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How Will The COVID-19 Effect On My Financials Impact My Deal Value?

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.

 

Author
Anthony Monne
Transaction Senior Associate
Benchmark International

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

 

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Benchmark International Donates 400 Pizzas to Local Tampa Hospital to Feed Frontline Heroes

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.

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So, You’ve Decided To Sell Your Company. Now What?

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.

 

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Benchmark International Successfully Facilitated the Transaction Between Suntech Electrical Contractors, Inc. and Investors Stanoy Tassev & Rocco Reffie

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.”

Ready to explore your exit and growth options?

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.”

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Growing Your Business Is Not As Difficult As You Think

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.

 

Ready to explore your exit and growth options?

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.

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About “CARES Act” Loans For Small Businesses And M&a Transactions

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

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

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.

Ready to explore your exit and growth options?

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.”

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How To Retain Top Talent During An Acquisition

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.   

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Businesses Are Just Like Classic Cars

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

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

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

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

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

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

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

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

Author
Andre Bresler
Managing Partner
Benchmark International

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

 

 

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What The Heck is M&A?

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

The motivations behind M&A deals can be:

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

Mergers

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

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

 

Ready to explore your exit and growth options?

 

Acquisitions

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

Management Acquisitions 

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

Tender Offers

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

Acquisition of Assets 

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

Reverse Merger

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

Contact Us

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

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

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

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

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

 

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

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

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

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

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

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


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


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

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


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


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

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


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


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


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


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


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

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


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


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

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


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

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

Any questions, please read the full article here.

 

Author
Nick Hulme
Managing Director
Benchmark International

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

 

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2020 Outlook For The Global Agriculture Sector

Geopolitical Factors

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

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

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

Ag-Tech Opportunities

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

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

Ready to explore your exit and growth options?

 

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

Hemp Farming

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

Growing Conditions

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

In the U.S. alone:

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

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

Ready to Make a Move?

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

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One Certainty about this Virus – Your Taxes Will Go Up

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

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

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

 

Ready to explore your exit and growth options?

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

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

 

Author
Clinton Johnston
Managing Partner
Benchmark International

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

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

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

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

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

Ready to explore your exit and growth options?

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

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

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

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7 Quick Tips About Growing Your Business

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

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

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

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

 

Ready to explore your exit and growth options?

 


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

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

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

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

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

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

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

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

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

Is transformation important to your business?

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

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

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Why You Should Consider Buying A Business After Retirement

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

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

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

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

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

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

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

 

Author
Kendall Stafford
Managing Partner
Benchmark International

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

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The Anatomy Of A Letter Of Intent

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Author

John Lousber
Transaction Associate
Benchmark International

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

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

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

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

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

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

Ready to explore your exit and growth options?

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

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

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

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

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

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

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

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

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

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

Ready to explore your exit and growth options?

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

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

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

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

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

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

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

Is transformation important to your business?

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

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

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

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

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

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

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

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

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

* * *

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

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

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

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

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

Author
Clinton Johnston
Managing Director
Benchmark International

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

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Effects Of Coronavirus On Business Owners And The Economy

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

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

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

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

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

 

Ready to explore your exit and growth options?

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

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

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

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

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

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Key Steps For Successful Post-Merger Reorganization

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

According to research:

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

Create a Profit and Loss Statement

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

Know Your Strengths and Weaknesses

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

 

Ready to explore your exit and growth options?

 

Create a Reorganization Team

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

Evaluate Your Options

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

Get the Previous Steps Right

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

Enlist an M&A Expert

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

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

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

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

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

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

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

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

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2020 Global Outlook For The Marketing Sector

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

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

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

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

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

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

Content Marketing

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

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

 

Ready to explore your exit and growth options?

 

Social Media

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

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

Print

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

Direct Mail

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

Loyalty Programs

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

Mergers & Acquisitions

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

Thinking About Selling?

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

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The Value Of An M&A Advisory Firm

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

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

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

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

Ready to explore your exit and growth options?

 

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

Work With the Best

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

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M&A In The Global Transportation and Logistics Industry

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

Industry Subsectors

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

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

 

Is transformation important to your business?

 

Economic and Industry Factors

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

The Impact of Amazon.com

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

Automation Technologies

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

Data-Driven Tech

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

 

Ready to explore your exit and growth options?

