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

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

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

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

 

Learn More About the SAVCA Southern Africa Industry Conference Here

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

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2020 Global Outlook For The Media Industry

The New Media World

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

Streaming Wars

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

Podcast Popularity

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

 

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For the Love of Data

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

User-Generated Content

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

M&A Opportunity

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

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

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Why 2020 Is The Right Time To Transition A Business

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

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

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

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

The 2020 U.S. Election

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

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

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

Ready to explore your exit and growth options?

Brexit

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

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

The Boomer Retirement Wave

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

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

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

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

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

Are You Ready to Sell?

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

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2020 Global IT Industry Outlook

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

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

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

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

 

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Forecasted IT Spending

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

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

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

Cloud Security

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

 

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The Year of 5G

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

Edge Computing

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

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

Let’s Talk Soon

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

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The Aviation Industry and M&A

The transportation industry on a whole has seen major opportunities for investment thanks to a myriad of technological advancements such as self-driving cars, ride sharing and alternative fuels. As technology permeates all global industries, the aviation industry has its own unique circumstances, and must turn to acquisitions and market share to create competitive advantages in the 21st century.

Major areas of focus include aerospace, defense, supersonic travel, artificial intelligence, robotics, cybersecurity, surveillance, and communications. The idea of space exploration has become more privatized. It is not just about commercial astronauts anymore, but about making it possible for everyday people to engage in space travel. Also, urban on-demand air transportation is redefining the possibilities for how people commute to work. This technological advancement is proposed to use three-dimensional airspace to ease traffic on the ground, save commuters time and money, and provide a safer yet still relatively quiet travel option.

Aerospace and Defense (A&D)

As global A&D spending increases, so does the opportunity for M&A activity. In our digitized world, threat and risk mitigation continue to take on more importance, resulting in more mergers and acquisitions within IT, cybersecurity, and space companies.

Commercial aerospace firms are stretching their aftermarket capabilities to gain repair revenue over the lifespan of an aircraft fleet and benefit from improvements within the areas of electronics and avionics.

Private equity investors are also becoming more attracted to this sector, looking to sink capital into targets that have high growth prospects and high margins.   

 

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Aircraft Backlogs and the Maintenance, Repair and Overhaul (MRO) Market

Commercial aircraft order backlogs also drive M&A activity in the middle market, as equipment manufacturers within the supply chain must respond to the demand, and are sitting on a tall stack of orders. Over the next 20 years, around 40,000 new aircrafts are slotted for production. Major airlines have a tendency to prefer larger suppliers, so consolidation to create more efficient and reliable MROs is a tactic that ensures the orders can stay on pace without major delays. As this consolidation occurs, it becomes more difficult for smaller, independent MROs to compete, causing them to team up with larger original equipment manufacturers (OEMs) in order to meet demand and avert delays.  

Pilot Training

There is an existing and growing pilot shortage that presents a major challenge for all airlines around the world. According to Boeing, it is estimated that 800,000 new pilots will be needed over the next 20 years. More pilots are reaching the mandatory retirement age at the same time that an increasing number of people around the world are booking flights. Plus, military expansion means a reduction in the pool of military pilots that are typically sourced by commercial aviation. These factors all combine to create new opportunities in M&A in the global aviation industry through the need for pilot training and the creation of new, more efficient flight simulators, as well as the development of autonomous piloting technologies.

 

Ready to explore your exit and growth options?

 

A New Era of M&A

M&A activity is crucial to the many new types of developments in the global aviation industry. Private equity and venture capital are needed to keep the innovations coming, alongside the pursuance of new growth strategies and market retention by existing industry players. M&A in the aviation industry has become very much about bringing new services to new markets. This changes the way competitive companies must view each other, calling for more collaboration in order to drive innovation and create value.

It is strongly advised that anyone entering into the complex world of aviation M&A obtains an advisor that has the appropriate experience to conduct proper due diligence, navigate the intricacies of the industry, create the right connections, and be familiar with the industry-specific regulatory environments. 

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At Benchmark International, we’d love to start a conversation about how we can help you grow or sell your company. Schedule a chat with one of our M&A experts today. Our global network of buyers and our innovative processes make us recognized around the world for getting great deals done.  

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Tips For Evaluating A Buyer’s Letter Of Intent

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

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

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

 

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Here are some basic considerations for evaluating an LOI.

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

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

 

Author
Don Rooney 
Transaction Director
Benchmark International

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

 

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14 Common Misconceptions About Selling A Business and Engaging an M&A Firm

1. “I can conduct the sale myself.”
You could. But you are likely to get a much better deal if you have the guidance of an M&A professional on your side. Not to mention, you are going to have far less of a headache if you do not take on this complex process on your own. It’s going to take a good bit of time and is going to involve meticulous details. The help of an M&A expert also allows you to remain focused on running your business instead of getting caught up in the sale process and being overwhelmed by trying to juggle both, just to get a smaller profit.

2. “I already know my buyer.”
You know your business better than anyone, so it is easy to assume that you will know your perfect buyer. But it is a competitive world and there are many types of buyers that could be a great fit. Fixating on one type of buyer limits your options. Exploring all of your prospects will allow you to maximize your sale potential. This includes buyers that may not even be in your same industry. You are more likely to find the right buyer with the help of an M&A firm that has global connections and vast experience brokering these types of deals.

3. “Selling will only take a few weeks.”
It is very rare that any merger or acquisition is completed quickly. It typically takes months to years to find the right buyer and iron out the details of the sale. Six months is a common estimated timeframe for small to mid-sized businesses.

 

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4. “Asking price will be the purchase price.”
These are not the same thing. Following negotiations, it is common for the sale price to be lower than the asking price. A qualified M&A advisor can determine the fair market value of your business, help to maximize this value, arrange a better deal, and manage your expectations regarding the transaction.

5. “A buyer's financing is not my problem.”
A buyer's financing should surely concern you because they cannot buy your company without the capital needed to do so. You can play a role in moving the process along by boosting lender confidence through your testament as to how the business can continue to thrive under new ownership.

6. “I already have the advisors I need.”
As a business owner, you have skillful attorneys and accountants on your side that deserve credit for the fine work that they do in their areas of expertise. But it is unlikely that they are experienced in conducting complicated M&A deals. Even if they have a small level of experience with M&A, it probably is not enough to ensure that you get the best deal possible. Remember that selling your company is a monumental one-time deal that will impact the rest of your life. Consider how much you really want to risk your life’s work in the hands of someone who is not a consummate M&A expert.

7. “Next year, I can sell for more.
Markets can be extremely unpredictable, especially in certain sectors. While timing is important to a sale, it is possible to wait too long and miss out on your best window of opportunity. Working with M&A professionals can help you make better decisions based on reliable data and knowledge, best determining when you should sell.

8. “My business is entirely different.”
It’s not out of the ordinary for a business owner to feel that their company is worth more than it actually is simply because of their emotional connection to it. While most businesses do have their own unique aspects, the reality is that unicorns are rare. You are better off to keep your expectations down to earth, because your business is likely not immune to middle-market norms.

9. “Selling means getting what I want.”
You deserve a deal that delivers on your goals for your future. But remember that a sale is going to have to work for both sides—otherwise you might as well not even consider selling. Many buyers are savvy and recognize when a seller is going to be unreasonable. The best way to fulfill your aspirations is to work with an M&A advisor that knows how to communicate with buyers and negotiate on your behalf while being mindful of how to make the deal enticing for them.

 

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10. “I can wait to sell when I am ready.”
If you are seeking disappointment, this is the attitude to have. Waiting until you feel ready is a major pitfall. There are several factors regarding the economy, your industry, and the state of your business that must be considered into the timing of a sale. You might finally be ready, but you may not get what you could have if you went to market at a more suitable time. If you plan to sell eventually, the smart move is to start preparing your business sooner rather than later.

11. “Things are going great. So why sell now?”
Because when your business is trending upward, you are in a much more advantageous position to sell. You are more likely to see increased competition to buy and higher company valuations, and you will be under less pressure to accept any old offer.

12. “My company is ready to sell.”
Properly preparing a business to be taken to market takes quite a bit of work, time and energy. The level of detail that a business owner puts into compiling finances and business records, increasing marketability, planning for the transition, and crafting an exit strategy, directly impacts the salability of a company. If these matters are not in order, your company is not ready to sell.

13. “I must sell 100 percent of my business.”
There are some buyers that are content to providing capital for a minority ownership stake. This type of deal can give you capital to put back into the business and facilitate growth while you still remain the owner. Working with an M&A advisor can help you identify these buyers.

14. “Negotiating is over once I sign the LOI.”
Signing the letter of intent (LOI) is very important, but negotiations do not end there. There will be comprehensive due diligence leading up to the drafting of the purchase agreement. Negotiations continue until the purchase agreement is signed.

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If you are considering selling your company and enlisting the help of passionate M&A experts like ours at Benchmark International, we are ready to become your partner in success

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5 Qualities The Best People In The M&A Industry Tend To Have

1) Discretion

Privacy and confidentiality are absolutely essential to any M&A deal. Anyone handling or involved with the sale of a business must be trusted implicitly to maintain discretion around all details of the business and any sensitive materials, including intellectual property.

Discretion is also important to ensuring that both employees and customers do not hear that the company is for sale before the intended timing. This can result in unnecessary panic and the loss of clients and valued talent. Sellers should seek out an M&A advisory team that has an established reputation of trustworthiness in such delicate matters. 

2) Passion

The best people in the M&A industry do not just like what they do—they absolutely love it. When you love what you are doing, it is easy to be truly dedicated and passionate about it. That kind of passion translates into the ability to deliver on the best interests of the seller and arrange a deal that helps them fulfill their aspirations for their business and their future. When your entrusted M&A expert is passionate about delivering life-changing choices for you, it will be evident in their actions and the options that they bring to you.

 

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3) Analytical Thinking

M&A transactions are very complex and require assessment of a great deal of data and financials, knowledge of valuation techniques, the ability to market a company, and many other aspects. Navigating through so many details with precision is crucial to any lucrative transaction. A highly analytical mind is needed in order to process massive amounts of information and develop an accurate and error-free evaluation in every step of the process.

4) Experience-based Vision

In order to sell or grow a company through M&A, there must be a clear understanding of the seller’s industry, the market, the competition, and applicable geographic regions and their related nuances. An effective M&A strategy for maximum success comes with pertinent experience and the ability to define a clear path to creating value and reaching the best possible outcome. A quality M&A partner will have a proven track record with all of these aspects. 

5) Compassion

To be truly successful as an M&A advisor, there should be a compassionate understanding of the client being served. Business owners have worked so hard through their entire lives to build their companies and selling is a very personal, emotional journey. They are going to have fears and doubts that need to be mitigated. Empathy during the process is key to fully understanding a seller’s motivation and goals for their future. It also facilitates better communication and the ability to bring people together. A truly good M&A team will never force a seller into a deal with which they are not 100% comfortable. This requires a willingness to see everything from the seller’s perspective throughout the entire journey.

Contact Us

If you are ready to engage in a deal to sell or grow your company, please reach out to our esteemed experts at Benchmark International. As a passionate and compassionate M&A team, we take a personal stake in formulating the ideal path to achieving your goals and maximizing the value of your business.

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M&A In The Global Insurance Industry

Mergers and acquisitions in the global insurance industry carry their share of unique challenges. There is always the potential for increased regulation, and ever-changing technologies and infrastructures can make it expensive and difficult for companies to keep pace. When it comes to cross-border M&A, cultural integration is often overlooked. These factors make the world of M&A in the insurance sector complicated to navigate.

Key Drivers of M&A in the Insurance Industry

M&A activity in the global insurance sector becomes more dynamic as a result of several contributing factors and strategic objectives.

  • Companies acknowledge the need for economies of scale and seek to expand by moving into global markets.
  • Lower policy rates push industry players to consolidate to maintain profitability and find ways to remain competitive by uniting two synergistic companies and gain more value through scale efficiencies.
  • Stagnant domestic markets result in cross-border targets.
  • Organic growth cannot be relied upon to meet company goals.
  • Heightened interest comes from a broad range of backers, from hedge funds to international investors.
  • Low profitability results in low investment yields.
  • Insurers need ways to spend large cash reserves.
  • They need to integrate new technologies (such as mobile apps and big data) to revitalize flat business models, improve internal capabilities, reach customers, or gain market insights.

 

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Due Diligence

As with all M&A transactions, meticulous due diligence in the insurance industry is critical to a successful deal. While many due diligence topics for an insurance company overlap with that of all types of M&A transactions (property, tax records, employee issues, etc.), the insurance industry is subject to some unique scrutiny, such as:

  • Regulatory issues (licensing, permitted practices, regulatory filings, and interactions with government agencies)
  • Assessment and adequacy of reserves
  • Structure of investment portfolio
  • Underwriting and claims administration
  • Market conduct and producers
  • Reinsurance collectability
  • Intercompany agreements
  • Data security
  • Compliance with privacy laws

Crafting of the purchase agreement in insurance M&A transactions is also an important part of the process. If done correctly, it will address both the unique nature of insurance companies and the regulatory environment in which they operate.

Insurance-Specific Indemnities

Indemnification provisions within insurance M&A agreements are similar to that of other industries, with exception of a few differences. An M&A transaction can call for unlimited indemnity protection for specific circumstances in which the buyer asks the seller to assume the risk. Common areas for specific indemnities include:

  • Policyholder claims for extra-contractual obligations or claims that exceed policy limits
  • Litigation specific to the insurance industry (i.e., class action policyholder lawsuits or regulatory actions for improper business conduct)

Cultural Integration in M&A

Global insurance executives have reported that overcoming cultural and organizational differences following a deal has been a significant challenge.

In order for cross-border M&A to be successful, leaders must look beyond financial motivations and consider how cultural integration can result in improved synergy and innovation. This can happen in several ways:

  • The acquirer can completely assimilate the culture of the target company.
  • The acquired company can maintain its own identity and independence.
  • The two can meld, creating an entirely new culture.

The route a company chooses to take depends on the size of the two companies, the post-deal organizational structure, and the advantages generated by different cultural traits.

When companies carefully take culture into account, they can greatly benefit from the positive outcomes and lower the risk of failure in M&A. A cultural assessment should be conducted alongside due diligence far before the deal nears completion. This assessment should study the geographic locations, management styles, work habits, and attitudes of both companies. Successfully uniting employees from diverse backgrounds calls for a customized process that should not be rushed and includes clear and honest communication.

 

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Steps for Success

When insurance companies are considering M&A for financial growth, geographic expansion, and bolstered competitiveness, there are certain steps that leadership should take to find the right type of deal and ensure a positive outcome.

