successfully. Bear markets tend to weed away many of these less credible buyers creating a similar flight to quality detailed in the above discussion about the public markets. And while the cost of debt will tick up and valuations may similarly tick down, the likelihood of actually consummating a transaction increase as there is a much better chance that the buyer selected can get a deal done.

I tend to view my decisions in life through a very specific lens- my expected value lens. If one were to look at an M&A transaction through that lens, we would likely find the expected value of the proceeds from a transaction as being higher, even if valuations tick down, because the likelihood of closing is greatly increased.   And frankly, while the cost of capital on senior debt will rise over the course of the year, given the aforementioned stores of cash in their coffers, buyers will have the ability to utilize more equity to bridge any gaps in the capital stack. Private Equity funds have more than $2 Trillion of dry power. They also have a mandate to put capital to work regardless of the cost of debt lest they face aggressive headwinds during their next fund raise. Their Limited Partners, known as LPs, require that they put the money to work. Deals will continue to happen and we may in fact see more deals in the next eighteen months or more as buyers finally draw down on the excess stores of cash build-up that resulted from inflated valuations and bidding wars with less credible buyers.

Sellers must consider several factors when considering a sale. Of course, valuation and a healthy economic environment are among those factors but they don't have to be the determining one. We are often faced with life changes of which we have no control. Some of us simply reach a stage where we no longer wish to carry the burden that invariably comes with owning and running a business. Or, God forbid, we encounter health challenges personally or in our family that requires that we focus our attention elsewhere. Perhaps we come to the realization that we are no longer the right caretaker for the business? That the business has reached a level where our skills no longer map to what is required to successfully steer. Whatever the reason to sell your company, we can only control the controllables.

Just like in the public markets, if we try to time it perfectly, we will invariably fail because the objective was unattainable. Selling one's business is a life-altering decision. Selling a business can be both liberating and gutting. Sellers are at once monetizing their life's work and entrusting someone else with its care. The stakes are high. When making that determination, it is critical that sellers consider all of the critical variables. While valuation, market conditions and timing are among the variables worthy of consideration, they are merely inputs to a multivariate equation. Often, upon careful consideration, sellers determine that the qualitative elements are more important than are the quantitative ones.

  Author
  Dara Shareef
  Managing Partner
  Benchmark International

  T: 813 898 2350
  E: Shareef@benchmarkintl.com 

Brittney Zoeller, Benchmark International’s director of marketing, has been named one of the 10 Most Inspiring Women Leaders of 2022 by Industry Era for Women.

If you are considering selling your business, you will need to have a clear understanding of its type of customer revenue because it can significantly impact the value of your business. Sometimes people confuse recurring revenue with repeat revenue, but it is essential to understand how they are not the same thing.

Recurring Revenue
Recurring revenue stems from a contractually bound legal agreement for a solution delivered over time. It is usually contractual over one or multiple years, and because it may carry penalties or fees if the customer leaves, it can be counted on into the future. This makes it highly valued by prospective acquirers because of its predictability and lower risk.

However, recurring revenue does not have to be contractual to be valuable. Depending on the business and the services offered, it can be too costly or too much of a hassle for a customer to leave or switch providers. An excellent example of this is customer relationship marketing companies that collect large amounts of valued data over time, making it more beneficial for clients to stick with their services. Below is a list of the different types of recurring revenue.

Benchmark International is delighted to announce it has officially opened its new offices in Germany.

Taking residence on the eighth floor of the Sky Office in Düsseldorf, the large and modern offices opened in 2009. With an aesthetically pleasing design both inside and out, the building creates an inspiring working environment in a first-class location.

In close proximity to Düsseldorf International Airport and near the city centre of Düsseldorf, the building is very well positioned from a logistical standpoint.

A perfect fit for Benchmark International, the Sky Office will be a great representation of the Benchmark brand in Germany.

Benchmark International’s Executive Chairman, Steven Keane, has been named the Best International Chairman of the Year, USA by the Global 100 (2022).