 

Transportation and Logistics M&A

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

Sellers are motivated by:

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

Buyers are motivated by:

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

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

Contact Us

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

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Why You Should Spend More Time Thinking About Selling Your Company

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

1. Start Making Your Business More Valuable

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

2. Know Your Number

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

3. Know Your Buyer

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

 

Ready to explore your exit and growth options?

 

4. Get Your Records in Order

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

5. Keep Your Eye on the Business

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

6. Have a Plan

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

Let’s Discuss Your Options

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

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Tips For Transitioning A Company's Leadership

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

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

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

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

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

 

Ready to explore your exit and growth options?



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

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

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

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

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

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

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M&A In The Ride Services And Autonomous Vehicle Industries

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

Ride Service Companies

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

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

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

 

Ready to explore your exit and growth options?

 

Autonomous Vehicles

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

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

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

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

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

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

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

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

Contact Us

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

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Leisure Industry in M&A

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

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

Opportunities and Challenges

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

 

Ready to explore your exit and growth options?

 

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

 

Feel like it's a good time to sell?

 

Cross-Border M&A Considerations

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

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

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

Contact Us

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

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Benchmark International Successfully Facilitated the Transaction of Osborn Equipment Sales, Inc. to Still Holding Company

Benchmark International has successfully facilitated the transaction of Osborn Equipment Sales, Inc. to Still Holding Company. Osborn Equipment Sales, Inc. has been in business for over 60 years and serves as a manufacturer’s representative of dry process material handling equipment to customers located within Oklahoma, Western Arkansas, and the Texas Panhandle.

Still Holding Company is owned by Roy Still, an individual with an M&A advisory background, who currently owns a diverse portfolio of businesses in the Tulsa, Oklahoma region, including funeral homes in the area.

Vice President, Keith Garoutte of Osborn Equipment Sales, Inc. commented, “We are a 60- year-old company located in Oklahoma. After 40 plus years of owning the company, my business partner and l were thinking about retirement. We were contacted by Benchmark International wanting to know if we were in the market to sell our company. It was perfect timing for both of us. Benchmark International sent a gentleman to meet with us and after several phone calls we had reached an agreement to have Benchmark International solicit our company for sale in March 2019. We supplied Benchmark International with all the information they had requested, and they proceeded to market our company. Benchmark International found several companies interested in purchasing our company and after only a few months we were in negotiations. We were finally able to close and collect our money on January 6, 2020. Benchmark International did an outstanding job in marketing our company. We were very impressed with their sales team and their sales and negotiation knowledge. Their sales experience made selling our company very easy and without headaches. I would definitely recommend Benchmark International if you want a professional and aggressive sales team to sell your business.”

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J.P. Santos, Associate at Benchmark International added, “Randy and Keith were a pleasure to work with and the Benchmark International team is excited that we were able to play a role in the successful sale of their business. From the beginning of the sales process, Randy and Keith were looking for a buyer who could continue their legacy of decades of high quality service, as well as, meet their goals from the sale as they look towards their future endeavors. Roy Still was able to accomplish both of those objectives and the company looks to continue its success under his stewardship.”

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2020 Outlook For The Global Energy Sector

The global energy mix is comprised of the oil, liquefied natural gas (LNG), coal, renewable energy, and electricity sectors. The landscape of this industry has seen a great deal of change over the years, and is primed for even more change in the future. Five years ago, fossil fuels accounted for 82 percent of global primary energy. This number is targeted to decline, with large growth in the natural gas and renewable energy sectors, especially wind and solar. However, a rising global population and economic growth make it challenging for renewables to keep up with demand, meaning that fossil fuels will remain a primary source as energy demand will rise one percent each year over the next 20 years.

Oil & Gas

Oil output is projected to remain on the rise in the next 10 years, with 85 percent of the production increase coming from the United States. At the same time, oil demand is expected to slow after 2025 due to better fuel efficiency and more electric vehicles, according to a report by the International Energy Agency (IEA).

In 2020, shale production in the U.S. is expected to continue to grow even as growth is slowing due to reduced capital expenditures from drillers. Additionally, exports of U.S oil and LNG are forecasted to grow as infrastructure capacity increases.

As the number of U.S. oil and gas companies in distress grows amid limited funding options, there is an opportunity for smaller firms to be acquired by bigger firms, or for them to merge in order to scale operations and reduce costs. M&A strategies may be more appealing to these companies than the option of restructuring through bankruptcy.

Oil and gas prices should remain range-bound this year as production increases from non-OPEC nations such as the U.S., Brazil, and Norway.