  • Assess the future of the industry, the trajectory of the business, and where the two align.
  • Plan for different scenarios that could trigger economic changes in the next one to two years.
  • Craft an M&A strategy that aligns with ownership’s goals.
  • Choose target companies consistent with leadership’s overall strategy and long-term goals. What seems like a good idea today may not make sense for five to ten years down the road.
  • Remain cognizant of the changing tax and regulatory environments.
  • Evaluate in-house corporate development and overall integration abilities.

Contact Us

If you are ready to grow your company, sell your company, find a new investment opportunity, or plan your exit strategy for retirement, give us a call at Benchmark International. Our esteemed M&A advisors will craft strategies that deliver outstanding results for your plans for the future. 

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The Biggest Trends In M&A This Year

As we approach the end of 2019, it’s a great time to take a look back at trends in mergers and acquisitions activity that emerged around the world throughout the year. Overall, there was an increase in the number of reported M&A transactions and total deal value worldwide.

Four industries experienced significant increases in deal value from the first half of 2018:

  • Industrial (22.6%)
  • Energy and power (11.2%)
  • Health care (6.1%)
  • High tech (2.8%)

New M&A Motivation

A growing trend that is permeating all industries is the deal activity that is occurring as a result of companies needing to integrate technology into their offerings, altering the business landscape. Companies are being compelled to work with a much wider scope of partners to accomplish their tech-enabled goals. For this reason, we are seeing more non-traditional partnerships with different depths of cross-industry integration. These nontraditional deals include joint ventures and alliances, corporate venture capital investments, and the purchase of minority stakes. An example of these types of alliances in 2019 include Uber Advanced Technologies’ (their self-driving car unit) raising of $1 billion in funds from Toyota, Softbank’s Vision Fund and auto components manufacturer Denso.

First Quarter

During the first quarter of 2019, we saw relatively few cross-border megadeals. This could be because of fluctuating geopolitical factors such as increased trade tension between the United States and China. Amid this year’s early cross-border megadeals was the acquisition of Canadian company Goldcorp by Newmont Mining Corporation, a U.S. company. The deal was a stock-for-stock transaction valued at $10 billion.

In the middle market, M&A activity remained robust through the first quarter. Transaction volume was up slightly over the previous year’s period. Private equity funding and a high level of strategic buyer activity continued to drive deals significantly. Foreign buyer activity increased to account for almost 16% of middle-market deals. 

 

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Second Quarter

Megadeals heated up in the second quarter of 2019, especially in North America. Of the 21 megadeals announced in the first half of 2019, the highest in value included:

  • AbbVie’s $62 billion buyout of Allergan
  • Fidelity National Information Services $35 billion purchase of Worldpay
  • Saudi Aramco’s $69 billion majority-stake purchase of petrochemicals group Sabic
  • Bristol-Myers Squibb’s $74 billion acquisition of rival Celgene
  • The $121 billion merger of United Technologies and Raytheon

The second quarter also saw an increase in deal volume in the middle market, up from the same period in 2018. Foreign buyer activity accounted for almost 14% of middle-market deals. 

Third Quarter

By the third quarter, global M&A activity dropped 16% year-on-year to $729 billion, the lowest quarterly volume since 2016.

In Europe, M&A activity reached $249 billion, up more than 45% over the same third-quarter time period in 2018. With a 6.4% share of global M&A and $177 billion worth of transactions, Britain was Europe’s biggest M&A market in 2019. This is due in part to the uncertainty regarding Brexit turning companies into bargain acquisition targets. Additionally, Ireland showed strong M&A activity through the first half of 2019 with deal value up 24% compared with the previous year, while later slightly slowing amid economic uncertainty.

Third-quarter megadeals in the U.S. included:

  • The $24.6 billion merger of drug giant Pfizer’s off-patent branded drugs business with Mylan NV
  • Media companies CBS Corp. and Viacom Inc.’s $20 billion merger in an all-stock deal

In the middle market, global third-quarter deals closed totaled $600 billion, remaining on pace with the first three quarters of 2018. The largest of these deals included Norwegian company Equinor ASA’s $965 million acquisition of U.S.-based Caesar Tonga Oil Field.

 

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High Tech M&A

The technology sector continued to be ripe for M&A transactions in 2019. However, we have witnessed a softening in tech M&A activity in the second half of the year. This could be due in part to enhanced scrutiny that tech companies are facing around issues of consumer privacy, regulations, and misuse of market power. Such scrutiny can be the source of some apprehension to invest in these types of businesses.

Among the notable mega tech deals of 2019 were:

  • Apple’s $1 billion purchase of Intel’s modem business
  • Google’s $2.6 billion acquisition of Looker
  • Nvidia’s $7 billion acquisition of Mellanox
  • Salesforce’s $15.7 billion acquisition of Tableau
  • Uber’s $31 billion purchase of their rival Careem

In the first half of 2019, the largest North American middle-market technology deals (each valued at $500 million) included:

  • JPMorgan’s acquisition of InstaMed
  • Envestnet, Inc.’s acquisition of PIEtech, Inc.
  • Kohlberg Kravis Roberts & Co. L.P. takeover of OneStream Software LLC

Globally, the largest middle-market technology deals included:

  • Canada Pension Plan Investment Board and Insight Venture Partners LLC’s acquisition of Switzerland’s Veeam Software AG
  • GEMS Education’s purchase of Ma’arif for Education & Training
  • TPG Capital/Insight Venture Partners’ buyout of Kaseya Limited

Is a Deal in Your Future?

If you feel the time is right to sell or grow your business, our team of M&A advisors at Benchmark International would love to hear from you. We look forward to partnering in your success and making extraordinary things happen for you and your company.

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Common Pitfalls Owners Face When Selling A Business

Not Knowing the Value of Your Business

As important as it is to know the value of your own business, the reality is that 65 percent of business owners do not know their company worth. Valuation is a crucial step in taking your business to market. Simply put, you cannot negotiate the best selling price for your company if you do not know what it is worth.

Selling at the Wrong Time

Market timing is important to a business acquisition because it can directly affect a company’s value based on competition, demand and economic factors. You do not want to rush to sell, but you also do not want to wait too long. Finding this delicate balance is crucial to maximizing your company value prior to your exit. Professional M&A experts can assist you in properly determining the right time for you to sell your business because they have a strong understanding of the markets and have exclusive access to opportunities that can play into the timing.

Lack of Preparation
The most frequent mistake made by business owners in sale is not properly preparing for it. Before taking a company to market, there are several factors that must be addressed. These include detailed documentation regarding finances and profitability, contracts, personnel, exit planning, and other issues that will affect both value and salability. Proper preparation can take anywhere from months to years, depending on the size and complexity of your business. It is smart to seek the guidance of a professional M&A advisor to help you with these details to ensure that nothing is overlooked. 

 

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Misunderstanding Future Cash Flow

As a business owner, it is easy to focus on liquidity as a result of a deal and fail to consider how timing and proceeds will be factored into your retirement plan and how it conforms to your standard of living.

Studies show that 70 percent of business owners do not know what after-tax income they need to support their lifestyle. 

You need to have a clear and detailed understanding of your risk and liquidity profile to help you discern if and when you should sell your business. This includes the calculation of your net worth by comparing your financial assets with your financial liabilities, sources of cash flow, and income tax liability.

Not Having an Exit Plan

A staggering 85 percent of business owners have no exit strategy—something that every business owner absolutely should have in place. 

Exit planning is extremely important for several reasons. A solid exit plan will help you outline your goals for the future of your business as well as your financial retirement goals. It also helps you determine a timeframe for when you want to sell, can enhance the value of the company, gives you a blueprint for success, and protects you in the event of unforeseen circumstances.

Misrepresentation
Of course you want to portray your company in the best light, but you must be careful to not misrepresent it to prospective buyers. Avoid the urge to inflate numbers, exaggerate projections or try to hide issues. Providing inaccurate information can blow a sale and erode your reputation with other potential buyers, derailing any possibility of a deal. Your honesty and transparency will also earn the trust of investors, increasing the likelihood of a sale.

 

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Breaking Confidentiality
When selling a business, even if only considering it, it is important to carefully handle who knows what—and when. It will not be a good situation if your staff hears about the sale from anyone other than you or your leadership team and they descend into a panic. You also do not want your customers or clients finding out and jumping ship. Another reason to be careful with confidentiality is because it can affect the sale if a buyer feels that you cannot be trusted or that they are getting damaged goods.

Not Addressing the Transition
Selling a business is a major undertaking and it is easy to get so caught up in the details of the sale that you overlook the transition process that will need to happen after the deal is closed. You will need to work with the acquirer to determine if you need to stay on with the company for a short time to help move the transition along smoothly, or if it will be an immediate exit. There are also other factors that will play into the transition, including how it will affect the management team and the staff. It is important to make plans for the transition completely clear to avoid confusion, frustration and fear of the unknown.  

Is it Time to Sell?

Enlist the expertise of the M&A advisors at Benchmark International as your partners in achieving the highest standards for the sale of your company. Our team will make sure you avoid pitfalls that you are not even aware may exist, and we are dedicated to arranging the very best deal with your goals and best interests as our top priority every step of the way.

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M&A And The Chemical And Plastics Manufacturing Industry

The chemical manufacturing industry converts raw materials such as gasses and oils into chemicals such as ethylene, propylene, methanol, benzene, chlorine, and paraxylene. These chemicals are feedstocks for value chains that produce a wide array of intermediates, plastics, and performance materials that are used to create more than 70,000 registered productsaround the world. It is an extremely diverse and complicated industry. Because many of the industry’s products are intermediates, the customers of chemical companies are often other chemical companies.

M&A Strategies

Among the many factors that influence multi-billion dollar investment decisions include energy market trends, global economic growth, and regional trade dynamics. Investors seek sustainable competitive advantages regarding the costs of energy and feedstock, technology and scale, proximity to markets, and degree of integration.

Mergers and acquisitions have been a long-time tactic used among chemical companies to create growth, change strategic course, and consolidate segments. In an industry that has seen major expansion, certain factors can complicate M&A. This includes the substantial size of some transactions and merger-of-equals deals that are more complex to carry out.

Key drivers of M&A in the chemical manufacturing industry include:

  • The pace of organic sales growthin sub-segments
  • Consolidation driven by a need for innovation and fewer opportunities to differentiate from competitors in high-value and specialty-chemical areas
  • The state of capital-markets returns and a campaign for higher valuations
  • An abundance of capital and private equity interest and access to low-cost finance

 

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Digitization & Optimization

Technology continues to transform all industries in the modern world, and the chemical manufacturing industry is no different. Data management through advanced analytics is enabling plant optimization across sites, improved supply chains, and infrastructure synergies. Digital solutions reduce downtime and costs as a result of maintenance and repairs. Sensors monitor plant and warehousing conditions, improving logistics. Also, a vast amount of field operator workload can be transferred to automation and robotics, allocating people resources elsewhere in the business and creating more opportunities for up-skilling. Implementation of these technologies results in revenue improvements.

The Circular Economy of Plastic Waste Recycling

Plastics production accounts for more than one third of the chemical industry’s manufacturing activities. But only a small percentage of these plastics are being recycled, resulting in resources that are lost forever into landfills. Global plastics waste volumes are expected to reach 460 million tons per year by 2030. Public outcry for sustainability is rising and raw material supplies are growing tighter, forcing the chemical industry to adapt on this issue. New plastic recycling methods offer new opportunities for value-creating growth for petrochemicals companies. Instead of focusing on the problem that plastic waste creates, companies are starting to recognize the billion-dollar profit pool it represents through new types of businesses, resulting in an entirely new landscape for M&A activity.

Activist Investors

Additionally, activist investors are playing a larger part in the chemicals sector. Activist investors attempt to create change within a company by purchasing a large number of shares or board seats. These players are emerging influencers of M&A activity and they have an ever-increasing role in the chemical industry through restructuring initiatives. This creates new challenges for industry executives because long-term strategic planning is not a typical priority of activist investors. Although activist investors are capable of delivering solutions that add value, they usually are more interested in shorter-term, higher valuations and results. This often results in cost-cutting measures, shareholder buybacks, and the splitting off of company divisions. 

 

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Successful Chemical Industry M&A

Deals that employ proven M&A best practices will yield higher total returns to shareholders. Capturing the full value potential of a deal requires specific industry knowledge and expertise. To craft a successful deal in the chemical sector, sellers should enlist the advice and methodologies of dedicated M&A experts such as those at Benchmark International. They should also:

  • Monitor the field to identify potential opportunities
  • Review their portfolios to ensure current assets fit their core business
  • Look for gaps that may need to be filled for fast action when opportunities arise
  • Prepare non-core businesses in order to maximize value from a deal

Contact Us

Are you thinking about selling your business? Set up a time to quickly chat with one of our global M&A specialists to discuss your options and opportunities. Our expertise spans several industries and continents and our talented people are dedicated to achieving your personal objectives. 

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What Drives The Need For Companies To Consider Mergers And Acquisitions

Mergers and acquisitions (M&A) are an ideal pathway to stimulating positive results for businesses such as creating growth, gaining a competitive advantage, boosting market share, or improving supply chains via the consolidation of companies.

Growth Creation

A merger or acquisition is an extremely effective method for growing a company’s market share or creating stability in the market. When one business either buys out or combines with another business, it can result in increased productivity, sales and brand loyalty, as well as improved cost synergy. Having a larger share of the market usually means a company can raise their prices and generate more profits. Growth can be created by access to emerging markets, new geographies, new technologies and the acquisition of intellectual property.

Competitive Edge

In many cases, M&A transactions enable acquirers to grow their market share by eliminating the competition through the purchase of a competing company. In today’s technologically savvy world, the aim to improve tech capabilities and drive innovation is a huge driver of consolidation.

 

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Acquisition of Talent

In many industries, there is an ongoing shortage of talent. These shortages can obstruct a company’s ability to grow and hamper its ability to serve existing customers. A business can address their pressing need for talent by purchasing another company that has the type and amount of talent that can address their needs. It can also be a faster route to getting the needed talent versus trying to develop it organically.

Economies of Scale

When two companies combine forces to create synergy, the pooling of their strengths tends to bolster overall performance and lower operating costs. This can be especially beneficial in industries that have high fixed costs and require large amounts of capital such as airlines, auto manufacturers, and pharmaceutical companies.

Supply Chain Power

When a business acquires one of its suppliers or distributors, an entire layer of costs can be eliminated. Buying out a supplier is known as a vertical merger. It allows a company to save money on the margins the supplier was adding to its costs. Buying out a distributor enables a business to ship products at a lower cost. These changes can translate to lower costs for consumers, which can increase sales.

Another benefit of a vertical merger is that it gives the acquiring company more control over supply, eliminating the risk of price gouging by suppliers. Depending on the type of business, a vertical merger can also result in improved technologies or expertise.

 

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Increased R&D

When a company acquires another company, they can often make more investment into the areas research and development. Studies show that M&A activity strongly increases the incentive of companies to conduct R&D. This is less so for large firms, as they may buy smaller firms to gain their technology.

