Benchmark International continuously thinks of ways to give back and support its local communities, especially during this time of safe social distancing. The Benchmark International Austin office showed their support to the community this week by volunteering at the Central Texas Food Bank.

The Central Texas Food Bank is the largest hunger-relief charity in Central Texas. They help about 46,000 people per week, with one-third of them being children, get the nutritious food they need and otherwise wouldn't be able to afford. The food bank serves 21 counties in Central Texas through partnerships and smaller pantries.

Our team, along with others from the community, boxed 4,360lbs of food, which will serve 3,625 meals. This effort was completed while maintaining social distancing guidelines.

Benchmark International was honored to volunteer and contribute to the Central Texas community. Learn more about how you can support the Central Texas Food Bank - https://www.centraltexasfoodbank.org

Successful integration strategies are crucial following any merger or acquisition. Knowing how to execute integration the right way means knowing what failures can be avoided.

Not Seeing the Big Picture
When a deal is underway, it is common for the focus to be on external strategies such as gaining market share and creating growth. But internal focus and maintaining continuity need to be just as important during this time as well. The long-term vision for the company is paramount, and this vision should be aligned between all parties involved throughout the M&A deal process and following completion of the transaction. By not sharing a big-picture strategy for the future, leadership puts the health of the overall organization at risk. All areas of the business are able to work together fluidly when all team members understand the goals for the company moving forward—goals that should be firmly outlined and clearly communicated by management. This should be planned before any M&A deal is completed, not after.

A Lack of Planning
Speaking of planning…the lack of it is a major reason for post-M&A integration failures. And planning applies across the board to pretty much every topic and scenario that can affect day-to-day operations, from HR to project management to revenue projections. Everyone should know his or her roles and responsibilities. All systems should be prepared to keep running smoothly. Proper planning can bridge the gap between a singular focus on the bottom line and daily operational matters, bolstering the odds that the business will run efficiently and prosper. This becomes especially important if the integration is happening cross-border and both cultural and regional issues need to be thought out.

Botched Due Diligence
M&A integrations are prone to failure when the due diligence process is not well executed, which is why deals should never be rushed. Without the necessary due diligence measures, any deal can fall through. The right oversight and research increase the chances of success for a transaction before, during, and after it is complete. Due diligence is critical to uncovering any potential issues so they can be addressed before a sale. It also provides an accurate picture of the inner workings of the business, which aids significantly in the process of integration. Due diligence is hugely important to any merger or acquisition and should never be overlooked or pushed through just to get a deal done.

High Costs of Recovery
Leading up to integration, it is possible to run up high costs that become an issue. This comes back to the topic of planning but deserves to be called out because it can be disastrous. You should be sure that you have adequate resources and bandwidth that can withstand the potential costs of integration. When faced with a challenging integration that could span several years, it can be difficult to recover costs in the long term.

Culture Clash
Cultures within the workplace can vary greatly, especially in cross-border transactions. It is an enormous factor in getting the integration process right. When culture is not accounted for in the integration, it can be both costly and a massive headache. Ideally, the cultures should be similar enough to integrate as smoothly as possible. The merging work environments should be carefully analyzed prior to a deal to achieve an understanding of how the two parties will mesh following the deal. This also means that the leadership team needs to grasp any cultural differences, no matter how minor, in order to be sensitive to any issues that may arise post-integration.

Inadequate Capacity
Deals that involve expansion have certain integration needs of their own. There must be proper assessment of the organization’s capacity to integrate and scale up. This means having enough resources so they can fill in any gaps without being over-extended, leaving you with no room for future growth. These resources include people, time, money, equipment, and space.

Time to Make a Move?
If you are a business owner considering an M&A strategy, our team at Benchmark International would love to hear from you. You can count on us to put our global connections and superior resources to work for you, and our award-winning advisors have the experience to help you avoid any pitfalls and get the integration process right.