Internationally, oil markets will be affected by the ongoing trade negotiations between the U.S. and China, as well as the result of the March expiration of the OPEC+ pledge between OPEC and non-OPEC partners for deeper production cuts.

 

Ready to explore your exit and growth options?

 

Coal

The coal industry continues to experience challenges, including declining demand, bankruptcies, climate concerns, ownership changes, and mine closures. Coal production in the U.S. is expected to decline, along with the amount of energy production that relies on coal, which is at its lowest level in more than 40 years. In contrast to the struggling coal industry, increased growth is forecasted in the renewable energy sector. According to the IEA, market share for coal will fall from 38 percent today to 25 percent in 2040, largely due to a surge in more affordable solar power.

Renewable Energy

The outlook for the renewable energy industry in 2020 is quite favorable. The sector has already seen unprecedented growth propelled by increased demand, competitive costs, innovation, and the uniting of industry forces. Renewables are likely to become a preferred provider in electricity markets this year, as customers are more concerned with saving money and addressing climate change issues. Last year, renewable energy eclipsed coal for the first time ever in the United States, with wind and solar energy accounting for about half of renewable power generation. Companies that are poised to innovate and jump on new opportunities will be in a position to thrive in this new growth phase.

Some key points regarding this sector include the following:

  • China has been the largest investor in renewable energy capacity, committing $758 billion over the past decade. The U.S. follows at $356 billion, with Japan third at $202 billion.
  • Lower prices for renewable sources and battery storage have helped to drive growth in this industry, making wind and solar more competitive with traditional energy sources.
  • Several utility companies have already outlined goals for de-carbonization and more are expected to follow suit.
  • Renewable energy will need to be scaled up significantly in order to meet the goals outlined in the Paris Agreement.
  • In 2019, 11 of the 28 countries in the European Union already met their 2020 renewable energy targets, but there has been a gradual slowing of the rate of renewable use because costs have fallen and less investment is needed to install the same level of power capacity.
  • Grid modernization projects will also contribute to growth, as renewable microgrids are becoming more popular solutions for increased efficiency.
  • In the U.S., the Production Tax Credit has been extended for 2020. However, the amount of the Solar Investment Tax Credit will be reduced from 30 percent to 26 percent. Both of these credits have been important drivers of growth in this market.

 Electricity

Power and utility companies will face several priorities and challenges in 2020, but with a balance of careful strategic planning, digital innovation, and risk management, the industry can sustain growth throughout the year.

  • Clean energy remains a major priority, as many power and utility companies are setting their own clean energy goals to help customers make the transition.
  • Cyber security is an increasing concern, with vulnerabilities being a clear and present danger.
  • Preparation and response for natural disasters will be more significant as major storms have become more common around the world.
  • Providers will continue to be more focused on improving the customer experience.

Let’s Discuss Your Options

Please contact us at Benchmark International to talk about how we can help you grow your business or formulate a solid exit plan for the future, no matter what industry in which your company operates. We look forward to hearing from you.

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Do You Want To Be Featured At The Savca 2020 Southern Africa Industry Conference?

Get Your Business Showcased At The Local Industry's 'Must Attend' Event

Benchmark International is pleased to announce that we will be contributing material to the attendees’ welcome pack at the SAVCA Southern Africa Industry Conference from February 25th-27th at the Spier Wine Farm.

In 2019, the SAVCA Conference attracted 437 Private Equity delegates and 195 Venture Capital delegates who represented local and international institutional investors, fund managers, advisors policy makers and entrepreneurs.

 

Learn More About the SAVCA Southern Africa Industry Conference Here

Would you like to be showcased to these industry leaders with strong, acquisitive appetites? We will be including a limited number of client investment profiles in the flyers which will form part of the delegate bags. Contact us now to ensure your business is included.

Schedule A Call

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2020 Global Outlook For The Media Industry

The New Media World

The media industry has undergone several major transformations in the Internet age. Magazines and newspapers have been disrupted by digital publications. News consumption has been significantly altered by the existence of social media. Broadcast radio is now challenged by satellite radio, podcasting, and both free and fee-based music-streaming services. Television continues to undergo sweeping changes that come with more and more people cutting the cord, smart TVs, and the inundation of subscription streaming platforms on a variety of scales. And all of these sector trends affect how advertising dollars are being spent and how audiences are being targeted. 2020 proves to be no different, as these trends will continue to reshape the industry.