In the Global 100 by EMG Publishing, a world-renowned publishing house, each award has a unique, proprietary selection process and ranking method. According to a comprehensive set of criteria, only the most worthy winners are chosen based on their domestic and international work. Judging focuses heavily on the complexity, and strategic significance of work performed, underscoring the importance of the recognition each winner is receiving as an organization or individual.

EMG Publishing is based in the United Kingdom and is known for producing some of the world’s most coveted awards programs that celebrate excellence across the globe. EMG Publishing aims to provide a benchmark of the very best industry leaders, exemplary teams, and distinguished organizations.

Congratulations, Steven!

Benchmark International is pleased to announce the acquisition of Kent-based Fuse Rail by international construction and civil engineering group, John Sisk & Son (Sisk Rail).

Fuse Rail services electrification and plant requirements within the rail industry. Working on behalf of Network Rail, recent projects have included a new electric distribution cable at a supply cable in Lydden, installation of a new conductor rail on the Sevenoaks tunnel refurbishment, and new reactive DC cabling for the Eastbourne substation.

With a 160-year history, Sisk Rail is an international construction and civil engineering business undertaking structural remediation, buildings refurbishment, mechanical and electrical planned maintenance, litter clearance, earthworks, fencing, drainage clearance and repairs on behalf of Network Rail and other train operating companies. The company has offices throughout Ireland, the UK and mainland Europe, specifically the Benelux, DACH and Nordic regions.

The acquired company will continue to operate under its current branding and management team.

Benchmark International’s own Kendall Stafford has won the Top USA Woman Deal Maker Award from the 4^th Annual USA Growth Intelligence Forum and the USA M&A Atlas Awards.

The award singularly honors the A-list of the most talented, respected, and brilliant women dealmakers from private equity, venture capital, investment banks, legal, and restructuring transactional communities. It is officially “award winner recognition,” unlike industry lists, rankings, editorial praise, or write-ups.

Benchmark International is pleased to announce the acquisition of Dublin-based Real Regulatory by private equity-backed tranScrip.

Real Regulatory is a consultancy firm specialising in European regulatory affairs, quality systems and compliance for products including medicines, medical devices, and drug device combinations. Headquartered in Dublin, the company also has offices in Cambridgeshire and Malta.

Founder and managing director, Karen Real, who has more than 35 years’ experience in the pharmaceutical industry, will remain with the business moving forward.

tranScrip is a fast-growing contract drug development organisation which supports the development and lifecycle of medicines. It is backed by private equity firm, Palatine, and the deal is the first acquisition made by the company since securing Palatine’s investment in 2021 via its dedicated Impact Fund.

The strategic acquisition significantly expands tranScrip’s regulatory affairs capabilities, strengthening its ability to provide comprehensive support to its customers.

Benchmark International continues to draw accolades on the world stage, being awarded the Gamechanger™ Progress Champion Award 2022 by the Gamechangers™ 2022 Global Awards.

Digital tools have been advancing in business operations for years, but today they have become essential for most companies, especially since the onset of the COVID-19 pandemic. The global crisis forced businesses to find ways to connect their employees to each other and their customers without being in person. This storyline became so prevalent that, in the first year of the pandemic, 60% of businesses moved their workforces to the cloud. Two years later, this number continues to increase.

Such demand for rapid digitalization has become a key driver of M&A deals, and continues to create more opportunities for growth and transactions. As a result, many organizations are also adopting tools to facilitate the M&A process on more digital terms. These tools include data and analytics during due diligence, platforms that support fast-moving transactions, and cloud-based services. You can take a deeper dive into the facets of post-COVID due diligence here.

Benchmark International has advised on the transaction of Irish headquartered O’Flynn Medical and O’Flynn Innovation, to Healthcare 21. O’Flynn will become part of the Healthcare 21 Group, which AddLife acquired in 2021.