Entering into a merger or acquisition is one of the most important decisions a business owner can make, so finding the right M&A advisory firm is equally important. In the news, we frequently hear about massive M&A deals happening between big corporations. Big investment banks typically broker these large-scale deals. These same banks usually cannot be bothered to represent companies in the lower to middle markets because it’s not enough of a moneymaker for them.

Why Do I Need an M&A Advisor?

While you are an expert in your area of business, you likely do not have access to the connections and experience to identify opportunities that will result in the best strategic M&A solution. Partnering with an M&A expert will afford you many advantages. Selling a company is a complicated process and you will be relieved by how much they will tend to the many details and constant requests. A high quality M&A firm will:

• Have established networks that will get you access to the right type of buyers.
• Be skilled at managing expectations on both sides.
• Know how to improve your business and market it appropriately.
• Maintain the highest levels of confidentiality throughout the process.
• Know the right timing for taking a business to market based on experience in that sector.
• Appoint legal and financial services where needed.
• Perform comprehensive due diligence and data management.
• Conduct extensive negotiation and create a competitive bidding environment.
• Finalize a fair and premium valuation of the business to get you maximum value.
• Structure the transaction in terms of legal issues, payments, contracts, shareholders, debt restructuring, warranties, and indemnities.
• Keep you informed at all stages of a deal while keeping you out of unnecessary minutia.
• Assist with any necessary strategic decisions regarding integration, employees, timing, and announcements.

Finding Quality M&A Representation

As an owner of a small to mid-size business, where do you start when you are seeking M&A representation? After all, this is a major life decision and you absolutely want to get it right. M&A advisory services range from big investment banks to small boutique firms. You need to assess what is right for you in several aspects. These are some key considerations for your search:

• Many M&A advisory firms do not have varied expertise that spans local, regional and global levels. Look for a firm that will expand your options through the farthest geographical reach.
• It’s okay to be discerning. Talk to multiple firms and create a shortlist. This is going to be a long process so you should feel comfortable and have a liking for the people you are working with, while you should also feel confident in their abilities to get the deal done right.
• Study the reputations of the M&A firms and look for one that is well known for getting maximum value in deals. Look at what types of deals they have done in the past and if their experience is applicable to your business regarding markets, products, services, and regions? Also, seek out any available testimonials from their clients and look for a firm that has proven strong relationships.
• Pay close attention to the initial discussions you have with them. Do they seem aligned with your goals and motivated to get you exactly what you want or do they seem stuck on going their own direction? You want your M&A advisors to be as aligned as possible with your vision and aspirations for the future. You should feel confident that they are in your corner and not just there to make a buck.
• Assess their ability to create a competitive bidding scenario among multiple parties. Are they known for doing this? Do they have a large enough network and the right resources to make it happen?
• Consider how their fees are structured. Some firms may take a percentage based on deal size. Some may have upfront fees, monthly fees, and registrations fees. You don’t want to be met with surprise costs. Make sure they are transparent about their fees and that their justification for them makes sense. While you do not want to get ripped off, you should also keep in mind that selling your business is a once in a lifetime opportunity and you want to get it right, so this probably isn’t the time to cheap out.
• Look for an M&A advisor that you know will work with you as a true partner. A good firm will offer you constant engagement and welcome active contributions from you. They will make sure you do not miss any details and that you never feel left in the dark. They will also make sure that zero communications are sent to a buyer without your consent and input.
• Make sure you are getting an M&A advisor and not just a business broker. A broker is less likely to offer a comprehensive partnership that details long-term plans and integration strategies that are important to the process.

Are You Ready to Sell?

If you are seeking an M&A partner, we kindly ask that you include Benchmark International in your search. We believe that our award-winning team can offer you all the qualities you desire while getting you the most value possible for your company. We look forward to hearing from you.

Effective management is essential to the growth and success of any business. This is especially true following a merger or acquisition. Through analytics conducted by companies such as Google, we know that certain characteristics and behaviors have been proven to make all the difference in leadership’s ability to get results for the business.