Streaming Wars

Companies and TV networks are faced with the task of inventing new offerings for delivering content in ways that facilitate direct relationships with consumers. New bundling and tiered options will be more in demand as viewers grow frustrated with having to manage various streaming options amid a crowded sea of subscription services that go beyond Netflix and Amazon Prime. Individual TV networks are offering their own on-demand services (such as HBO Now), and big industry players are getting in the game with their own digital networks such as Disney+. And the availability of tiered streaming platforms such as BritBox and Sling TV continues to grow. The major streaming networks will be faced with how to leverage an influx of competition. These options will also need to address how advertising is delivered regarding ad-free options and ad-supported video.

Podcast Popularity

There are currently more than 700,000 active podcasts, and research shows that the consumer appetite for podcasts continues to thrive. Podcasts are going to be seen as a new vehicle for content and will garner more advertising money, with predictions that the spending amount will surpass $1 billion by the end of 2020.

 

Ready to explore your exit and growth options?

 

For the Love of Data

As media companies compete for more audiences, data will become more imperative to achieving the goals of these companies. This means that the data platforms used by media companies and advertising agencies are going to become paramount. The gathering and processing of the third-party data needed to create more meaningful and personalized experiences and services for consumers will be essential to the ability to remain competitive.

User-Generated Content

In today’s social-media-driven world, users are able to generate their own content through various mobile applications such as SnapChat and TikTok. As more of these types of platforms emerge, larger parent companies (such as the Facebooks and Googles of the world) may be inclined to acquire them to diversify their offerings and expand their user bases.

M&A Opportunity

As media companies continue to need more diverse content and content delivery options, it creates significant opportunities for mergers and acquisitions. This M&A activity is expected to be on smaller scales than the megadeals that occurred in the last couple of years. This is because there are fewer opportunities for the major networks to consolidate, especially as there is a growing over-supply of third-party streaming applications and the content rights are being withdrawn. 

Contact Us

If you think that it is time to sell or grow your company, or even start your exit planning strategy, please reach out to our experts at Benchmark International. We look forward to taking your future to the next level.

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Why 2020 Is The Right Time To Transition A Business

When determining the best time to sell or exit a company, unfortunately nobody has a crystal ball. However, there are several circumstances that should be considered, from fundamental business positions to external influential factors.

The state of the M&A market is among the most significant factors in a decision to sell a business. The market held steady from 2015 to 2017, and optimism skyrocketed in 2018. In 2019, the market dipped slightly but remained strong in deal volume and value, with a wave of multi-billion-dollar megadeals being completed.

While some expect a modest drop in global M&A value in 2020 due to what is perceived as inevitable economic correction after a lengthy, seemingly unstoppable up-cycle, many experts predict that little change is expected due to sustained economic growth, low unemployment, low inflation, high consumer confidence, and strong corporate earnings. Companies still have a need to diversify their portfolios, acquire talent, and innovate technologies in order to stay competitive—all needs that are best addressed through M&A. Also, plenty of capital is available and private equity has amassed the dry powder that can drive larger deals, even in the event of an economic downturn.

Additionally, there is potential for more aggressive M&A strategies earlier in the year to get ahead of a potential downturn and downgrade in valuations. Companies that have proven to perform well during times of recession may be especially appealing targets.

The 2020 U.S. Election

Regarding a potential downturn, one of the major factors that play into the state of this year’s M&A market is the upcoming November 2020 presidential election in the United States and the issue of impeachment of the current president. History indicates that economies typically perform well in election years. However, as uncertainty looms contingent upon the results of the election when it comes to topics such as trade and regulation, acquirers may become hesitant and the M&A market could lose momentum leading up to November, with the market remaining slow in the months following, depending on the election results.

Another matter affected by the election results is capital gains taxes, which is a matter of concern if you are selling a company because how much profit you yield from the sale will be taxable. Some presidential candidates are proposing higher taxation of the highest-income taxpayers’ accrued wealth and income, and this includes capital gains. Most candidates’ plans would tax capital gains at ordinary income rates, with just the very top marginal tax rates varying at incomes of more than $488,850.

The closer the election nears, the more every single day counts. If you hope to sell, the sooner you initiate the process, the better, as most M&A deals take several months.

Ready to explore your exit and growth options?

Brexit

As of January 31, 2020, the United Kingdom is officially no longer part of the European Union, but a second round of negotiations will continue with the goal of reaching a deal by the end of 2020. With lessened political uncertainty now that an initial Brexit deal has been made, there is heightened confidence in deal-making activity. The inability to make a second deal by the end of the year will mean higher costs and barriers to trade.