Social or Political Influence

In certain industries, there can be a motive to increase social or political influence by gaining a greater stake and, therefore, more of a voice. This can pertain to media companies, newspapers and the like. An M&A transaction can also change public perception of a company. If a company has struggled with negative publicity, an acquisition by a company with a stronger, more positive image can alter public perception of the business.

Bankruptcy Solution

An M&A strategy can be employed to prevent a firm going into bankruptcy and being liquidated, often referred to as distressed M&A. A thriving company may wish to acquire a struggling company with the objective of turning it around and making it profitable. These transactions can be particularly risky, as well as legally and financially complicated.

Research indicates that M&A in bankruptcy is more likely at times when the cost of financing a stand-alone reorganization is expensive relative to the cost of selling the company’s assets to a buyer with internally generated funds or lower capital costs.

Is an M&A Strategy Right for You?

If you are considering selling or growing your company, our M&A experts at Benchmark International would love to hear from you. Our globally connected team is dedicated to helping business owners maximize the value of their companies and complete deals that go above and beyond expectations. Setting you on the path to the future of your dreams is what drives us to do great things.

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Why Owners Call Benchmark International after M&A Firms and Business Brokers Fail

We recently noticed the fact that a significant number of deals we’ve closed this year involved clients that had been to market with other M&A firms and business brokers. This led us to look internally at our processes and to contact some of these former clients to identify a few of the key factors that drove successful outcomes for our clients that had been previously snubbed by the market.

Our approach to outreach. Benchmark International has always prided itself on having the most robust and broad outreach in the market. Each client’s team includes four outreach specialists dedicated solely to distributing teasers far and wide, securing executed non-disclosure agreements, and conveying those expressions of initial interest to their client. We’ve long known that this sets us aside from the competition and is a key to our success but what we didn’t know:

  • Other M&A firms and business brokers build a single buyer list near the initiation of the process.
    • They don’t have anyone dedicated to continuously update that list with new ideas and market feedback.
    • They don’t have an internal feedback loop that allows other team members assisting the client to easily offer new insights to the outreach professionals.
    • They build their buyer list too early in the process, before they actually understand each of the value propositions the client can offer potential buyers and they thus miss out on large categories of potential acquirers willing to pay top dollar.
    • Similarly, some do not get to know the client’s business well enough to identify all of those value drivers, regardless of when they “build their list”.
    • They have a “usual suspects” approach to buyers. We find this particularly problematic for our clients when they were with “industry specialist” brokers. Given our process, we find that the best buyers for our clients are actually very rarely the “usual suspects” but instead are buyers for whom we have identified a particular need which our client can satisfy for them. As they say, “You can’t find what you’re not looking for.”
  • Many lack the software and systems to conduct and execute a thorough outreach process.
    • Outreach can be mundane, there is no getting around it. For each hour spent on outreach, the broker will have more than a few doors slammed in their face. Accountability is thus key to achieving top results. Other M&A firms and business brokers typically lack the necessary hierarchical team approach and the software necessary to monitor and motivate outreach professionals.
    • Building a list using a variety of ideas arising from as many investment theses as possible for the client requires access to vast data bases of buyers. Benchmark International has built up a proprietary data base of buyers built over 30 years of experience in the market and over 1,000 closed deals. In addition, we pay significant license fees for the world’s leading M&A acquirer data bases. We ensure that our outreach professionals have access to these best-in-class resources and the training necessary to exploit them to their maximum benefit.
    • For any individual engaged in a broad outreach effort, keeping track of who’s been reached, who’s been left messages, who’s responded, etc… is a daunting task. It can’t be efficiently performed with pen and paper or even spreadsheets. Only an interface specifically designed for the task can ensure that all buyers on the list are contacted, follow ups occur at optimal times, responses are not only captured but also analyzed for insights into the outreach effort, and nothing falls through the cracks.
  • Lack of a global approach limits results.
    • There are actually very few clients that need a “local buyer”. Yet we learned that many of our smaller clients had been marketed solely via local contacts, country clubs and Rotary meetings, and local online portals.  But taking the US as an example, Benchmark International has sold clients from the smaller end of its portfolio from Miami to a buyer from Sri Lanka, and an “as-seen-on-TV” business to a buyer from France.
    • The key here is not just having access to a global buyer base but more importantly running the process with the philosophy that the buyer can and will come from any corner of the globe.

 

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Our handling of acquirers. Though they could not fully explain why, our clients stated that they noted a distinct difference in buyers’ interactions with both them and the broker when Benchmark International was the introducing party as opposed to their former broker. When describing the differences on their initial calls with buyers and, for those who had gotten that far with the prior broker, their negotiations with buyers; our clients referred to being treated by the buyers more as peers, having a more cordial relationship and being more comfortable, getting more quickly to the key issues, and seeing quicker term around times from buyers. To augment our clients’ insights as to the sources of these differences, we also then reached out to a few recent acquirers of our clients and, putting all the inputs together, learned the following.  

  • The markets have gotten more complicated.
    • We continue to see more complex deal terms and structures filtering down to smaller and smaller deals. Since the global financial crisis of 2008, many M&A professionals that formerly ran larger, perhaps publicly-traded, deals in the billions have moved “down-market” and are now doing deals in the millions. They have brought with them all their complex financial training and tricks. As a result, buyers have gotten sharper, and deals have gotten harder and longer.
    • Our clients tell us that their former M&A firm or business brokers weren’t up to speed on these new issues, couldn’t stand toe-to-toe with the sophisticated buyers, and even that they “didn’t speak the same language” as the buyers. Most significantly, they couldn’t bridge the gap between the seller’s understanding of the process and the buyer’s.
    • Getting deals done at today’s high multiples requires knowing how to use these new tools to find win-win solutions for buyer and seller. Our clients tell us that they saw their former M&A firm or business brokers utilizing the old-fashioned bazaar mentality of zero-sum-game negotiating and when they saw how Benchmark International handled the negotiation process, they could tell that our process was built on a different foundation.
  • The broker’s reputation with buyers matters.
    • Our clients described their former M&A firm or business brokers as aggressive, antagonistic, and even “churlish” when negotiating with buyers. That’s not our style. Our style is to build respect and goodwill with buyers. The respect is there to be preserved and used to allow buyers to make a leap of faith with us when necessary.  The goodwill is to be burnt strategical and only if and when required to get the client the right result.
    • Because of the number of deal teams we field, the quality of the clients we bring, and the experience buyers have had with us in the past, they take our calls and they read our confidential information memorandums. They know that we have great “deal flow” to show them, that we only bring serious clients, and that our clients are prepared for the process. Buyers have told us time and time again how important these three factors are to their decision to return our call first, open our outreach emails, and sign our non-disclosure agreements.
    • M&A firms and business brokers who burn their bridges on deal after (broken) deal aren’t doing any of their clients a favor. If the buyer can’t trust the broker – or even worse, won’t take their call – deals don’t get done.
    • Being a household name is important. But if your name is bad, its important in a bad way. Smaller M&A firms and business brokers aren’t a household name and many larger ones lack the quality control across their offices to ensure that the name is a good one. So say a few private equity funds Benchmark International contacted on this point.
  • Thinking like a buyer is important.
    • While Benchmark International is a sell-side only firm, many of our professionals have worked for trade buyers, private equity funds, venture capital firms, and the like. They are not only staffed on many of our clients’ sales but have also provided input into our processes and training to ensure cross-pollination of their insights. This allows us great visibility into their needs, their negotiating techniques, and their next moves. It also helps us relate to them, build trust, and (as mentioned above) truly “speak their language”.
    • While some brokerages provide both sell-side and buy-side services, serving in this capacity is not the same as being a buyer or having been a buyer. Unlike sellers, buyers are experienced in setting up and executing M&A transactions because, among other reasons, they do it repetitively. As a result, buy-side M&A firms and business brokers don’t typically get in there and get their hands dirty molding the clay of an introduction into the statue of a closed deal. They are more in the nature of “finders” or introducers, leaving the heavy lifting to their buy-side clients (i.e., the people many of our professionals used to be).
    • Empathy and emotional intelligence are important for managing the relationship that is formed during the sale of a business. Our clients have been telling us for years that they appreciated our attention to the personal side of the deal often manifested in family issues, a strong attachment to the business, the occasionally irrationality that pops up in this high stress situation, etc…. But undertaking this process of determining what distinguished us from other M&A firms and business brokers led us to realize that our emphasis on these aspects of each transaction has a spill over to the nature of our interactions with buyers. While they like to give the appearance of detached, entirely-rational Vulcans; they are in fact people too and bring their own subtext to every deal. Based on our conversations with acquirers, building a process that can absorb such unavoidable distractions – from both sides – is perhaps Benchmark International’s single largest distinguishing characteristic. They tell us its an intangible that would be almost impossible for other M&A firms and business brokers to match unless their firms were built from the same DNA as ours.

 

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Lastly comes a point we here at Benchmark International already knew. We hire people who seek challenges to overcome, the bigger the better. Knowing that a client has come to us disappointed by a prior process, whether they focus that disappointment on the market or the broker, fires us up.  Anyone can sell a business that is easy to sell for a normal multiple to a decent buyer. But true satisfaction comes to us only from selling the difficult business, achieving the aspirational valuation, or finding the perfect buyer. So the last answer to the question set out in the title above is  - we rise to the challenge.

 

Author
Clinton Johnston
Managing Partner
Benchmark International

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

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How Proper Exit Planning Benefits Both Seller and Buyer

Value For Sellers

Proper exit planning is critical for any business owner that intends to sell their company. When you are going to sell, you must know the amount of money that you will need to have on hand in order to make a comfortable exit, which involves assessing your cost of living. You may need to formulate a plan to decrease your annual cost of living, for example, by downsizing your living arrangements or selling unnecessary luxuries such as cars, boats, or vacation properties.

Selling a company is a complicated venture. There are complex considerations from financial, legal, tax, estate, operational, personal, family, and legacy perspectives. Having professional assistance from a reputable M&A advisor can help you navigate these matters and ensure that nothing is overlooked. They can also help to make the process less stressful and give you peace of mind that your exit plan is a sound one. They will also help you maximize the value of your business in a sale and prevent you from making costly mistakes.

 

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Also, once you know your number, you can take steps to increase the profitability of the business and make it more attractive. The more marketable your company is, the more prospective buyers you will entice, and they will be higher quality buyers. Another reason that having a solid exit strategy in place will make your company more appealing to buyers is because it shows them that you are serious and have been smart about how you run your business.

There are several options for your exit strategy. You can sell to an outside buyer, sell to an inside buyer, do a partial sale, pass the company onto family, or liquidate the business altogether or over time. Astute exit planning can help you figure out which course of action is right for you.   

Value For Buyers

Exit planning simply primes a business for easier transfer in ownership. An acquirer wants to know what they are getting into regarding how the business will operate after the sale.

  • How involved will they need to be?
  • How much work will be required on their part to grow the business?
  • Will existing customers and clients remain in the relationship?
  • What is the state of the management team and will it remain in place?

A buyer is going to prefer to take on a business that will continue to run seamlessly through and after the transaction.

 

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Smart for Everyone

When done properly, exit planning gives the seller a clear plan for their retirement and mitigates risk for the buyer so that both parties can feel good about closing a deal. The entire process is about setting concrete goals and following a timeline to keep your exit plan on track so that you can exit on your own terms. Failure to have this plan in place can result in disastrous circumstances, such as:

  • Being forced to sell at an unfavorable time by unexpected events
  • Having your business undervalued and leaving money on the table in a fire sale
  • Wasting time and money on transactions that fail
  • Failing to fulfill your retirement goals
  • Burdening family with matters they are unprepared for and undercutting your legacy
  • Paying more taxes than necessary

Is it Time to Plan Your Exit?

Even if you do not foresee retirement in the near future, it is never too soon to have a plan for the future. It is also extremely prudent and can protect you and your company from unforeseen circumstances. Take the time to do it right. Contact our experts at Benchmark International and begin the conversation about selling your company and your exit plan options. We will work at your pace to achieve your goals and lay out a blueprint for a future that you can feel wonderful about.  

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M&A And The Big Data Industry

“Big data” has revolutionized the once traditional methods of analyzing data, making it possible to source more data at a much faster rate and with a great deal of variables. Companies that curate these massive databases do so to help businesses across all industries make more carefully calculated business decisions.

Big data sources revenue from software, hardware and professional services. It encompasses security, storage, infrastructure, networking, discovery tools, applications, and analytics, just to name a few.

The power of big data has grown with the widespread use of smartphones, social media and apps, and its technology continues to grow into edge environments, such as network nodes and industrial machines. Data is flowing between organizations of all sizes to help save time, save money, improve relationships, provide valuable insights, and advance technology. Big data is a major player in automation, artificial intelligence, cloud computing, and the Internet of things—innovations that are impacting virtually every industry in the world.

In an increasingly digitized society, everyone is looking to get a piece of the data pie. Technology companies are built on and around data. Advertising agencies look to acquire data companies in order to gain a competitive edge when it comes to understanding consumer behavior and targeting ads to audiences. Healthcare companies are spending billions on data companies to transform everything from precision medicine to medical records. In education, teaching and learning methodologies are being transformed by the use of big data. Mergers and acquisitions firms are using big data to improve target company searches and results. Essentially, there is no industry that is not somehow touched by the use of big data, and that results in sweeping opportunities for M&A transactions.

 

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Big Data’s Impact on M&A

While individuals, companies and governments across many different business sectors are using big data more frequently, new techniques are making it possible to analyze big data more effectively. This can have a significant effect on certain areas of M&A, such as strategy, business model validation, and valuation.

  • M&A strategies include value creation, operational synergies, risk arbitrage, and company turnaround. An M&A strategy is defined by the goals of the company, the skillsets of the M&A team members, and market factors that determine timing and viability. These factors are becoming more data driven in the making of strategic choices.
  • Big data is greatly improving M&A target searches and screening processes. Better screening can lead to better matching of buyers and sellers, leading to a higher percentage of successful deal closings.
  • Big data is making it possible to get a more detailed analysis of a company’s core business model regarding growth, market patterns, customer preferences, and market reaction to products.
  • Combining big data with market-based valuation techniques will make it possible to extract multiples from much wider market databases. It will also make it faster and more reliable to compare a target company and the company’s valuation reference set.

Regulatory and Privacy Issues

While big data offers major benefits for companies of all industries—with benefits that are passed on to customers through a heightened understanding of their needs—there can be certain challenges when it comes to legal issues that concern privacy, government regulations, international access, and increased scrutiny of information collection practices. 

A prime example of what big data must contend with is the changing privacy laws in Europe. In 2018, the European Union’s General Data Protection Regulation (GDPR)replaced an older law from 1995, creating a new regulation for privacy that affects organizations within the E.U., as well as organizations outside of the E.U. that offer goods and services to residents of the E.U. In addition to requiring clear privacy notices for users, the law also requires that organizations give 72-hours notice of a data breach. Users must also be given certain information about how their data will be used and are allowed to request deletion of their content.