Good Communication & Collaboration
Quality leadership entails listening to staff as well as sharing information with them. Talent that feels both heard and informed also feels included, valued, and motivated. When employees think that their feedback does not matter, or that they are being kept in the dark, they not only feel underappreciated, but they can also lose trust in their leaders. That’s never part of any playbook for success.

Clear Vision and Strategy
Clarity provides the direction that is critical to getting things done, which correlates to the valuation of the company. Management should fully grasp where the company is going and how to get it there. Vision and mission statements are helpful but the leadership team needs to actually believe and uphold what they say.

Adaptability
Leaders of businesses are frequently faced with changes and new challenges. They must be able to adapt to these circumstances quickly in order to be successful. This is especially true in this day and age when technology brings about change more rapidly. Effective leadership will not view change as an obstacle, but rather as an opportunity. When championed by management, this philosophy can be contagious throughout the ranks.

Supportive of Development
It is important that employees understand how they are performing and are given paths to self-betterment. Management should help talent set goals, create timelines to achieve those goals, and regularly evaluate performance. Research shows that 69 percent of high-performing businesses rated company-wide communication of goals as a leading tool for building a team that is loaded with top performers. Also, achievements should be celebrated and rewarded. Even small gestures can make a difference.

No Micromanagement
Building trust, respect, and quality relationships between management and employees means avoiding micromanagement. When staff is micromanaged, they tend to feel the opposite of empowered and it can directly affect morale in a negative way. This also means that your leadership must have the ability—and willingness—to delegate.

Strong Decision Making
When you picture a great leader, you picture someone with strength and conviction, not someone who cannot make up their mind. Leaders need to be productive, results-oriented and have confidence in their choices. They must be able to balance reason with emotion, and know when the timing of a decision is critical to its results.

Empowering Coaching Mentality
Management should foster an inclusive team atmosphere that shows concern for the success and wellbeing of employees. This involves being supportive of staff, finding ways to help them grow, keeping promises, and providing an encouraging work environment.

Relevant Technical Skills
Studies show that technical skills fall at the lower spectrum when it comes to ranking leadership qualities. However, in order to help advise the team, the leadership should possess the proper skills and knowledge that apply to the business. If employees feel that management does not know what they are doing, they will see right through it and will struggle to take leadership seriously.

Time to Make a Move?
If you feel that a merger or acquisition is key to your future, please reach out to our M&A dream team at Benchmark International to arrange a deal that will turn your dreams into reality.

Once you’ve made the difficult decision to sell your company, there comes a time when you must inform those closest to you about the news. Telling your family that you are going to sell will depend on their level of involvement with the company. If none of your family members are employed in the business, sharing your plans will not be quite as sensitive of a subject. In fact, they may welcome the decision because you are about to have more time to spend with them, which is why you should not inform them until you are certain that you are going to sell.

Family Matters

It is an entirely different story if you have family that is on the payroll. Will a family member be taking over the company? How will any staff that is family be impacted by a change in ownership? These types of scenarios are when things need to be handled more delicately.

If a family member is taking over the business, there are several important considerations that can affect how the entire process plays out and how smooth the transition goes. It is important that you are sure that you and the new owner share the vision for the future of the company. If you decide to sell to them, and later learn that they wish to take the business in a different direction, you may not agree and emotions could lead you to change your mind, causing friction in the relationship that can affect the health of the business moving forward, especially if they are an essential part of the management team. Selling to a family member also means that it is important that there is clear and open communication regarding the valuation of the company and how they will be paying for the transaction.