The Brexit situation is affecting changes to M&A strategies. M&A could be used to secure an operational presence in the EU to maintain access to European markets. M&A could also facilitate access to markets outside the EU. Additionally, some companies could be facing new pressures that can directly impact share prices.  

The Boomer Retirement Wave

While it seems as though we have been talking about it for years, the Baby Boomer generation remains a factor in 2020.

According To Pew Research Center population data, 10,000 Baby Boomers will turn 65 on each day of this year.

In the U.S. alone, Baby Boomers own 2.34 million small businesses, and employ more than 25 million people. This aging ownership pool points to a flood of M&A activity in the lower and middle markets this year, especially in certain sectors such as those that offer professional services.

As this population retires, there will be an increased need for consolidation, succession planning, and exit planning. If Boomers do not properly plan for these scenarios, it could result in an economic crisis that in turn affects millions of jobs. Also, most of these business owners have the majority of their net worth tied up in their company. This means that if the company should lose value, so does the owner’s ability to retire.

The unfortunate reality is that the majority (75%) of owners of small to mid-sized businesses choose to procrastinate and do not have a plan in place. If you are a part of this generation, you should most certainly already have your plans for the future underway. Even if you are not a Boomer and are considering selling, this is the time to get ahead of the massive wave of businesses that are expected to hit the market this year.    

Are You Ready to Sell?

If you are considering selling your business, we encourage you to enlist the expert M&A guidance of Benchmark International’s team to create your growth strategy, exit strategy, or company sale for maximum value. The time to start planning is now.

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2020 Global IT Industry Outlook

The global Information Technology industry encompasses the sectors of hardware, software and services, telecom, and emerging tech including ‘as-a-service’ solutions under the umbrella of the Internet of Things (IoT) and automating technologies.

 The global IT industry is projected to reach $5.2 trillion in 2020, with global spending growing 3.7%

As the world continues to be more digitally connected and industries become more automated, technology will remain a massively growing market in the beginning of the new decade, especially as companies focus less on cost reduction and more on innovation.

The United States is the world’s largest tech market, accounting for one-third of the total market, and exceeding the gross domestic product of most other industries. Although the US market is so large, the lion’s share of tech spending actually happens outside of the US (68%) and is made by enterprise or government entities. Western Europe is a major contributor in the global tech market, and China is also a significant player with focuses in robotics, infrastructure, software, and services.

 

Ready to explore your exit and growth options?

 

Forecasted IT Spending

In 2020, IT spending budgets will be largely driven by the needs to upgrade outdated infrastructure, address security issues, and accommodate growth. The amount of spending and the mix of services will vary by company size.

  • Smaller businesses are expected to spend more on hardware such as servers and laptops.
  • Mid-size companies will be spending more on mobile devices.
  • Larger corporations will spend more on managed infrastructure IT services such as power and climate solutions.

For software spending specifically, small businesses will focus their spending on operating systems. Mid-size companies will have a larger budget for productivity software and business support applications. Large enterprises will be spending more of their money on virtualization, database management, and communications software. Cloud services and recovery software will represent major budget allocations in the coming year and cloud spend will vary by company size.

Cloud Security

With the increasing popularity of cloud-based software and services and hybrid cloud solutions comes the increasing concern regarding cloud security. This is further reinforced by an ongoing rise in cyber attacks and data breaches. Cloud-based security solutions will remain a growing need across several sectors, especially in highly regulated ones such as finance and government. The global cloud security market was anticipated to garner $8.9 billion by the start of 2020. This need will create more opportunities for companies, entrepreneurs and investors.

 

Feel like it's a good time to sell?

 

The Year of 5G

The highly anticipated 5G technology will see a much more momentous rollout in 2020, in contrast to the lackluster emergence in 2019. Hundreds of millions of 5G-enabled smartphones are expected to ship in 2020. 5G will deliver significantly high speeds and remarkable data capacity to expand the financial possibilities for businesses. It is able to support billions of connected devices across sectors, allow new innovation for the IoT, Artificial Intelligence, and Virtual Reality. It will also enable a new world of autonomous vehicles and smart cities through a fully connected society, shattering boundaries to create a scalable global marketplace through unified technologies. Businesses will need to be prepared with how this new technology is going to dramatically alter the possibilities of the cloud and the need for virtualization-based networks as opposed to fixed-function equipment. While it is not going to happen overnight, 5G technology will grow increasingly more available throughout 2020, changing the availability of certain devices and transforming industrial possibilities.