Established in 2000, O’Flynn Medical is a leading provider of medical equipment and PPE to Ireland’s care home and domestic markets offering the sale, rental, and associated services and maintenance for a range of specialised products.

O’Flynn Innovation was later established in 2011 for the distribution of automated garment dispensing control systems. Together, the group has become a trusted distributor of medical equipment to the care home and domestic markets.

Established in 2003, Healthcare 21 is an independent medical device distributor offering sales, marketing and technical solutions for many of the world’s leading healthcare equipment manufacturers. The group has an annual revenue exceeding €159 million and more than 450 employees across four European countries.

The acquisition provides Healthcare 21 with the opportunity to expand its portfolio into the rental market segment, to become the leading provider in Ireland. The acquisition also provides entry for Healthcare 21 into the bariatric market segment.

O’Flynn Medical will continue to trade under its existing name and remain headquartered in Macroom, Cork.

Benchmark International is pleased to announce the acquisition of County Cork-based Velopi by Boston-based Educate 360.

Established in 2007 and headquartered in Kinsale, Ireland, Velopi provides training and consultancy services, specialising in the niche of project management. The firm has a list of renowned clients that includes Abbott and Pfizer.

Educate 360 is a professional training partner that designs training, coaching, and consulting solutions to improve efficiency, increase cross-functional alignment, and drive results. The acquisition enables Educate 360 to have a greater reach into the European market and the ability to build upon Velopi’s existing clientele.

Is the bull market for privately held companies over? No, that’s not (yet) the reality. But one of the hallmarks of the glorious decade for selling businesses is no more. And unfortunately, many of the acquirers’ gatekeepers weren’t around the last time there was a bull market that looked like this one.

So what is this new normal? Let’s first look at the old normal that we enjoyed from 2010 to 2019 - a nice, slow, smooth macroeconomic recovery. The normalcy of the “teens” allowed small and medium businesses to grow smoothly under ideal conditions. As a result, many businesses experienced near-constant year-over-year growth. And when they’ve failed to do so (or failed to do better), the reasons for the deviation could almost always legitimately be traced directly to some internal event; perhaps the loss of a key salesperson, the launch of a bad enhancement, the lack of ability to pass on an increase in inputs to the customer, or the inability to keep up with a specific competitor.

Benchmark International has successfully advised on the sale of Edinburgh-based 7 Elements to Harrogate-based Redcentric.

7 Elements is a CREST accredited and award-winning technical assurance services company providing industry-leading security testing, incident response, and bespoke consultancy services.

Established in 1997, AIM-listed Redcentric is a managed service provider. The company operates across five locations and has over 500 employees.

This acquisition expands upon the cyber security skills, capabilities, and services of Redcentric, complementing a growing portfolio, while addressing increasing market demand and customer requirements for security products and support.

Selling your business can be an emotional experience. You certainly don’t want to be left at the end of the process with a sinking feeling that you have made a bad deal or sold to a buyer who doesn’t appreciate the value and legacy of the company you have built. However, there are things that you can do to avoid seller’s remorse; we will discuss several of them in this article for you to consider.

It’s best to begin putting together an exit plan sooner rather than later. Preparing well for the transition of a business requires time, action, and significant attention. For many business owners, their business represents the majority of their wealth. Planning for the transition allows you to have enough time to minimize taxes, prepare financially for a living situation without the income from the business and put a plan together for the next phase of life. Although typically, entrepreneurs are not the retiring type, knowing what your next move will be can be very important for your state of mind post-sale. Seller’s remorse can often be avoided by beginning to plan for the transaction three to five years before the business owner wants to exit.

Benchmark International has advised on the transaction between Loch Lomond-based Absolute Solar and Wind (Absolute) and Cheshire-based RSK.

Established in 2007, Absolute provides renewable energy design, installation, and maintenance services for commercial and industrial renewable energy projects, primarily in the solar sector.