Also, it is not uncommon for family members to feel it is adequate to seal a deal with a handshake, but a strictly verbal agreement can be very problematic. You cannot simply just hand it over. It is crucial that you have a tangible agreement in writing so that everything is clear, on paper, and you can move smoothly towards your exit. You will want it to cover details such as a third-party valuation, amount paid, payment schedules, if you as the initial owner will remain on payroll, and whether you will still be involved in the business and to what extent. It can be helpful to bring in a M&A professional to advise you through this process to ensure you have all of your bases covered and help you avoid making emotionally driven decisions.

Additionally, you need to be sure that the next generation actually wants to take over the family business. Sometimes an owner assumes that their children will take the reins without realizing they have no interest in doing so. Another scenario to consider is whether a family member has a sense of entitlement regarding the business that you may not be aware of. You’ll want to make sure everyone is on the same page. If you plan on selling to a buyer outside the family, and you unknowingly have a family member who thinks they will be inheriting the business, a great deal of resentment can arise and cause stress for employees, and problems within the operations of the company, as well as with the success of any merger or acquisition.

Timing is Everything

Regardless of to whom you are selling the company, the timing surrounding sharing the news is critical. Confidentiality is imperative to the sale process, so you never want to break the news too soon. The process can go many different ways. The deal can fall through, or you could change your mind about partnership or minority investments, or the buyer could take actions that alter the terms of the deal. You may even decide to go with a different buyer. In any case, the due diligence process in any M&A transaction can take several months to years. Communicating the news of a potential sale with too many people too soon can lead to issues such leaked information, distracted employees, and other factors that could end up negatively impacting the final terms or killing the deal altogether. It is best to keep the situation to yourself for as long as possible. By waiting, you are also ensuring that the deal is closer to being finalized and less likely to fail, so you avoid getting people worked up about a sale that is not even going to happen.

Communicate Clearly

In any case, when you share the news with your family that you are selling your business, you will want to be open and honest about your reasons. Talk about the buyer and why you chose them. Discuss your plans for the future. Clear communication can help to avert misunderstandings or misplaced expectations. For example, say that your spouse thinks that you are now going to travel the world together but you actually plan on starting a new venture. Do not assume they know what is on your mind. Being clear and up front about your plans can keep things running smoothly at home.

Let’s Talk About Selling

If you are ready to sell your company, contact our M&A specialists at Benchmark International for the highest level of expertise and guidance. We understand that you’ve spent your life creating wealth and value. We know you want your legacy to be handled with care. We can help you sell for maximum value and get you on the path to the perfect retirement or the next phase of your entrepreneurial life.  

Purchasing an existing business is a far less risky alternative to starting a new business from the ground up. In fact, more than half of start-up companies fail within the first several years. Some research even reports that a whopping 90 of new businesses fail within four to five years.

By buying an existing business, you are acquiring all of the positive aspects that it already possesses, such as the customer base, infrastructure, supplier relationships, and brand recognition. You will also be taking on its shortcomings as well, and that is another element you will need to factor into your search. So, when looking for the ideal business for you to acquire, where do you start?

7. Consider Your Value

When embarking on your search, think about how you can bring value to the table. Consider how your particular experience, skills and areas of expertise can improve the company and strengthen its weaknesses. It is a logical step in finding the type business that makes sense for you. It also aids in making your case to the owner as to why you are the right person to carry on their legacy.  

6. Focus Your Passion

If you are going to go all in on a business, it is more likely to succeed if it something that you feel passionate about. If you have zero interest in producing or selling trombones, then a trombone company is probably not the best choice for you. Seek out a business that you naturally feel gravitated toward helping flourish. Because you are going to need to dedicate a great deal of time to this new venture, it will help that you feel inspired by your mission.

You may even come across a business that interests you that is not on the market. Don’t be afraid to ask the owner if they are willing to sell. Even if they say no, they could change their mind down the road so make sure to give them your contact information.  

5. Leverage Your Network

Reach out to your colleagues, friends, and family members to see if they are aware of any companies on the market. This can be a simple path to finding a good lead, especially if you already have a connection to the ownership, making for an easy introduction. Also keep in mind that this route can also lead to prospects that may not be serious or may not be the best fit. Just because you know someone who knows someone who wants to sell, it does not mean it is the right opportunity for you.    