The GDPR law is limited in that it only regulates data pertaining to individuals and not organizations, but it does have the potential to limit the type of data gathered. With such a rapidly growing industry that affects so many people and industries, it can be expected that other countries will take similar actions to regulate the use of big data, especially in the United States.

 

Ready to explore your exit and growth options?

 

Contact Us

We do things differently. Please reach out to our M&A specialists at Benchmark International if you are thinking of selling a company in the middle and lower middle markets. We will formulate a partnership that works in your best interests, using our unique databases to thoroughly identify every possible option until we find the perfect solution for you and your business.

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Don’t Delay Your Exit Strategy

In the latest to happen in the rollercoaster that is Brexit, another delay has been granted to the UK with EU members agreeing to an extension until the 31st January.

Meanwhile, reports from the EU are warning that economies may be falling into a recession with the potential decline in part due to Brexit, with countries particularly struggling when dependent on exports.

Despite this, M&A activity has not halted as there are still plenty of opportunities as it’s a way for companies to grow and develop and dealmakers are always on the lookout for strategic acquisitions. In fact, while dealmakers may be cautious and their timelines may be extended on deals, the uncertainty caused by Brexit has carved opportunities for dealmakers as they are ready to take advantage of factors such as the weak pound sterling making for cheap UK assets. This has resulted in the corporate mid-market remaining relatively robust with last year’s figures at record highs.

Feel like it's a good time to sell?

Therefore, if thinking of an exit strategy the time to act is now before it is too late. Potential recession could be a sign of things to come and while M&A has prospered so far despite Brexit, too many business owners are leaving their planning for Brexit until the last minute to wait for certainty from politicians. If certainty is guaranteed, this could lead to the market becoming saturated once a deal has been agreed or, if uncertainty continues to persist more and more economies could fall into recession – so it’s best to strike while the iron is hot.

Still unsure if now is the best time to sell? Read the below: 

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M&A In The Global Health and Life Insurance Industry

Common drivers of mergers and acquisitions in the global health and life insurance industry include the entry into new markets, access to new technologies, valuation trends, and reaction to regulatory changes. With growth strategies leading the charge, market expansion is often made possible through the acquisition of target companies that optimize product portfolios and customer bases, especially those that provide relatively easy yet quite valuable add-on opportunities, as organic growth does not come easily in the insurance space.

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The Digital Marketing Industry and M&A

The trillion dollar advertising space is a rapidly changing industry with most of the action happening on the digital marketing side. As the world’s digital advertising revenues increase, there is a global demand for more online content. Lead generation, advertising, search engine optimization, and affiliate partnerships are major drivers of income in the 21st century marketing industry. This demand drives up the value of content-related businesses and digital marketing agencies in an era where everyone is glued to their connected devices. All of this screen time has caused traditional advertisers (print, TV, outdoor, radio) to shift their largest spends to digital marketing tactics and mobile internet advertising, even outspending television ads.

Worldwide digital advertising spending is predicted to reach $517 billion by the end of the year 2023.

The robust growth, sheer size, and high fragmentation of the digital marketing sector has led to healthy mergers and acquisitions activity involving digital agencies. Everyone from traditional advertising agencies to private equity investors is seeking target companies that offer growth benefits.

The establishment of digital capabilities and relationships has become a major priority for traditional ad agencies and their large holding companies as they look to grow their digital revenue and expand their portfolios. As conventional media continues to be displaced by digital marketing, the percentage of media spend on digital marketing on behalf of traditional ad agencies will continue to grow.

Evolving Technologies

In the digital marketing industry, there is also growing popularity of technologies that offer individualized features and more in-depth experiences. Brands are being pushed to invest and acquire these types of technologies while post-sales marketing has become a more prominent element along the customer journey.

  • The use of chatbots and personalized messaging is enhancing customer experiences.
  • Audio queries made possible by smart devices and digital assistants are driving voice search.
  • Online video advertising is a quickly growing segment.
  • Artificial intelligence analytics are helping to better target marketing strategies based off of real-time data. This data leads to meaningful insights that are used to improve customer interaction, and optimize media budgets and marketing strategies.
  • Social search is changing e-commerce and vehicles for product reviews and recommendations.

This industry is sure to see more and more future technologies that have yet to be developed, continuing to drive rapid change and growth, and create opportunities for M&A.

Large User Platforms

Giant platform companies such as Google and Facebook provide free digital products and services but are still able to profit because they reach such massive audiences.

The larger the platform, the more consumer data is collected. The more a consumer uses the platform, the more information is gleaned about them. And with more data, the platform can better tailor the content consumers see, and keep them on the platform longer. This results in improved customer experiences and more advertising capacity, which means better understanding of consumers, heightened influence, and more revenue from targeted advertising.

Affiliate Partnerships

Affiliate partnerships use affiliate websites to promote products or services that belong to another company. The valuation of an affiliate website depends on the specific terms of the affiliate program. These factors include longevity, product category and seasonality, commission tiers, high caliber content, and the link portfolio. Websites that fulfill these attributes often have the better earnings, margins and lifecycle, which are attractive to investors. For valuation purposes, advertising agencies are similar to affiliate businesses because they are dependent upon content and end-user action to produce revenue.

These types of partnerships that monetize content also apply to offline businesses that need new and better ways to generate access to audiences. Investors also tend to be drawn to this segment based on existing relationships that can be used to an advantage.

Exit Opportunities

Some digital marketing agencies are being established with the goal of selling in mind. There are extremely low entry barriers when it comes to creating a digital marketing firm, but there are also limited benefits to growth. Some brands do not wish to work with a huge firm. And low employee tenure means lower retained corporate knowledge in an industry where talent retention is already incredibly challenging.

An agency with strong historical growth and projected growth of more than 20% can lead to strong multiples. The purchase of smaller agencies offers opportunities for growth for the large advertising agency groups and an easy way to cash out for the leadership of the smaller agencies.

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Please feel free to contact our M&A advisors at Benchmark International to discuss your next move. Our industry expertise and global connections are true game changers when it comes to selling or growing a company, and forming an exit plan.

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The Global Packaging Industry and M&A

Manufacturers in the global packaging industry produce items such as bags, films, air pillows, bubble cushioning, heavy plastics, aluminum foil, paperboard, and corrugated materials.

In a segment that is greatly influenced by transportation and logistics costs, strategic buyers look for options that offer attractive margin profiles, cost-savings manufacturing advantages, shareholder growth options, and deals that broaden industry presence and consolidate business lines. Private equity buyers are inclined to focus on niche opportunities that leverage unique and proprietary capabilities and offer strong returns.

In this particular sector, lenders tend to show willingness to finance deals among packaging companies, which boosts healthy valuations. This is because packaging manufacturers are able to generate strong cash flow and are not overly vulnerable to economic downturns.

Growth from E-commerce

As long as e-commerce continues to thrive and the world demands sustainable and cost-efficient packaging solutions, the demand for packaging products will persist, driving mergers and acquisitions activity in this highly fragmented industry.

Protective packaging solutions are naturally of significant interest to e-commerce companies, as is machinery that uses automation to improve packaging processes. There is a demand for packaging companies that can offer innovative and attractive packing solutions that are protective but lightweight and focused on reducing package footprint size.

 

Ready to explore your exit and growth options?

 

Fast-Moving Consumer Goods (FMCG)

The FMCG segment involves high-volume, low-cost products that move quickly off the shelves of stores, such as paper products, cosmetics, medicines, detergents, and plastic goods. Packaging is top priority in the FMCG market because of how it directly affects brand positioning, differentiation, and high visibility through the use of graphics and product information. It plays a major role in consumers’ purchase decisions in a very competitive environment.

FMCG packaging makes up a large share of the costs involved in product manufacturing. Companies must look to innovation in packaging to reduce operational costs.

Increasing populations, technological advancements, and a demand for eco-friendly packaging are all key drivers of growth in the FMCG sector. Food and beverage is the largest market for investment from packaging companies.

On the supply side, the FMCG packaging market is highly fragmented with fewer companies having a substantial share in the overall market, leading to fewer barriers to entry. Additionally, the challenges for growth in this sector include issues surrounding skilled labor, equipment and machinery.

Healthcare and Pharmaceuticals

Medical plastics are a major driver of high valuations in the packaging sector. The healthcare industry is subject to significant regulatory and technical requirements and there is a need for companies that can fulfill their specific and complex packaging needs, which include thermoforming and injection molding techniques. The injection-molding sector is especially fragmented and highly competitive with steadily growing revenues and opportunities for consolidation.

There is also a demand for smart packaging technologies that help to combat the counterfeiting of medicines.

Packaging companies that serve medical device and component companies tend to enjoy stronger customer relationships, steadier revenue, better pricing power, and higher valuations. M&A activity in this area is highly focused on technology and expansion of capabilities.

 

Feel like it's a good time to sell?

 

Sustainable Solutions

Sustainability is an important factor in the packaging industry at every step of the value chain, as consumers and regulators apply pressure regarding environmental impacts of packaging applications. In addition to functionality and convenience, it is a key criterion in purchasing decisions. This demand for novel solutions and green technologies creates a noteworthy opportunity for industry players. 

Plastics are cost-efficient, convenient, and have useful characteristics in packaging, so their use remains in demand. However, there is a sweeping campaign to reduce the use of plastic in packaging materials.

Airless packaging systems are a growing market. They are designed to limit waste and contamination while improving product shelf life. These packaging products include bags, pouches, bottles, jars, and tubes.

As there is a growing need for packaging companies to lessen the environmental effects of their products, those that stay ahead of the curve by incorporating these solutions will benefit from substantial growth opportunities and will draw plenty of attention for M&A activity.

Contact Us

If you feel the time has come to enter into a merger or acquisition, reach out to our specialists at Benchmark International to get the ball rolling. Our customized solutions, global buyer network, and proprietary methodologies have the power to execute deals that are designed to always exceed seller expectations. 

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M&A In The Global Medical Services Industry

Globalization of healthcare contributes to a continually developing global medical services industry that encompasses hospital, physician and clinical, nursing and continuing care facilities, home healthcare, surgical facilities, emergency services, laboratories and other providers.

Value-based Care

An industry that was once about volume-based care has strategically shifted to value-based care. Because this requires improvements in facility efficiencies and quality, it also calls for more specialized external service providers. One tactic that medical services companies are using to gain competitive advantage is to keep their core caregiver and third-party caregiver groups under the same roof. As medical services must now deliver on value-based care, there is an increased need for integration of care and management of financial constraints.

 

Feeling unfulfilled? Explore your options...

 

Workforce Demand

As populations increase, especially aging populations, and chronic diseases remain prevalent, the demand for medical services increases, and so does the demand for specialized medical caregivers.

By the year 2030, it is estimated that the global demand for health workers will reach 80 million workers, while the supply of health workers is only expected to reach 65 million over the same period. This will result in a worldwide shortage of 15 million health workers. 

Regulatory Factors

When regulatory burdens on healthcare companies are reduced, technological advancement escalates, creating opportunities for medical technology companies including mobile and wireless providers. Also, advancements in surgical techniques result in less invasive treatments and shorter recovery times, altering the traditional hospital model. Additionally, third-party lab providers and research companies grow in demand along with the need for more complex clinical tests and services.

M&A Due Diligence

Mergers and acquisitions in the medical services industry require especially savvy due diligence in order to obtain a completely accurate assessment and valuation. Deals can be particularly complicated between hospitals and health systems.

As a seller, it can be extremely important to have sell-side due diligence conducted. Getting ahead in the process months in advance can be well worth the costs. When it comes to the medical services industry, billing and coding issues can trigger major delays in any M&A transaction.

Other benefits of sell-side due diligence include:

  • Enhanced credibility and positive reputation of the seller on the market
  • The increased possibility of higher bids
  • Adequate preparation for management and employees so that there is minimal disruption in workplace operations
  • The potential of a shorter due diligence cycle on the buyer’s side
  • A decrease in the chances of surprises that can derail a deal, which can increase the likelihood of the transaction being a successful one

Medical Services M&A Drivers

Among the key drivers of M&A activity in the global medical services industry, the top reasons include:

  • The goal of increased market share to broaden networks and patient access
  • Improved integration across the continuum of care
  • Keeping pace with increasing prevalence of consumerism, which includes more convenient, non-traditional care settings
  • Gaining access to capital for investment in staff, new technologies, medical equipment, and improved operations
  • A way to improve efficiencies and enhance patient satisfaction
  • Reaction to rising consolidation among insurance payers
  • A growing need for alternative payment models, which reimburse providers based on value rather than volume of services

 

Ready to explore your exit and growth options?

 

Traits of High-value Targets

In this sector, the attributes of high-value M&A transactions can vary greatly, however certain characteristics can be found to be consistent across most successful deals:

  • A defined operating model with strategic vision and revenue-growth and cost-reduction strategies
  • Transparency in communications regarding culture and organizational goals
  • Focused integration planning that aligns with the deal’s rationale

M&A in Diagnostics

Diagnostics present unique circumstances for M&A activity apart from the medical services industry. Clinical laboratories in the medical services industry vary in size, business model, areas of concentration, R&D capabilities, as well as in their relationships with providers and payers. With countless labs in operation, acquiring the right one can be challenging. Large public labs tend to focus on deal volume, while other buyers are interested in the laboratory testing market, and private equity leans towards companies with attractive cash flow yields. In many cases, because diagnostic manufacturers, life-science companies, and big pharma all need access to patient and pathology samples for research and development, labs are strategically acquired by non-laboratory healthcare companies.

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If you are looking for exit and growth strategies, Benchmark International offers unique ways to identify the perfect buyer, take your company to the next level, and create dream exits. We look forward to working with you.  

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Why You Shouldn’t Wait For The New Year To Sell Your Company

A new year always conjures up the feeling that it’s a clean slate, so that may seem like a good time to take your business to market. And, yes, timing is everything, but waiting for the new year could mean that you miss out on the opportunity to get the maximum value for your business.

Get Ahead of Economic Uncertainties

No one can say for sure what the state of the global economy will be next year. But we do know what it is NOW. These are certainties that we know, understand, and can work within. We know what M&A strategies can be advantageous today based on the level of:

  • Buyer demand
  • Bank generosity
  • Current valuations
  • Tax breaks
  • Interest rates
  • Retiring competitors
  • Inflation
  • Political unrest

It is not uncommon for business owners to want to postpone a sale with hopes that they can sell at a higher price in the future. This can be a dire mistake. 

 

Ready to explore your exit and growth options?

 

Waiting too long could mean that you end up trying to sell during a recession, a down cycle, or under other unfavorable circumstances that result in you not getting all that your company is truly worth. It can also mean that if you miss out on your ideal window of opportunity, you may have to wait five to seven years for such an opportunity to arise again.