Working with customers such as Scottish Water, Exeter City Council, Edinburgh Airport, UK Research and Innovation, and local authorities, the Absolute team delivers solar, wind and low carbon heating services in conjunction with its supply chain.

RSK is a global leader in the delivery of sustainable solutions. The transaction marks part of RSK’s continued strategic expansion and is the 28^th acquisition by the company this financial year.

Following the transaction, Absolute will join RSK's Agriculture, Land and Property Management (ALPM) division under the direction of Ian Strudwick. The company will continue to be led by Absolute director Tom Newall.

Benchmark International’s Executive Chairman, Steven Keane, has been named the Best International Chairman of the Year, USA by the Global 100 (2022).

What’s Your Competitive Advantage on the Market?

Consider why prospective buyers would be interested in purchasing your company. You should be able to identify its assets in order to get a proper business valuation. How unique is your product or service offering? Do you outperform the competitors in your sector or in a particular geographic area? You will also want to consider whether your revenues are stable, growing, or declining. If you understand why someone would be interested in purchasing your company, you will be more equipped to enhance those qualities and effectively articulate them to buyers.

We have all heard the horror stories from lower middle market business owners. Private Equity buyers will come in and get rid of all of my employees, borrow an absurd amount of money to finance the acquisition, thereby straining my company’s balance sheet and income statement, and then, light a match Goodfellas-style when they are done extracting value from it. But, I’ll let you in on a little secret? The days of financially engineering a path to outsized profits are long gone. While there certainly was an era where Private Equity funds looked to lock in a guaranteed “win” by over-levering the balance sheet, stripping the Income Statement of “fat”- read, people- and quickly flipping to monetize the win, those days are largely behind us. Today, most professional buyers value the team in place more so than any perceived competitive advantage with the product or service offering. I’ll say that again, buyers often view the team as the most important determinant of success- more so even than the core product or service offered by the business.

Benchmark International is pleased to announce to acquisition of Livingston-based Boyd Brothers by British Engineering Services.

Family-founded Boyd Brothers is an electrical and civil engineering contractor with over 50 years’ experience. Since its establishment, it has grown to become a specialist in electrical vehicle charging point installations.

For over 160 years British Engineering Services has been engaged in the testing, inspection, and certification of industrial machinery via its highly skilled engineer surveyors and engineering consultants. The acquisition is British Engineering Services' sixth since 2019 and will enhance Boyd Brothers’ electrical division, as well as make specialist services more easily accessible to customers.

Stephen Boyd, managing director at Boyd Brothers, commented: “We’re really happy to have joined the British Engineering Services Group. This is a fantastic move for both businesses. Their growth over the last few years is impressive and we’re excited to be a valuable part of their future.”

Paul Trivett, MD of Electrical and Consultancy at the British Engineering Services Group, said: “This is another great addition to the British Engineering Services Group. We’ve spent lots of time with the Boyd Brothers team over recent months and it’s very clear they share the same values and priorities as the wider Group. Not only do they always put their customer first, but they’re very focused on making sure nothing is left to chance. This will further enhance our presence in the electrical safety field, which we started to develop further with the acquisition of Lantei in December 2020.”

Mergers and acquisitions are effective solutions for growing a company, getting a competitive edge, accessing new resources, lowering risk, tapping into new markets, and acquiring key talent. Obviously, these are all very appealing to investors and upper management. But employees do not always see it this way. 

In actuality, employees often view such a major change as a threat. These negative feelings can lead to employee retention problems, especially in today’s world where labor shortages are already a significant problem. Staff members may feel uncertain about the future of the company, how secure their job may be, how the culture will change, and how a change in leadership will impact them. They can also have their concerns worsened or blown out of proportion if there is not a clear line of communication about what is happening with the company during a transition. Sometimes employees will feel a sense of betrayal. Furthermore, some team members may feel guilty if they keep their jobs while coworkers are victims of downsizing or restructuring. Combine all these factors and quickly end up with people looking for work elsewhere. But that is not good for any deal. Why?