4. Search Online

There are several online marketplaces that list small businesses that are for sale. This is a relatively effortless way to access key information such as location, asking price, revenue, inventory, and have access to global listings. Just be aware that these sites may list high company valuations. Also, these types of sites can be flooded with listings, which can be a major waste of your valuable time. You may also come across sellers that are not actually serious about selling. 

3. Consider Lifestyle Impacts

When purchasing a business, you are taking on a massive responsibility and it is important that you make sure your lifestyle can accommodate all that it will entail. Think about how taking over a company will affect your time, your family, and any other obligations you may already have. How much of your time are you willing to invest? Will you need to relocate? Are you going to be losing sleep over any debt? Avoid over-extending yourself for your sake, the sake of your family, and the sake of the company.

2. Know Your Budget

Before even attempting to buy a business, it is important to establish what you can afford to invest in the endeavor. Be sure to ask yourself the right questions, such as how much you have on hand, if you will need financing, and how much debt you are able to take on. Also, if you have a reasonable idea of what you are willing or able to spend on an acquisition, you can avoid wasting time looking at companies that are outside of your ballpark.

1. Work With M&A Experts

By working with a mergers and acquisitions advisory firm, you will have access to exclusive information about businesses that are for sale that you will not be able to find on the street or the Internet. These experts will also have superior resources and proficiencies in matching quality businesses with the right buyers. Going this route also means you can be sure that you are dealing with serious sellers only—not someone who is just toying with the idea of selling. These many benefits are proven to translate to a more efficient and fruitful experience overall.   

Looking to Buy?

While we specialize in sell-side M&A, our talented team at Benchmark International can also help to effectively match buyers with the right businesses. Visit www.BenchmarkIntl.com/buyers/ to create your buyer profile and learn more about the merits of working with us.

Many first-time buyers acquiring businesses in the United States are unsure of how to structure their offer in terms of a deal to buy the equity of the business (i.e., the stock, membership interests or partnership interests) or the assets of the business. The below FAQs should help point you in the right direction or at least allow you to have a meaningful conversation with your advisors.

Which do sellers view more favorably, stock deals or asset deals?

Typically, a seller’s initial reaction is to prefer a stock deal to an asset deal. They lean this direction because the first thing they have been told is, “Your tax bill will be smaller on a stock deal.” But there are actually a number of other significant considerations and the conventional wisdom on taxation is not always correct. Even still, when all is said and done and sellers are fully educated, they will almost always seek a stock deal as opposed to an asset deal.

How does this decision affect the definition of the “seller”?

In a stock deal, the owner of the business is the seller. He or she is selling her equity in the business. In an asset deal, the company itself is technically the seller. It is selling its assets to you.

Are the implications of securities laws different?

Yes, federal and state securities laws apply to a stock sale but do not typically apply to an asset sale. This benefits the buyer because of Rule 10b-5 issued by the Securities Exchange Commission (SEC) pursuant to the Securities Exchange Act of 1934. This regulation holds sellers responsible not only for material misstatements in the sale of securities but also material omissions in such sales. With asset deals, the default US rule of caveat emptor applies (unless the purchase agreement says otherwise). Buyers therefore gain a bit of extra protection with both civil and criminal penalties when acquiring via stock deal. However, it is important to remember that Rule 10b-5 applies to both the sale and the purchase of securities so the higher standard applies to both parties to the stock transaction.

What about the meat of the deal? Does it change?

Absolutely. In an asset deal, the buyer and seller must agree which specific assets are being acquired and which are not being acquired. Similarly, they must specify which liabilities are assumed by the buyer and which are left behind. In a stock deal, all assets owned by the company and all liabilities owed by the company move along with the sale unless specifically called out in the purchase agreement. We most often see asset deals in situations where the parties have agreed to leave all or almost all the liabilities behind and stock deals where the reverse is true.