Take Advantage of a Seller’s Market

What may be a seller’s market today, can just as easily become a buyer’s market tomorrow. If you decide to wait, you could end up losing your upper hand as a seller. There are millions of business owners that are approaching retirement age and if there is an influx of these sellers onto the market, it can result in increased competition and buyers will enjoy having their pick of the litter. That also means lower valuations for your company. You can easily get out in front of this scenario by not hesitating to start the process.

According to the Pew Research Center, 10,000 Baby Boomers will celebrate their 65th birthday every day through the year 2030.

Act Early for a Patient Process

Patience is a virtue, especially when it comes to selling a company. Ironically, getting into the sale process sooner rather than later will afford you the ability to be patient through the process. If you wait too long and end up in a situation where you are panicking to sell your company, buyers will sense your desperation and will try to low-ball you on a deal. By demonstrating to buyers that you have been carefully considering and planning for this, rather than appearing to just “want out” without an exit or succession plan, it will likely increase your sale price. 

 

Feel like it's a good time to sell?

 

Test the Market

Maybe you are feeling too uncertain about selling now. Keep in mind that you can always test the market. Prepare your company for sale, put it out there, and see what kind of offers you get. You might find that there is interest in your company that you were not aware of, and eager buyers might come to the surface, surprising you with offers that are hard to turn down. In the case that the offers are lower than what you were hoping for, you can simply take the company of the market for the time being and wait for a better time.

Ready to Talk?

The process of selling a business can take several months. Even if you are simply considering a sale, reach out to one of our M&A advisors at Benchmark International to start the conversation. We can help you get a better understanding of the market timing, if you feel that you are ready to sell, and what exit strategy is right for you. We also understand that you have worked hard to build your business, and parting with it is going to be an emotional process. That is why we always work in the seller’s best interest, working relentlessly to arrange a deal that is the absolute very best for you and your family and with which you feel truly comfortable.

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M&A In The Global Education Industry

Around the world, the global education industry remains shaped by population growth and access to education, and driven by new technologies and service offerings.

  • Solutions for professional education, teacher development, improved online and adaptive learning, and language training (especially English) are always in demand.
  • Online learning technology and the need for corporate workforce training drives increases in corporate spending on outsourced training programs.
  • Smartphone-only Internet users are reshaping learning models.
  • Enrollment in pre-primary education continues to rise as it has proven to show positive long-term results.
  • In primary and secondary education, technology investments directly impact school expenditures.
  • Higher education is being forced to adapt in the wake of changes to jobs, skills and increasing student debt.
  • Learning Management Systems are shifting the teaching focus away from content and onto learners.
  • Newer offerings include cloud-based student information systems, digital tools and learning platforms, and data reporting and analytics.

The global education market is expected to be valued at $10 trillion USD by the
year 2030.

 

Ready to explore your exit and growth options?

 

M&A Activity

In today’s digitized society, as education becomes more globalized, it presents newforms of private, for-profit involvement. In the global education industry, less than three percent of overall education expenditure is spent on technology. This is expected to increase in the future, yet at an alarmingly slow rate, giving investors a favorable position to get in on
the market.

Mergers and acquisitions opportunities are heavily influenced by the possibilities created by new innovations in digital education, instruction, and credentialing. The global education sector’s biggest strategic performers are diverse companies that continue a shift towards digital services and away from print. Target companies within the education landscape that are in drawing investment include those that provide adaptive learning solutions and assessment products, such as software that facilitates testing and scoring. Other areas that appeal to buyers include education-market-focused infrastructure software and English language learning solutions.

Education Infrastructure Software

Modern education-focused infrastructure software has the power to transform learning environments for students and teachers both inside and outside the classroom by balancing technology across all locations. The approach is comprised of cloud computing, enhanced privacy and security, connectivity, storage, and manageability. Additionally, virtual infrastructure not only simplifies troubleshooting, but it can reduce costs for institutions by reducing overhead through the reduced impacts of having to frequently replace hardware. With support of more devices, teachers can better tailor learning experiences to students learning needs, and a more collaborative learning environment can be created.    

Global English Language Learning Market

The global English language learning market is expected to exceed $22 billion USD by the end of 2025. These programs are in growing demand due to globalization, urbanization, and an appetite for improved education and job opportunities. The escalating numbers for student enrollment in graduate schools in English-speaking countries is deemed to be a primary contributing factor to growth in this market. In higher education, universities in the United States, the United Kingdom,  Australia, and Canada require applicants to pass language tests such as the Test of English as a Foreign Language (TOEFL), Graduate Record Examination (GRE), and International English Language Testing System (IELTS). This drives students to enroll in English language training programs, leading to notable demand for them in countries (such as an India and China) where the number of graduates relocating to English-speaking countries for advanced studies continues to grow at a significant rate.

The global market for digital English language learning is comprised of both regional and international manufacturers. As the international companies expand their reach, improve quality, and lower prices, the regional firms struggle to compete. Such an intensely competitive market for innovation and service extensions increases the number of M&A transactions.

 

Feel like it's time to slow down?

 

An Industry Continuing to Evolve

Innovation in education requires capital and government funding is limited even in the wealthiest, most developed countries. Private equity and M&A can strategically create and grow companies of scale in the education sector. Larger size means more attractive acquisition opportunities, more prevalence, and more potential for transformation in the industry and its subsectors.

Advancements that are impacting and will continue to impact this industry include:

  • Artificial Intelligence, virtual reality, and unified data solutions
  • Online education
  • Robotics
  • Specialized curriculum start-up companies
  • Improved curriculum storage and peer-to-peer sharing platforms
  • International schools
  • Digital classrooms
  • Chat bots and voice enabled hardware
  • English language training
  • Enhanced admissions management and student retention
  • Global school networks
  • Improved vocational training
  • Alternate university models
  • Online program managers
  • Job training boot camps
  • Primary education mobile apps
  • Increasing availability and free access to academic publishing resources
  • STEM and coding
  • Gaming and simulation

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If you are ready for a change, contact us at Benchmark International. We are committed to creating an impressive plan of action for your business. Schedule a call with one of our M&A advisors and start planning a more prosperous future for you and your company today.

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The Engineering Services Industry and M&A

The engineering services sector is made up of Engineering Services Outsourcing (ESO) firms or Engineering Service Providers (ESPs) that specialize in planning, design, and technical work at each stage of a product lifecycle. ESO is commonly used by industries such as construction, automotive, telecom, energy, transportation, pharmaceuticals, and manufacturing. Among the services offered by ESO that are consistently in high demand are structural, architectural, civil, and electrical engineering.

Industry Growth Drivers

Growth in the engineering services industry is stimulated by circumstances that include:

  • Increasing technical complexities regarding product development and manufacturing
  • A need to reduce costs
  • Shorter product lifecycles
  • Demand for innovation
  • Increasing tie-ups between ESPs and Original Equipment Manufacturers (OEMs)

The Demand for ESO

As clients demand more complex solutions and shorter product lifecycles, there is a growing need for the use of subcontractors through ESO. Shorter duration solutions result in renewed managed service contracts, helping ESO businesses to do well. Additionally, some engineering companies opt to use ESO as an extension of their own capabilities.

Other reasons that companies choose to use ESO include:

  • Access to more cutting-edge technologies and more complex engineering services
  • The ability to focus time and resources on other critical tasks such as marketing
  • Need for less office space and lower office equipment costs
  • Faster project turnaround that can result in improved client satisfaction
  • Access to services on an as-needed basis
  • Around the clock support services

ESO demand is also affected by the specific needs of individual industry sectors.

  • ESO in consumer electronics is driven by consumer demand for enhanced mobility and entertainment, and the better exchange of information between devices for data and media.
  • Both onshore and offshore ESO is used in the automotive segment in developing countries due to their high demand for passenger vehicles and economical cars. Demands in developed countries include car connectivity, advanced driver assistance, Vehicle-to-Vehicle (V2V) and Vehicle-to-Infrastructure (V2I) communication.
  • Tech companies, OEMs and semiconductor companies look to ESO for assistance in developing next-generation smart devices. These businesses also employ ESO to stay competitive by focusing on product localization needs, new features, and industry best practices.
  • The telecom industry accounts for a major share of ESO revenue as global telecom companies continue to expand their market presence around the world.

Adapting to the Tech Era

In today’s digital world, engineering services companies must adapt their business models to focus on emerging technologies and their integration with manufacturing and engineering services. This adaptation is crucial to realize the full potential of these growth opportunities. These technologies include data, sensors, the Internet of Things, embedded electronics, Machine-to-Machine adoption, and other digital transformative solutions.

The Need for M&A

As delivery methods for engineering services continue to change, engineering firms must either look to acquire new technologies, or diversify into higher value advisory services and focus on forming strong client relationships. Mergers and acquisitions are a resourceful path to establishing these services in a highly competitive market.

M&A strategies are also vital to creating growth and uncovering new strategic pathways. Larger companies look to acquire smaller companies in order to remain relevant, close talent gaps, expand to new regions, and strengthen their portfolio of offerings. This increased consolidation results in the prevalence of more one-stop service providers.

Because larger engineering services firms have more developed infrastructure and economies of scale, they are able to easily outbid smaller firms. This makes it problematic for the smaller firms that are trying to keep up and stay profitable. As a result of such challenges, many small engineering services companies are forced to rethink their options and consider partnership with larger firms through acquisitions.

M&A as a Succession Solution

Additionally, private engineering services companies may face succession issues because they typically have one or two founders who eventually plan to retire. When these particular business owners choose to exit the company, in many cases the next generation either cannot afford to buy out its departing leaders or is unwilling to do so. In these situations, M&A transactions are an ideal way for middle-market leadership to solve succession-planning issues, form a strong exit strategy, and set up the future trajectory for the company.  

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Please reach out to our cross-border M&A specialists at Benchmark International to start the conversation about selling your business or devising your exit strategy. We can offer unique perspectives, services and tools that work in concert to arrange a deal that delivers on your every aspiration. We think you will like what we bring to the table.  

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M&A And The Machinery And Equipment Manufacturing Industry

The modern manufacturing industry on a whole is continually undergoing somewhat of a seismic shift in operations thanks to rapidly changing technologies, globalization, rising wages, and demands for higher quality standards, shorter timelines, and more customization. These factors reshape strategic imperatives and decision making, largely in part to emerging disruptive technologies in the machinery and equipment manufacturing industries.

Technology Driving M&A

As is the case with most industries in the 21stcentury, the availability of new technologies is driving major opportunities for mergers and acquisitions in the industrial-equipment manufacturing sector. Some of these game-changing technologies include:

  • Data CentersAs the use of data centers becomes more and more prevalent in the machinery and equipment manufacturing industry, there is an increasing demand for mass power generation and back-up power generating systems. Because data centers consume a tremendous amount of energy, there is also a need for growth within the market of energy-efficient industrial solutions that have the capability to reduce operational costs. The data center construction market is forecasted to reach $45 billion by 2023.
  • Sensors and Control Systems: Wireless sensor networks offer a cost-effective way for data center operators to implement system changes that reduce energy consumption. Sensors detect and log specific operating conditions such as temperature, pressure, torque, load, and lighting. Control systems ensure proper workflow and identify potential problems and hazards. The addition of these technologies expedites digital strategies and creates a solid platform for connected solutions in safety and maintenance. By the year 2022, the sensor market is expected reach $27.4 billion and the control systems market is projected to reach $50 billion.
  • High-performance Computing (HPC): HPC is the practice of aggregating computing power in a manner that enables performance that is far beyond what is capable of typical desktop computers. It uses parallel processing to run advanced applications quickly and efficiently. Companies in the equipment-manufacturing sector are using HPC throughout the entire product lifecycle.
  • Automation: Industrial companies are increasingly using automation and predictive analytics to overhaul processes, improve capabilities and rectify previous operational inefficiencies. Specifically, automation is playing a major role in the use of industrial machinery in the food and beverage sector, driving M&A transactions. The global factory automation market is expected to reach $368.4 million by 2025.
  • The Internet of Things (IoT): The implementation of all of these technological advancements has led to a need for IoT networks that connect them across operational platforms. These networks enable machinery and equipment to communicate for the purpose of recording data, merging systems, and rooting out costly disruptions. The access to such knowledge gives companies the power to improve their manufacturing processes and the entire supply chain. The global industrial IoT market is expected to reach $933.6 billion by 2025.

Driving Acquisitions and Competition

Because it is simply easier for large industrial companies to buy smaller niche companies that offer specialized technological capabilities rather than attempting to develop them in-house, acquisitions in this sector are a favorable tactic. Additionally, the ability of a buyer to leverage new technology within its own operations and distribution channels gives strategic acquirers far better synergistic potential. Even in light of this fact, there remains growing interest on behalf on private equity investors, creating a competitive M&A environment in the machinery and equipment industry.

Target Company Attributes

Regarding M&A activity in the global machinery and equipment manufacturing industry, target companies that possess the following characteristics typically garner higher multiples:

  • Predictable revenue stream
    • Stable contracts with well-capitalized customers
    • Long-term customer relationships
    • Demonstrated sales diversification strategies
    • Business lines that can withstand cycles and recessions
  • Opportunities for growth
    • New end-markets and geographical locations
    • Cross-selling to existing customers
    • Bolt-on acquisitions
  • Growth-supporting infrastructure
    • Ability to maintain projected revenues
    • Long-term control over facilities
    • Proper maintenance of equipment
  • Technical product differentiation
  • Strong and stable management
    • Depth and continuity
    • Cohesive culture
  • Technology investments
    • Strong finance management
    • Post-enterprise resource implementation
    • Dependable, quality data

It is strongly advised that business owners who are seeking M&A strategies partner with an experienced M&A advisory firm that understands the intricacies of the industry and has the kind of global connections and prowess that maximizes value.    

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Is it time to make a move? Our experts at Benchmark International are standing by, eager to partner with you on M&A strategies that can achieve all of your objectives for the sale or growth of your business. Please contact us at your convenience.

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Provision of Healthcare To Patients, and M&A

The provision of healthcare to patients is the delivery of interventions within an organizational or home setting, including medical services, devices, health insurance, pharmaceuticals, and facilities.

Healthcare Around the World

The provision of public healthcare was not a priority until the last 100 years. Prior to World War I, public healthcare expenditure on healthcare was less than 1% of all national incomes worldwide. Today, the countries with the highest levels of public healthcare spending commit nearly 10% of their national revenue to it.

Wealthier nations spend more per person on healthcare and, not surprisingly, they have longer rates of life expectancy.