Edge Computing

Edge computing is not a new concept, as it has existed for years. However, the value opportunity that it represents across industries is enormous. 2020 is anticipated to be a highly emergent year for edge computing due to the availability of faster networking technologies such as 5G and analytic capabilities in smaller devices.

Edge computing allows data processing to be done physically closer to where the data is generated (the edge of the network) rather than at a massive data processing center, which in turn reduces latency and processes the data much faster. This opens up countless new opportunities. Additionally, this technology offers several benefits for businesses, such as reduced costs, improved energy efficiencies, predictive maintenance, increased reliability, smart manufacturing, and security enhancements.

Let’s Talk Soon

At Benchmark International, our team of M&A advisors is ready to help you plan the next steps for you and your company. Whether it is selling your business, creating an exit strategy, seeking investor assistance, or finding ways to create growth, we are here to work on your terms to help you make your future as bright as possible.

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Tips For Evaluating A Buyer’s Letter Of Intent

A Letter of Intent (“LOI”) is an expression of the buyer’s intent to acquire a seller’s business on specific terms and conditions.  It is considered a milestone in the transaction process, primarily because it is predicated on the concept that the seller and buyer have agreed upon the basic terms, assuming that due diligence supports assumed facts.

An LOI is generally non-binding as to substantive terms (price, transaction structure, and forms of consideration) but is often binding as to process items. These include access to seller’s information, cooperation by the parties, seller’s exclusivity obligations, seller’s obligation to conduct business in the ordinary course, governing law, confidentiality, and allocation of expenses.

Sellers need to manage their expectations and be aware that buyers can still walk away from the deal even after they have reviewed sellers’ sensitive information provided in due diligence.  If the buyer is a direct competitor, this can have unintended consequences for the seller, notwithstanding well-drafted non-disclosure agreements with limitations on use of the information.  For example, will a strategic buyer determine through due diligence that investing the purchase price in their own business is more cost-effective than paying an acquisition premium?  It is critical that the seller and his/her advisor carefully evaluate all offers and determine if the buyer has the actual intent and financial wherewithal to close the transaction before signing the LOI.

 

Ready to explore your exit and growth options?

 

Here are some basic considerations for evaluating an LOI.

  • Is the deal too good to be true?Reasonable business practitioners do not offer consideration or terms well above the norm.  Such offers often end in re-trades or worse, in a long period of failed efforts to secure acquisition financing, during which time the seller’s business is off the market because of exclusivity.
  • How will the buyer finance the transaction? Cash at closing or bank debt. Third-party financing adds significantly to the complexity and timing considerations of the transaction.The seller should consider requiring satisfactory evidence of a financing commitment early in the process, with the ability to break exclusivity, and perhaps recover out of pocket costs if it is not provided in a timely manner. 
  • How will the seller be compensated? Will the seller receive the full purchase price in cash at closing?What indemnification provisions (how much for how long) apply?  Is rollover equity a component of the deal?  Is stock of the buyer a component of consideration?
  • Is the transaction cash-free/debt-free?If so, does the seller’s balance sheet indicate that a substantial portion of sale proceeds go to retirement of debt?
  • Does the transaction include a working capital adjustment?Assuming that value is based upon a stream of cash flows, a “normal” level of working capital (that historically facilitated the income streams used to determine value) will be required at closing.  Careful attention must be given to how this issue is treated in the LOI, and in the asset or stock purchase agreement, because working capital adjustments (based upon factors determined in a quality of earnings review) are often used as an effective re-trade by sophisticated buyers.
  • What post-closing involvement is required of the seller?Will the seller be required to continue in the business post-closing?  For how long and for what compensation?
  • What non-competition requirements are required?Most acquisition agreements include a non-competition provision that lasts from two to five years.  The points for consideration include geographic location, limitations on the type of business precluded, passive investment versus active participation, and the overall length of time the limitations are effective.

It is crucial to understand that an LOI is not the end of the transaction process, but for legalities.  It is, in effect, just the beginning. Due diligence and quality of earnings review, drafting the asset purchase agreement, and financing the acquisition are all yet to come.  The terms of the LOI can have a serious affect on the seller’s ability to realize his expectations through this process.

 

Author
Don Rooney 
Transaction Director
Benchmark International

T: +1 813 898 2350
E: Rooney@BenchmarkIntl.com

 

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