What about those tax issues?

This is often the crux of the difference of opinion between buyer and seller. Though the issue can arise in an infinite number of variations, the most common occurs when the seller has used accelerated depreciation under the Internal Revenue Code and an asset deal occurs. In an asset deal, the parties must mutually agree on a purchase price allocation for tax purposes. All purchased assets are either specified items or “goodwill.” After the acquisition, the buyer can depreciate the value assigned to each specific item but not so with the goodwill. Depreciation creates a “tax shield” that results in the business kicking off more cash for the buyer in the years following the acquisition. The higher the percentage of the purchase price allocated to specific items, especially quickly depreciating items, the more appealing the asset deal is to the buyer and its future cash flows. But the IRS does not like buyers to depreciate assets that the seller already depreciated. In such an instance, the IRS would lose (and we all know that can’t happen). So the IRS has something called “recapture tax.” Suppose a seller bought a machine for $100 and depreciated it quickly down to $15 in its tax books. The result over that time was $85 of expenses that resulted in lower taxes. If the buyer and seller then ascribe a value of $100 back to that item, the buyer will—in future years—get to depreciate that item back to $15 again. “Not fair,” says the government. The recapture tax says, essentially, that if they agree to allocate $100 to that item, then the seller has to pay taxes for the “over-depreciation” it took while it owned the machine. So the buyer wants high value on the specified items and low value on the goodwill, a built-in conflict making deals harder to close.

This is but one of many tax issues that, almost always, tends to pit buyer against seller. Generally speaking though, for most circumstances, the tax issues in a stock deal result in significant reduction in the degree to which buyer and seller are diametrically opposed on tax issues.

Is a stock deal sometimes inevitable?

Yes, it is. When the company being sold has a large number of contracts that require the third parties’ consent to assignment, asset deals can be almost impossible to pull off. This is why larger deals are rarely structured as asset deals.

Most contracts include what is called an “assignment clause.” When a business sells its assets and assigns it liabilities to another company, its contracts are “assigned” and the assignment clause must be consulted. These clauses often require the consent of the counterparty prior to any assignment. Asset deals require assignments; stock deals do not. Obtaining the consent of 4,000 clients and five landlords can often push the buyer and seller to a stock deal regardless of any other consideration.

Some contracts also have “change of control clauses” that essentially state that any change of control of one party will be treated as an assignment. Thus, structuring as a stock sale is not a panacea to this consent issue.

Permits and licenses can pose similar restrictions on the parties, pushing them towards a stock deal. Similarly, in an asset deal, employees must be fired and rehired and must be tied into the buyer’s or new company’s benefits plans.

Is an asset deal sometimes inevitable?

Yes, it is. We see this happen when the company being sold has significant pending litigation, problems with its history, poor documentation, or other defects that make the equity interest in the business unmarketable. Though buying substantially all of the assets can lead to successor liability in some circumstances, asset deals provide fairly effective ways to take the desirable aspects of the business and leave the offensive pieces behind.

Which deal structure moves more quickly?

Stock deals tend to move much more quickly than asset deals for a number of reasons. Buyers can rely on the protection of securities laws so diligence tends to be less involved. Fewer third party consents are required. There are fewer tax issues to debate.

Author
Clinton Johnston
Managing Director
Benchmark International

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

Selling a company can take several months to even years, depending on factors such as the state of the business, the industry, the market, and the economy. At Benchmark International, we have created an efficient process that we use as a framework to guide any merger or acquisition from start to finish. While not every deal will follow this timeline exactly, it is what we strive to adhere to and what you can expect from the process, keeping in mind that when several parties are involved, timing depends on when they each do their part.   

The 120 Days Prior to Going Live: Strategy Development & File Preparation

First, in order to determine the “go live” date (when we take the business to market) we carefully assess your needs and priorities as the business owner, the completion of audits and taxes, the harmonizing of the business’s external image, and the M&A market calendar. 