In most countries, government is heavily involved in healthcare markets. And in most wealthy countries, such as in Europe and Canada, the government runs the healthcare system. Universal healthcare is achieved in these nations through:

  • Government tax-funded systems
  • Privately run but government funded systems
  • Private insurance but with regulation and subsidies to ensure universal coverage and non-discrimination based on pre-existing conditions

The United States is the only industrialized nation with no universal healthcare option, where big pharmaceutical companies and insurance giants wield heavy influence on the industry.

Many developing countries make an effort to provide universal healthcare but face challenges associate with poverty, corruption, and inequality. There is also reliance on foreign aid.

A major difference between government-funded and market-based healthcare lies in the realm of medical innovation and advancement in new, effective treatments. Under government-financed systems, price and budgetary limits and other restrictions reduce investment in medical research.

Healthcare provision is extremely complex and is also subject to cultural, political, social, and economic conditions. This makes the sector very different from other business markets that operate based on supply and demand, especially when governments ensure that healthcare provisions are distributed in adherence with certain policies.

 

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A New Era in Healthcare Provision

Healthcare spending makes up a growing share of the world economy. As the 21stcentury progresses, the provision of healthcare to patients is undergoing changes to the overall landscape. People are living longer and spending more on healthcare. Evolving technologies are changing every aspect of healthcare. Chronic diseases remain a burden on healthcare systems. And more integration is needed for the continued improvement of the provision of healthcare to patients.

New technologies, such as fitness monitors for example, are empowering people to take more control over their own health. There is an opportunity to further help patients play a larger role in symptom disease management and their overall health through continued innovation in the healthcare sector.

There is a massive opportunity to improve patient outcomes through the engagement between clinicians and patients. Healthcare facilities are being reimagined so that they are designed around patient experiences rather than the need of the providers. They are also being digitally equipped with interfaces that streamline admission processes and recordkeeping, improve the continuity of care, and ultimately provide better patient care. New digital frameworks are allowing facilities to be updated rather than entirely rebuilt when technology undergoes drastic changes.

Integrated care is a growing focus in the healthcare provisions sector. How communities work with facilities is being reexamined to formulate the right platforms for patients and alleviate the demand for inpatient beds.

Healthcare Provision and M&A

Mergers and acquisitions in healthcare tend to always be a topic of debate, as they can have a serious impact on the patient experience. And as M&A healthcare deals become more frequent, concerns over monopolies arise. However, structure changes can be quite vital for some companies to survive in an ever-evolving industry. Additionally, M&A can actually help patients have better access to quality care and improve costs.

  • According to the American Hospital Association, certain mergers can boost access to capital and other resources, lowering costs for patients.
  • When small independent facilities are acquired by larger organizations, they can remain open and patients do not lose access to care.
  • Under a merger, it is common to streamline protocols, which can lead to enhancements and new standards in quality care. This can also reduce the instances of patients undergoing surgical procedures at a facility with limited experience in that area.

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M&A In The Global Mining Sector

The Role of Mining in the World

The global mining sector employs millions of people worldwide and its role in the global economy continues to significantly evolve. Standard functions in the mining industry include production of metals, and metals investing and trading. Additionally, there is a strong correlation between the global mining industry and other industries. For example, elements such as copper, nickel, and aluminum are core components used in the construction, aviation, automobile and other industries. In areas where mining is more concentrated, the industry plays a more important role in local economies.

According to the International Council on Mining and Metals, at least 70 countries are extremely dependent on the mining industry, and most low-income countries rely on it to survive. The same study shows that in many low-middle income countries, mining accounts for as much as 60-90% of total foreign direct investment.

Increased populations and urbanization drive the demand for growth in mining activities, as there is more demand for cars, buildings, and consumer products.

 

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M&A Challenges and Considerations

Mergers and acquisitions can be intense in the global mining industry. They are heavily influenced by timing, fluctuating commodity prices, supply uncertainties, and come with many variables depending on transaction size, volatile markets, and the geo-location of the mine. There are certain considerations that are unique to the industry:

  • Mining projects can have limited lifecycles depending on the availability of deposits.
  • Mines cannot be relocated to areas that may be more beneficial economically or politically.
  • Because there are great technological and geological constraints, mining companies are not able to adjust production to increase revenue.
  • Funding is less readily available, access to bank financing is limited, and investors tend to be more cautious and selective.
  • Countries may have greater government regulations, and indigenous mining agreements designed to mitigate negative effects and to share the benefits from commercial mining activity.
  • In some parts of the world, there are human rights concerns, increased policing for corruption, and environmental impacts.
  • Once the ore is extracted, mine closure procedures can take several years, in turn, expending money and labor for activities that are not yielding any profits during that time frame.

Gold Mining Sector 

The gold mining industry is known for placing a high premium on growth. As of 2019, analysts reported that the leaders of gold mining companies say that they find mergers and acquisitions to be an easier path to growth than exploring for new untapped deposits underground. Modern M&A deals in the business of gold mining now focus more on capital efficiency and operational excellence, with heavy emphasis on evaluation of the management team.

Copper Mining Sector 

Copper is an essential metal needed by industrial economies. Globally, the copper mining industry is one of the leading metal mining markets. The continued innovations in battery technology continue to attract investment into metals such as copper, which plays a critical component in the function of batteries.

Coal Mining Sector

Coal has been widely used to provide power since the Industrial Revolution in the 1800s. In the 21stcentury, coal mining faces new challenges alongside the pursuit and popularity of renewable energy sources. At the same time, innovation in the coal mining industry remains alive. New, state-of-the-art technologies are being developed. Sophisticated robotic mining machinery and computerized systems are being used to streamline mining and boost production to unprecedented levels. And industry leaders are looking into new uses for coal beyond its long-standing role in the energy sector. An example is the development of carbon fiber, currently used in the aerospace field, and potentially used in prosthetics, electrodes, 3D printers, and more.

 

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Shared Buyer and Seller Risk

In the mining sector, both buyers and sellers alike face risks of deal failure, but are more likely to see success if a strategic plan is followed. Two of the most important factors are pricing efficiency and post-sale integration. Both buyers and sellers tend to be more cautious in this industry.

  • Sellers should expect buyers to be on the lookout for the risk overpaying for your company, not being able to integrate the company as efficiently as possible, and dealing with issues such as uninsured legacy liabilities. Buyers may become interested in underperforming assets because they have more experience and access to financing that the existing owner, as well as better government relationships, a different risk profile, and the option of consolidation with existing mines or facilities.
  • Sellers risk facing purchase price disputes and post-deal issues with warranty and indemnity claims. Plus, fluctuating markets, especially in mineral-rich regions such as Africa, can make valuation difficult.

If proper precautions are taken to understand and avoid these issues, overpayment or post-close surprises can be averted. Other benefits that come with proper preparation include improved sale and purchase agreements, smoother integration, and more efficient corporate governance. Enlisting experienced M&A advisors as early on in the process as possible can aid in significant mitigation of transactional risks.

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The Information Services Industry and M&A

The global information services (IS) industry employs integrated methods to gather, process, communicate and store different types of information for the purpose of improving efficiencies for society and organizations. IS data—which typically covers people, software, hardware and procedures—is used for study, analysis and better decision-making processes. 

The IS landscape is comprised of companies that vary in size, including:

  • Global multi-billion-dollar firms that cover several sectors
  • Firms with hundreds of million of dollars in revenues and more concentrated areas of focus
  • Smaller firms that focus on niche markets and specific geographic regions

M&A in the IS Industry

Many large IS companies use regular acquisitions to execute business strategies such as product enhancement, geographic expansion, keeping pace with changing marketplaces, and expansion into adjacent markets. Acquisitions in this sector can also serve as an alternative path to product development, allowing companies to purchase capabilities and content rather than create it themselves. IS companies typically look to acquire content that fits well within their existing offerings.

Synergy and Value

Value through M&A in this industry comes in the form of clear synergies and improved distribution capabilities. This is partially due to the fact that IS content can be used several times at no added cost. After a one-time integration of content and capabilities between the two companies, there is much versatility in how the content can be used. Synergies are especially important to M&A deals when they are part of a business owner’s exit strategy in order to maximize the value of the transaction and fulfill the business owner’s personal objectives and vision for the company.

Consolidation planning is key to company valuations. IS companies do not typically view acquisition targets as stand-alone enterprises, but rather as opportunities to consolidate acquired content into existing platforms, therefore gaining positive revenue, improved cost synergy, and reduced technology costs.IS transactions can happen at a higher price if earnings and product synergies can be pinpointed and their profitability is clearly identified.  

Active IS Market Segments

In the IS industry, mergers and acquisitions activity tends to occur most in the following segments:

  • Business Intelligence
  • Financial Markets Information
  • Legal, Tax & Regulatory Information
  • Credit & Risk Management Information
  • Marketing Information

Business Intelligence IS

The Business Intelligence segment of IS—defined as information on industries, products and services that help companies identify market opportunities, respond to competition, and plan new products—is a highly active area for M&A. These companies use acquisitions to increase their existing coverage and expand into adjacent markets.

Financial Markets IS

In the segment of Financial Market Information, acquisitions frequently focus on adding content and capabilities to their distribution platforms to serve large portions of rapidly changing financial markets. New data is always in demand and new types of analyses are needed. Companies seek innovation, new customers, and stronger financial market data versus that of their competition.

Legal, Tax & Regulatory IS

The area of Legal, Tax & Regulatory Information is subject to ever-changing laws and regulations around the world. Also, IS companies face added regulations with the expansion of cross-border trade. To adapt to the need for product changes, these firms turn to acquisitions to expand content and capabilities.

Credit & Risk Management IS

In this particular IS segment, it is most common to see specialized firms being active in M&A transactions, with their primary strategy being to obtain more individual credit content. Also, as new entrants emerge in this space, the major credit ratings agencies see buying them as a way to strengthen their existing credit rating models.

Marketing IS

Marketing IS companies provide market research, audience management and other general marketing services. Companies in this diverse area use acquisitions for market consolidation, increased synergies, and the expanded mix of tools and information.

The Importance of Expert Guidance

As with any industry, it is recommended that business owners within the IS space engage the expertise of reputable M&A advisors to execute a deal in a sector that is subject to fast growth and high margins. These deals involve high levels of complexity and require the perspectives and resources of a partner that is committed to serving the best interests of the seller.

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M&A In The Ride Services And Autonomous Vehicle Industries

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

Ride Service Companies

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

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

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

 

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Autonomous Vehicles

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

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

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

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

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

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

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

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

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M&A In The Hotel, Lodging & Hospitality Industry

Hotel and hospitality brands have an insatiable appetite for rapid growth and there is an endless ongoing battle for global share. Because the industry is highly fragmented and brand driven (the top hotel brands only account for a third of rooms worldwide), mergers and acquisitions are always on the table as a key growth strategy. Since 1985, there have been more than 13,800 deals in the hotel and lodging industry, valued at $809 billion.

Studies have shown that, on average, lodging M&A is unique versus those in other industries because both the target and acquirer are better off following a merger.

Hotel M&A Value Drivers

There are several value drivers when it comes to hotel brand M&A.

  • Strategic value drivers include more customer offerings, the creation of new markets, and further reach into existing markets.
  • Operational value drivers include factors such as expanded loyalty programs, consolidated corporate teams, and improved technologies and reservation systems.
  • Additional key value drivers of a hotel brand include the integrity of its global trademark portfolio, and the value of both existing and potential management/franchise agreements and real estate portfolios.

 

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Clearing Hurdles in Hospitality M&A

It is not uncommon for various issues to arise during M&A transactions between hospitality companies. However, taking the proper steps can alleviate these concerns.

Clarify intellectual property.

Portfolio expansion through the acquisition of additional brands is a major reason for many M&A transactions within the hotel sector. In these cases, the target company's ownership of its intellectual property is very important to buyers, so it is just important to sellers. This is where third-party ownership claims can arise as an issue in a transaction. If a hotel brand shares valuable restaurants or other brands with a third party, and there is any chance that the third party could claim ownership of any interest in the brand, it can significantly devalue the brand and the target company. Ownership agreements must be adequately and clearly documented before entering into an M&A transaction. It is going to be crucial to the accurate valuation of the company.

Protect your data. 

Technology is integral to every step of the hotel booking process, which is why, as a seller, you can expect buyers in M&A transactions to heed the risks and liabilities surrounding the target company's data protection and cybersecurity practices, and its compliance with governmental regulations. There are web and mobile bookings, check-ins, complicated reservation systems, and even customer review websites to consider. Due diligence in regard to detailed data protection and cybersecurity at length is imperative. In order for a target company to maximize its value, management should thoroughly review its current compliance with existing regulations and take all precautions to ensure best practices are in place to minimize exposure to potential data breaches.

 

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Minimize withdrawal liability. 

Large hoteliers and hospitality companies typically have unionized employees covered by collective bargaining agreements that require contributions to one or more multi-employer plans. Withdrawal liability can occur when an employer has a significant reduction in union workforce, a complete union workforce reduction, or a withdrawal of all employees from a pension plan as a result ofthe event of a change in management or a sale of a hotel. Labor laws vary by country, but it should still be noted that there could be issues with determining whether the hotel owner or manager is the employer by legal definitions in that reason (for example, the Employee Retirement Income Security Act of 1974 [ERISA], in the United States). Multiemployer plans have the ability to disagree with who is considered the employer, and assess withdrawal liability on the party it determines is the employer. To mitigate the risk of withdrawal liability, all parties should consider who is the employer for labor law purposes, and who bears the liability under the management agreement.

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Working with an experienced M&A advisor is a game-changer in minimizing risk and closing a successful deal. We look forward to hearing from you about your interest in M&A as a seller of a company in any industry. Our global M&A experts are waiting for your call.

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M&A And The Electronics Manufacturing Industry

The electronics industry manufactures electronic equipment used within industrial electronics such as semiconductors, as well as consumer electronics such as televisions and smartphones.Companies in this sector design, develop, manufacture, assemble, and service equipment and components.

By the year 2024, the global consumer electronics market is expected to reach
$1.78 trillion.

Growth within the electronics manufacturing industry is driven by the following factors:

  • The demand from emerging market economies
  • Investment in foreign production of electronics, which results in new factories and factory expansions
  • Increased consumer spending
  • Increased competition that drives down production costs and expands the availability of affordable electronics products
  • Development of new technologies

The Semiconductor Segment

The semiconductor industry creates products such as memory chips, microprocessors, integrated circuits, and specialized processorsfor a wide variety of uses in electronics and computers. Primarily, large companies dominate this particular industry segment, but smaller, niche players are carving their place in the market.

The semiconductor industry is highly influenced by new technologies and global economic cycles. When product prices are high, companies produce more of them. This saturates the market and prices drop. As a result, some companies choose to produce less, gradually driving prices back up. The industry also requires a great deal of capital, and research and development, and is subject to long lead times from concept to production.

Because there is much reliance on economic environments—plus there is the high degree of risk due to cost of R&D—smaller companies and startups tend to prefer to be acquired by a larger semiconductor company as a more realistic strategy to create steady future growth.