In the 120 days prior to “going live” with your company, we will go through a preliminary preparation period. This period begins when you and your Benchmark Deal Team sign the engagement and we deliver a data request list to you in order to obtain the relevant information we will need to facilitate a deal. The initial delivery of these documents to us usually takes about two weeks. Then, two weeks after that, we conduct a Q&A session with you regarding the financial data to resolve any outstanding topics. This is when we dig in and do an even more thorough assessment.

A few weeks later, we have our first meeting with you for the presentation of any issues that we found, we request any additional data, and we conduct a preliminary discussion of a marketing strategy. In another 20 days, we have a second meeting to verify the completion of the harmonization of the company’s public image, finalize strategy, and recap any additional data still needed.

Then, in about three weeks, our deal team delivers drafts of the company Teaser and Confidential Information Memorandum (CIM). In the week subsequent to that, we will meet to finalize materials, we prepare market intelligence, and then we are ready to go live.

Two Months After Going Live: Solicitation of Candidates & Expression of Interest

Now that we are ready to go live, we move into the next phase of the process. We start by approaching prospective buyers. We begin obtaining non-disclosure agreements and screening candidates. Within about three weeks, our deal team delivers an interim candidate report to you, classifying candidates into three categories. We then meet to determine authorized recipients of the CIM out of the candidates delivered. Following this meeting, we deliver CIMs to a second round of prospects. You can expect us to be one month into this process when we deliver a finalized candidate report to you, which again classifies the candidates into three categories. Soon after, our team will meet with you to determine the authorized recipients of the CIM out of these candidates. Following this meeting, we deliver CIMs to a second round of invitees. By day 60, expression of interest is due from these candidates.

Two to Four Months After Going Live: Evaluation of Candidates & Offers

Now that we are two months into the process of having gone live, your Benchmark team presents the expressions of interest on behalf of prospective buyers to you. Next, you instruct us as to which candidates should be invited to bid. We then confirm each invitee’s continued interest and they are provided access to a preliminary data room.

At about three months in, letters of intent are due to us from the bidders. We revert to them with any questions raised by the letters of intent. Next, our team presents the letters of intent to you and follows up on any questions you have for the bidders. At this stage, around Day 107, we work closely with you to reevaluate the top bidders, and negotiations begin with one to three bidders. By Day 120, the letter of intent is executed and the counterparty is granted access to the complete data room.

Ready to Sell?

We’re ready to help. Contact our M&A advisory experts at Benchmark International to formulate effective strategies to grow your business or plan your exit strategy and sell your company for the highest valuation possible. 

1. Improve & Grow
Investors seek to buy companies that increase cash flow year over year. Obviously, the more profitable and healthy your company is, the higher valuation it will garner. This means that retained earnings (the amount of profit left over after all costs, taxes and dividends are paid) are an important factor, including how they are reinvested in the business as working capital. It also means you should be focused on lowering expenses and increasing revenues, as the efficiency of your operations is going to be a key driver of valuation. Look at the last three years to see if cash flow is trending upward. If not, you should take measures to get the company on the right course. Companies sell for higher prices when they show that they can continue to grow. Your future growth depends on your ability to identify new markets, adapt to changing technologies, and keep your workforce trained. Buyers look for businesses that have goals and a solid plan for achieving them.

2. Value the Power of Marketing
How marketing is defined when it comes to selling a business is twofold, and both are incredibly important. 1) Effectively market your products or services to customers and 2) Effectively market your company to potential buyers.

Create and retain a diverse customer base that creates recurring profits. Evaluate your marketing plan to determine strategies to boost sales, tap into new markets, get a competitive edge, and increase customer loyalty. The more diverse your customer base is, the more protected you will be if you lose a major customer. This insulation is important to buyers.

When you do the first part correctly, you will be in a stronger position to showcase your company’s strengths to acquirers. In order to best market yourself to buyers, it is smart to work with an M&A advisory firm that has the marketing experience and resources to make your company as appealing as possible.

3. Foster a Strong Team
A large amount of value in a business lies in its people, especially if it has few tangible assets. A prospective buyer is going to want to have faith and confidence in the existing leadership team and that they will remain there after your exit. They will also be more interested in a business that is known as a great place to work. Your key talent beyond management is also critical to the success of the company. They should be motivated, informed, and feel that their futures are in good hands so they are not tempted to jump ship because they are nervous about a possible sale. This is why it is crucial that the details and confidentiality of a sale and are handled very carefully. Employees need to be informed and feel included, but they should not be told about a sale until the proper time.

4. Have Detailed Recordkeeping
In order to sell your company, you will need to have all financial records and contracts related to the business for the due diligence phase of the transaction, and this extends beyond tax returns. Shoddy recordkeeping signals to buyers that there could be problems and that the business’s financial performance may not be portrayed accurately. Being transparent and thorough indicates to buyers that you are serious and more likely to be trusted.

5. Remain Invested
Just because you are planning to sell, do not lose sight of the fact that your business still needs you. It is easy to get caught up in the excitement of the M&A process, but you must keep the day-to-day operations running smoothly. Continue to improve and invest wherever possible and you will not only strengthen the overall value of your business but also demonstrate your commitment to its future success. Buyers want to see that you are doing what’s in the best interest of the company all the way up until your exit. At the same time, a business should not be reliant on any one person. While you should remain engaged through a sale, the company should be able to continue to operate successfully AFTER your exit, as well.

6. Get M&A Guidance
You have worked so hard to build your business and its sale may be the most important milestone in your life. You deserve to have the transaction done right so that you get the maximum value possible for your company. Experienced M&A advisors can not only make sure that the process goes as it should, but they have specific strategies and know-how that will get you as much as possible while adhering to your goals for your future and the company’s. Additionally, savvy buyers have solid knowledge of the M&A process and what to look for. Working with an advisory team will demonstrate that you are a serious seller while protecting your interests and getting you the amount you deserve.

Talk to our Experts
If you are considering selling your company, contact the M&A advisors at Benchmark International and tap into award-winning solutions and unparalleled expertise.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What Sellers Need to Know

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

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

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

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

What You Will Need

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Program Overview 

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

Application 

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

Additional Details for Borrowers 

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

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

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

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

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

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

Know Your VIPs

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

Build Trust Though Communication

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

Think Beyond the Bonus

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

Avoid Culture Clash

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

Let’s Do This

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

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

The motivations behind M&A deals can be:

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

Mergers

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

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

Acquisitions

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

Management Acquisitions 

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

Tender Offers

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

Acquisition of Assets 

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

Reverse Merger

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

Contact Us

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Any questions, please read the full article here.

Author
Nick Hulme
Managing Director
Benchmark International

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

Geopolitical Factors

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

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

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

Ag-Tech Opportunities

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

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

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

Hemp Farming

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

Growing Conditions

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

In the U.S. alone:

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

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

Ready to Make a Move?

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

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

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

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

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

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

Author
Clinton Johnston
Managing Partner
Benchmark International

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Author
Kendall Stafford
Managing Partner
Benchmark International

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Author
John Lousber
Transaction Associate
Benchmark International

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

* * *

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

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

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

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

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

Author
Clinton Johnston
Managing Director
Benchmark International

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

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

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

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

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

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

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

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

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

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

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

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

According to research:

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

Create a Profit and Loss Statement

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

Know Your Strengths and Weaknesses

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

Create a Reorganization Team

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

Evaluate Your Options

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

Get the Previous Steps Right

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

Enlist an M&A Expert

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

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

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

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

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

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

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

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.

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.

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.

• 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.

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. 

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.

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.

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.

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.

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.

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.