Next Wave Tech

Over the next couple of decades, printed, flexible and stretchable electronics will continue to represent a massive opportunity in the future of tech, as well as M&A activity. These electronic innovations include:

  • E-textiles, smart clothing, and wearable electronics
  • Flexible displays and screens
  • High-performance, low-power electronics
  • Wearable and mobile health monitoring tools
  • Flexible, foldable, roll-able batteries and photovoltaic technologies
  • Miniaturized components

Automotive Electronics Evolution

As software and electronics play an increasingly essential role in vehicles, the communication technology giants have been aggressively investing in the automotive industry. At the same time, traditional auto manufacturers are actively seeking to partner with technology companies in order to be more productive at digitizing and innovating their offerings. These market dynamics and adaptive strategies are key drivers of M&A in the automotive electronics sector.

The market for automotive electronics is expected to exceed $100 billion by 2025. 

Restructuring through M&A enables these companies to better integrate, reconfigure, and pool resources, gain new and specific knowledge, and enhance overall capabilities.

Integration of cultures can be an important challenge when a smaller tech firm converges with a giant conventional automaker. For M&A to be successful, both companies in the transaction must be mindful of how greatly differing cultures need to be integrated with care.

Achieving Successful M&A

Beyond cultural integration, other important considerations in an M&A transaction between organizations include:

  • Proper targeting and vetting of both companies
  • Identification and mapping of internal processes of both organizations
  • Evaluation of the structural fit for each organization
  • Locations of all global and regional offices and facilities
  • Synchronization of the data, applications, and types of technologies used by each organization
  • Assessment of how their legacy systems and languages might conflict or be enhanced

It is also critical to the deal that both parties are kept on track and expectations are properly managed. This is where the partnership with an M&A advisory firm can make all the difference in a smooth transition and the ultimate success of the deal. This valuable partnership can also save significant time and financial resources.

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M&A In The Global Transportation and Logistics Industry

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

Industry Subsectors

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

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

 

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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 logistic 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.

 

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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.

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M&A In The Renewable Energy Industry

The renewable energy industry is one of considerable expansion. Global efforts to cut back on the use of non-renewable energy and to reduce carbon emissions are proven to stimulate investment and growth.As the world’s energy needs continue to change, the opportunities for mergers and acquisitions continue to evolve. And as the big technology companies get involved in renewable investments, major oil and gas companies follow their lead.

M&A activity in renewable energy is driven by traditional energy businesses striving to acquire new capabilities, institutional investors seeking stable returns, public demands to address climate change, and countries working to integrate cleaner energies into their existing energy mix. The European Union expects to achieve 32% of renewable energy consumption by 2030.

Established, traditional power companies must rely on M&A to fill gaps in capabilities because they do not possess needed skills that were never part of the mix in traditional grid-based power systems.

 

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Once viewed as a luxury form of energy only used in developed countries, renewable energy is now being adopted worldwide and in many developing countries, such as those in Africa and Latin America. Fossil fuel energy can be costly and difficult to transport and distribute in remote areas, making locally sourced renewable energy a practical option.

There are also other areas of continued development in the realm of renewable energy that offer M&A opportunities for investment and growth. These include the further development of electric vehicles, the electricity storage market—particularly battery technology—extending from technology manufacturers into the mineral supply chain and storage control systems. Digitization of the sector also presents the types of abundant opportunities that are inherent to technology and data in the 21stcentury.

Business Valuation As a Factor

Among the deal-specific factors that influence the valuation of individual renewable assets are:

  • Asset quality
  • Finance costs
  • Regulatory stability
  • The state of the wholesale energy market
  • The competitive environment
  • The lifecycle stage of the asset relative to the prevailing subsidy regime
  • Curtailment risks beyond the control of the asset owner

Many governments offer incentives and subsidies for renewable energy production and use, strengthening the value of companies of this sector. 

 

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Key Due Diligence Areas

In the acquisition of a renewable power project, the following due diligence topics must be considered:

  • The venture must have an energy generation license (or exemption from a license) and adhere to the terms of the license. It is also important to know if there has ever been a breach of the license.
  • There must be assessment ofthe project’s profitability and any credit support requirements.
  • It must be determined whether there will be any government subsidies for the project, which can affect its funding.
  • Property rights and planning permissions must be documented, ensuring that the correct leases, easements, planning permissions, and consents are in place and compliant.

The following key contracts are specific to the renewable energy sector and will be needed:

  • A shareholders’ agreement or joint venture agreement
  • Power purchase agreement
  • CFD or capacity agreement
  • Fuel supply agreement (in the case of biomass or biofuel generating plant technologies)
  • Engineering, procurement and construction contract
  • Operation and maintenance (O&M) agreement
  • Connection agreement
  • Financing documents

Because completing an M&A transaction in the renewable energy industry is extraordinarily nuanced and complicated, and embroiled in tedious due diligence processes and paperwork, it is highly advised that you seek the expertise of an M&A advisory firm before attempting to broker a deal.

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The Ultimate Glossary of Terms for a Mergers & Acquisitions Transaction

If you are a seller or buyer that doesn’t have a lot of experience in the world of M&A, it can be frustrating and confusing trying to understand the terminology that is used. As much as we try not to confuse our clients, it is many times more efficient to use the specialized terms of the profession. To help, we have put together a list of common M&A terminology that we hope will assist you and make the process smoother if you are buying or selling a business.

Acquisition: One company takes over the controlling interest or controlling ownership in another company.

Add-On Acquisition: A strategic acquisition fit for an existing platform/portfolio company.

Asset Deal: The acquirer purchases only the assets (not its shares) of the target company.

Confidential Information Memorandum: Sometimes called “the book,” pitchbook or a deck, the Confidential Information Memorandum is a description of the business including products, history, management, facilities, markets, financial statements and growth potential. This is used to market the business to potential buyers.

 

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Data Room: Secure online website that contains information including contracts, documents, and financial statements of the business being sold. These online data rooms can track who views the information.

Deal Structure: May include seller debt, earn outs, stock, or other valuables besides cash.

Due Diligence: Part of the acquisition process when the acquirer reviews all areas of the target business to satisfy their interests. This includes viewing the internal books, operations, and internal procedures.

Earn-Out: A type of deal structure where the seller can earn future payments based on certain achievements or the performance of the business being sold after the closing. These are often based on revenue targets or earnings.

EBITDA: Earnings before interest, taxes, depreciation, and amortization.

Goodwill: An intangible asset that comes as a result of name, customer loyalty, location, products, reputation, and other factors.

Indication of Interest (IOI): A letter from the buyer to the seller that indicates the general value and terms a buyer is willing to pay for a company. The letter is non-binding to both parties.

Letter of Intent (LOI): A document that lays out the key terms of the deal. LOI’s are typically non-binding for both parties except for certain provisions such as confidentiality and exclusivity.

Multiple: Common measure of value to compare pricing trends on deals.

NDA: A confidentiality agreement that prohibits the buyer from sharing the confidential information of the seller. This is usually signed before the seller provides detailed, sensitive information to a buyer.

 

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Purchase Agreement: The contract that contains all the specifics of the transaction and the obligations and rights of the seller and buyer.

Representations and Warranties (reps & warranties): Past or present statements of fact to inform the buyer or seller about the status and condition of their business and its assets, employees, and operations.

Search Fund: This is an individual or a group that is seeking to identify a business that the individual or group can acquire and manage. Usually, search funds do not have dedicated capital but instead, have informal pledges from potential investors.

Teaser: An anonymous document shared with potential buyers for a specific business that is for sale.

Working Capital: A financial term used as a measurement of a business’s ability to meet its financial obligations over the coming business cycle (which is 12 months for most businesses). It is not defined under Generally Accepted Accounting Principles (GAAP). However, it is commonly calculated using this formula: Working Capital = Current Assets – Current Liabilities.

If you are thinking about buying or selling a business, Benchmark International has a team of specialists that can help answer your questions. A simple phone call or email to us can start the process today.

 

Author
Amy Alonso 
Associate
Benchmark International

T: +1 615 924 8522
E: alonso@benchmarkcorporate.com

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Environmental Services Industry M&A

Waste disposal and recycling companies provide essential services to global communities, giving this sector a relatively high level of resistance to changing economic cycles. Urbanization, increasing populations, and consumer spending drive the ever-growing demand for waste and recycling services.

By the year 2050, global waste generation is expected to rise from 2.01 billion metric tons to 3.40 metric tons - an increase of 70%.

Of the massive amounts of waste created globally, less than one third of it is recycled. Canada and the United States lead the world in waste production, followed by Europe.

The management of sustainable materials, including recycling, can help conserve resources, reduce waste, and minimize the environmental impacts of materials. An increasing number of regions of the world are using sustainable management practices for regulation. National governments are developing long-term strategies that assess their country’s current waste situation and are setting targets for recycling, sustainability, citizen awareness, and rehab of contaminated sites. There is also a movement in low-income countries toward better recycling, and waste disposal in controlled or sanitary landfills.

 

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Environmental Consulting

A sub-sector of the environmental services industry is environmental consulting. Environmental consultants ensure company compliance with environmental regulations.

With the world’s heightened focus on environmental issues, this global market continues to expand. A relatively small group of firms dominates this market. In order for other firms in this industry to remain competitive, they need to focus on specialized expertise, targeted M&A activity, and dependable client relationships.

Waste and Recycling M&A

In the waste and recycling sector, mergers and acquisitions activity is stimulated by quality and consolidation. Positive debt financing and public equity performance drive M&A valuation higher for waste and recycling companies. Investing in waste management and remediation is especially attractive to private equity for several reasons, including:

  • Lower risk through essential services
  • High barriers to entry
  • Demonstrated track records
  • Modest capital investments outside the recycling sector
  • Large number of industry players

From a seller perspective, you should be aware of the three most common considerations for M&A deals in this sector.

  • The buyer’s strategic rationale: Does the transaction tap new markets, complement existing markets, or deliver new service offerings?
  • The health and growth of the target company: Does it have favorable contracts and strong assets that will not require a significant infusion of capital?
  • The company’s management team: Can the buyer be confident in a smooth transition and a good post-acquisition relationship?It is not uncommon for waste management companies that have more impressive management teams in place to garner higher valuations.

Owners should focus on removing any uncertainty surrounding their company. In the months leading up to a possible sale, contract negotiations are key. Owners should also be aware of the possibility for anti-trust issues to arise, even when the geographic impact is limited to a single local area. These issues can impact the timing and outcome of a deal so an anti-trust risk assessment should be conducted prior to going to market.

When to Sell

As a seller of a waste management company, determining when to sell can be a difficult decision, but certain factors should be considered.

  • Are contracts secure with favorable terms?
  • Are revenue streams are diverse and trending positive?
  • Is the fleet is in good condition?
  • What are the conditions of the market?

 

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Procure M&A Experts

Company owners in this sector who enlist experienced M&A advisors are less likely to leave money on the table in a sale. It is important to choose the right buyer, get proper valuation of the business, and exit at the right time.

Industry lenders have reported that there are many more unannounced deals in the waste industry than those anyone hears about. For this reason, it makes perfect sense for a buyer to partner with an expert to seek viable acquisitions. The waste industry is highly fragmented and, other than the top three major players, most companies post less than $20 million in annual revenue. Typically, they do not have the knowledge or bandwidth to blindly jump into the M&A market. The right M&A advisor can identify quality companies not being offered on the market and negotiate a successful sale.

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If you are thinking that the time has come to sell your business or to formulate a growth strategy, contact us at Benchmark International today. Whether you are in the waste industry or any other industry, we can connect you with the right buyer. Our approach is proven to get results that exceed our clients’ expectations time and time again.

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M&A In The Nuclear Power Sector

Population and economic growth drive the global demand for energy. Nuclear energy is the world's second largest source of low-carbon power and it makes up 11% of the world’s electricity generation. Around 50 countries use nuclear energy, and there are hundreds of nuclear reactors in operation around the world.

There are also around 225 research reactors under operation, with more under construction. These reactors are used for research and training, and produce medical and industrial isotopes.

As the world increasingly focuses on ways to reduce carbon emissions, nuclear power has the potential to play a more pivotal role, yet the industry is seeing the state of things go both ways. Following the Fukushima nuclear disaster, Japan shut down 48 of its reactors, and Germany began phasing out its nuclear program. And in several countries, the creation of new reactors is facing delays and cost issues. However, there is a bit of a dichotomy, as France still obtains 75% of its electricity from nuclear power, and the United States generates about twice as much as France.

The United Nation's Intergovernmental Panel on Climate Change has warned that reducing emissions will be far more expensive without the availability of nuclear power.

 

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M&A Optimism

A single nuclear power plant is capable of generating a significant amount of electricity. It also requires very expensive components. For this reason, markets see drastic fluctuations from year to year. But there is still a great deal of optimism for the nuclear energy sector.

A strong appetite remains for companies that are of service to the nuclear industry. Acquirers and investors recognize the value that companies can gain from the multitude of services or products that are needed to keep the sector operational. This particular industry generates significant spending year after year in order to keep nuclear power plants compliant with the scores of federal, state and local regulations that exist. These companies must also keep up with increases in power production, which translates to regular spending on equipment and services. This type of reliability represents a quality investment opportunity. In general, the industry itself is always facing uncertainty, but the companies that have a history of serving this sector remain a solid investment.

As the energy industry transitions toward more sustainable cleaner energies, power companies are forced to alter their business models, and are faced with consolidations.  Mergers and acquisitions have the power to streamline this very fragmented sector. Some companies are simply incapable of organically achieving the level of change they need. Plus, the nuclear energy industry has to compete with the increasingly popular natural gas industry.

Also, a new class known as small modular reactors (SMRs) has been introduced to the world and is garnering a great deal of enthusiasm and support.SMRs are less expensive, more efficient, offer more flexibility for utilities, and are easier to finance. This represents a stellar opportunity for growth and investment in the nuclear power industry.

There is also another sector that wholeheartedly relies upon the operation of nuclear reactors, and that is nuclear medicine. While nuclear medicine has existed for some time (widespread clinical use began in the 1950s), later 20th-century developments increased its role in healthcare (diagnostic imaging), and it is seeing an entirely new renaissance in the 21st century. Conventional pharmaceutical companies are eagerly seeking to get in the game of radiopharmaceuticals, radiotherapeutics, and radiotheranostics. In fact, it is predicted that by the year 2030, radiotherapeutics will account for more than 60% of the market and nuclear medicine will be worth $26 billion. This represents a staggering opportunity for M&A activity.

 

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Nuclear Energy M&A Expertise

Any energy M&A transaction requires a specialized level of expertise in order to avoid pitfalls that can blow a deal. Finding the right company broker is advised.

  • Knowledge of the industry and the nature of the markets are key
  • The ability to identify areas of risk is imperative. The due diligence required for deals in this sector is exceptionally painstaking
  • Complex regulatory issues must be firmly understood. Laws and regulations in the energy industry go beyond the energy regulatory governance to include environmental, health, safety, tax, employee benefits and property issues
  • Cross-border transactions require global and local understanding of the market and the regulatory differences and how it plays into the company valuation

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At Benchmark International, our global M&A experts are eager to help you make the next big move for your company and your future. Whether you wish to sell your business or plan your retirement, we have the strategies, connections, and technologies to make great things happen for you. 

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M&A In The Pharmacy Sector

Even though consolidation in the pharmacy services industry has been ongoing for several years, ample opportunity remains for mergers and acquisitions activity. It is inevitable that people will continue to need treatments for illnesses, which means that the demand for pharmaceuticals is always a robust market, and that directly correlates to the pharmacy industry. High demand translates to unique opportunities for sellers.

If businesses plan to stay competitive in the pharmacy industry, there are certain areas of focus in which they will need to remain vigilant.

  • The pressures of an increasingly on-demand society and getting medications to patients faster
  • Transparency must be clearly demonstrated when it comes to costs and start-ups are poised to capitalize on this market
  • Enhanced offerings to patients such as improved medication compliance or unique services that will help maintain a competitive foothold within an aggressive industry

 

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Specialty Pharmacy

The subsector of specialty pharmacy has been a burgeoning industry and includes pharmaceuticals that are subject to certain criteria. They are used to treat chronic, rare, or complex conditions, and they typically come with a high price tag. Availability for these specialty treatments is only through exclusive or limited distribution and they can often require special handling, storage, or administration requirements. Their safety is under continuous monitoring and patients who require these treatments also require significant education regarding their use.

Therapies categorized under specialty pharmacy are often injections or infusions, but can also include oral biopharmaceuticals. The types of diseases typically managed by specialty pharmacies include cancer, multiple sclerosis, rheumatoid arthritis, HIV/AIDS, and hepatitis C.

It has become common for specialty pharmacies to collaborate with hospitals, retail, and manufacturers. Such collaborations can improve patient access and patient care. It has also become more common for specialty pharmacies to consolidate for growth of market share and enhanced capabilities. New technologies play a large role in specialty pharmacy scalability. While scale is a clear marker of success, growth spans beyond the biggest companies to mid-tier pharmacies. Independent retail community pharmacies are finding more cost-effective ways to serve customers by creating collaborative networks that also make them more appealing partners for manufacturers. When it comes to M&A in the arena of limited-distribution drugs, strong capabilities and payer relationships are key to gaining exclusive access to these higher-priced therapies.

Infusion therapies are already a major driver of revenue growth, and are seeing more attention in the specialty pharmacy market to boost margin growth amid a slowdown in the introduction of new drugs. Additionally, more and morepatients are being treated in outpatient settings and in their own homes. Herein lies a major opportunity for specialty pharmacy to establish complementary strengths in infusion therapy.

Institutional Pharmacy

Nursing homes, hospitals and hospices that do not have an on-site pharmacy rely on institutional pharmacies to repackage and deliver prescription medications and other services for administration. Demand in this sector grows as the population ages, and there is a need for nontraditional revenue streams such as patient therapy evaluations, regulation compliance strategies, and clinical management programs that employ newer technologies.

In this multi-billion-dollar market, institutional pharmacy providers are faced with a particularly intricate set of organizational and regulatory challenges. Navigating these issues requires innovative solutions for institutional pharmacy providers across a multitude of topics that range from pricing to compliance.

 

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Keys to Successful M&A in the Pharmacy Sector

Innovation is driving the charge to unlock rapid growth in this space with focus on smart, actionable data, lower cost-of-care workflows, and better technology platforms. A skillfully executed M&A strategy makes all the difference in achieving meaningful growth aspirations.

A solid integration strategy plays an important role in pharmacy M&A to ensure that the structure creates advantages and retains talent while aligning corporate cultures, values and objectives. M&A transactions in the pharmacy space require careful planning, due diligence, and attentiveness to manage the intricacies of integrating multiple systems, processes, and organizations. Aspects that should be evaluated include relationships, clinical platforms, therapeutic areas, IT capabilities, business development, marketing, and sales.

Market timing is key, and you must have a concrete plan for how to partner effectively to expand capabilities. These deals demand a clear vision and organizational leadership focus across multifunctional disciplines in order to achieve M&A synergy.

Contact Us

Are you ready to sell your company? Even if you are not sure, it is a great idea to have a conversation about your future with our M&A specialists. We can offer you expert strategies for how to grow your business, create a winning exit strategy, and executing a lucrative deal.

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Business Services M&A: Office Administration & Recruiting

When companies seek to enhance their margins and better serve their customers while reducing the cost of providing services, they outsource non-revenue producing functions to outside business services providers, known as business process outsourcing (BPO) companies. In the area of recruiting, it is a form of BPO, commonly referred to as Recruitment Process Outsourcing (RPO).

The business process outsourcing industry is valued at nearly $1 trillion USD. The United States leads the market with 40% share worth more than $400 billion, followed by Europe and the Middle East with a market valued at $300 billion. The global RPO market is valued at around $5 billion.

Technology has greatly expanded the capabilities in this sector, as it is not uncommon for companies to have virtual contact centers where employees work from their homes, or to have offshore centers where support staff works from another country or continent. It is less efficient for companies to have functions performed in-house that require overhead costs. This is a major driver of growth in the BPO industry and represents a relatively still-untapped opportunity in many countries that use little outsourcing.    

There are also several other benefits that companies gain by outsourcing services.

  • It frees up the time and energy of internal resources to focus on bigger picture strategic goals.
  • There is no time or cost associated with training new staff members.
  • It offers access to regulatory experts to ensure compliance in an increasingly regulated world.
  • There is no employer liability.
  • Administrative services can be paid for when they are needed, as opposed to employing someone full time and having them be under-utilized.
  • The interviewing and hiring processes can be avoided, saving additional time and money.
  • Employers do not need to pay benefits, leave or holidays for outsourced staff.
  • It also opens up the opportunity for smaller companies to carve out more market share by increasing their global reach.

 

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Office Administration Outsourcing

A large and growing segment of this outsourcing is office administration. Essentially any company in operation has administrative tasks that must be accomplished to keep the day-to-day operations running smoothly. Administrative functions that are often outsourced include payroll, accounting, human resources, data management, employee benefits, insurance claims management, and client support.

Recruitment Outsourcing

RPO companies emerged from traditional recruiting needs, but are designed to work differently. All or part of a company’s recruitment processes is assigned to an external service provider. RPO services differ from that of staffing companies in that they do not simply find candidates to fill job openings. They focus on the overall improvement of a company’s recruiting process as more of a strategic, consultative partner. They study factors such as turnover rates, technology, scalability, and how much time it takes to fill a position.

Many companies choose RPOs to improve recruitment efficiency, reduce cost, make hiring more scalable, improve the quality of hires, meet the talent needs of short-term projects, and improve workforce analytics and planning.

The industry sectors with the largest market shares are technology, telecom, finance, insurance, healthcare, biotech, pharmaceuticals, and medical equipment.

BPO M&A Activity

As the use of BPO services becomes more common around the world, the M&A activity surrounding them increases, with a large concentration in the middle market. There is a tendency for customers to prefer fewer vendors with more diverse service offerings, motivating BPOs to use M&A to diversify to increase customer wallet share.

In this highly competitive market, BPO companies typically acquire target companies in order to gain:

  • More capabilities for broader service offerings
  • Exposure to higher growth end-market verticals
  • Broader geographic reach to offer more global services
  • Economies of scale to lower proportion of fixed costs

 

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RPO M&A Activity

RPO companies are becoming increasingly globalized as a result of mergers and acquisitions. To be successful in this growing market, RPO providers have found different ways to distinguish themselves.

  • They specialize across geographic regions, vertical markets, related jobs, and buyer segments.
  • They offer value-added and technology-based services, such as analytics and mobile recruiting.

For an M&A deal to be successful, sellers should conduct an all-encompassing assessment of their value proposition and how it ultimately aligns with the buyers’ interests.

M&A Due Diligence

Conducting due diligence for a merger or acquisition is always a time-consuming undertaking, and this is especially true when the target is a BPO company. Location analysis of the target company should be performed for any potential acquisition to help form an accurate purchase price and avoid costly post-closing issues. It assesses site location, economic development, competition, real estate markets, workforce issues, saturation levels, historical attrition rates, recruitment, and retention viability. Partnering with a specialty company broker who has this type of experience is advised.

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If you are ready to take the next step with your business, whether it is selling, expanding, or retiring, contact our M&A specialists today. Our expertise, global connections, and proprietary technologies are here to guide you to a prosperous future. 

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Global Investment Banking Companies And M&A

New technologies are constantly reshaping industries, and global investment banking is not immune to these impacts, as newfinancial startups create technologies that cut into the relationship-based work that investment banks do.In order to continue to thrive, the big investment banks must keep up with innovation.

 IPOs

The underwriting of initial public offerings (IPOs) has always been a major source of profit for investment banks. Prominent investment banks play a large part in IPOs, as they come with prestigious reputations that instill confidence among public investors in the legitimacy of a deal.

However, tech companies have changed the game by negotiating lower fees, exploring alternatives to IPOs, and simply electing to not go public at all. Technology companies are usually the highest-returning public offerings. When venture capitalists and sovereign wealth funds put more cash on the table, some startups are able to remain private, providing challenges for investment banks.

Going public is a complicated legal process and most companies need the guidance of investment banks, which profit from the large fee that they earn to protect themselves from risk if the company’s stock underperforms.

Big investment banks have had to shift their strategies and turn to internal automation and technology in order to secure their competitive advantage in the world of IPOs. This allows them to hire fewer junior bankers, complete more IPOs in less time, and maintain high profit margins.

 

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Asset Management

Asset management is a highly profitable financial service, but it has faced increased regulation since the 2008 financial collapse. These regulations make it more difficult for investment banks to trade with client money because of checks and balances that ensure the banks are not carrying too much risk. Dedicated asset management firms do not face the same regulations as investment banks, so they tend to be a more popular growth option for investors. Also, money management firms are able to drive returns at smaller fees.

Strategic M&A

Traditionally, mergers and acquisitions were solely viewed as a pathway to increase earnings per share for companies combining assets with similar businesses. Big investment banks were once major players in these transactions, prior to the shift in focus to more strategic M&A solutions that require less financial management and more product vision. Middle market M&A expands with more technology options and big investment banks become less relevant in a shifting process that calls for more concentrated expertise, strategic vision, and an interest in delivering on the goals of business owners rather than just collecting hefty fees. M&A advisory firms are more suited to achieving the individual aspirations of owners through the crafting of strategies that are carefully tailored to their needs.

M&A is a very relationship-driven industry. The biggest investment banks often do not garner a high level of trust among executives for M&A transactions, and are subject to more potential conflicts of interest than that of smaller banks or advisory firms—which are also able to conduct M&A deals more quickly and affordably.

 

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As the industry landscape changes for big investment companies, they are being forced to adapt in different ways. Some banks are selling off dwindling operations and focusing on areas that are still profitable. Some are hurrying to launch new technology and digital products. Others are restructuring and hiring new workers in places where it costs less to operate. Overall, big investments banks must change the way they do business in order to fend off further decline.

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When you need global M&A expertise to guide your business into the future, contact us at Benchmark International. We will leave no stone unturned when it comes to crafting the right kind of strategies that work for you.

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Solar and Hydroelectric Power and M&A

As the world calls more and more for renewable energy sources to replace carbon-burning fossil fuels, the industries of solar and hydroelectric power offer important alternatives, as well as opportunities for mergers and acquisitions.

Solar power converts energy from the sun into thermal or electrical energy. It is one of the cleanest and most abundant renewable energy sources available. In recent decades, the cost of solar power has decreased substantially.

Hydroelectric power uses turbine-driven generators to convert the energy of moving water into mechanical energy. As one of the oldest methods of creating power, today it is one of the most largely used forms of clean, renewable energy. Because the use of hydropower relies on flowing bodies of water, its use varies based on geographical locations and circumstances.

As the world seeks to turn to cleaner sources of energy, major corporations are also doing so as part of a larger growth strategy. For example, oil giant Shell has a plan to become the world’s largest power company AND cut its carbon footprint in half by the year 2050. To achieve this goal, a majority of the energy capacity added to its portfolio must be derived from renewable power sources.

 

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Solar Power M&A

There are several factors that are proven to create opportunities for M&A in the solar energy market. Solar is still a relatively young industry, which opens up the opportunity for many newcomers to enter the industry and consolidate to grow in scale.

  • In Africa, there is an abundance of access to solar power, but there are obstacles to financing. By 2050, Africa is expected to grow from 1.1 billion to 2 billion people, with a total economic output of $15 trillion. This money can be targeted to infrastructure, energy and transportation, and global investors are taking note.
  • In the United States, the government makes it an attractive venture for companies to get into solar power through tax breaks, which translates to growth. In fact, in the U.S., solar power deals have already surpassed the $10 billion mark.
  • In Europe, companies view M&A as a strategy to enter the U.S. market.

Other opportunities for M&A in the solar energy sector surround installation and manufacturing. As the industry evolves, installers grow in size, brand, and geographical reach and gain market share through consolidation. Regarding manufacturers, the outsourcing of panel production and assembly can motivate solar companies to sell those capabilities as an outsourcing strategy.

The solar power industry is quite a global market. In order to successfully complete cross-border transactions in this space, companies should wisely enlist the expertise and network of a globally connected M&A advisory firm.

 

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Hydroelectric Power M&A

Hydropower may be a much older technology than other forms of renewable energy, yet there are still plenty of opportunities for the development of new facilities or expansion of existing infrastructure. Some of the positive aspects of hydroelectric power projects include their low operating costs, clean power generation, and lengthy service lives. On the downside, the regulatory approval process can be drawn out, and these projects call for significant early capital spending.

As in most industries, investment in hydropower is based on the project's risks and projection of future revenue. For developers to gain access to capital, they need to identify the revenue streams that will service debt (energy projects typically have several revenue streams), offer a return on investment, and have a plan to minimize regulatory and construction risks. It is typical for banks and other investors to only invest in new projects when there is certainty in the power purchase agreement.

The earlier investors are brought into the project, the more careful developers must be with regard to the terms offered. Investors may ask for ownership share or control that is excessive. Enlist the counsel of an experienced advisor to determine whether a proposal is fair. You may need more funding down the line, so the transaction must be flexible enough for more investors to get involved. The earlier you partner with an M&A advisor, the better you can plan the project’s future, and the more risks you can avoid in the long run.

Even the most encouraging and favorable hydroelectric projects can fall apart due to perceived risks. Any risks must be identified and addressed by developers as early as possible.Many issues can be environmental in nature. Research into the project’s impacts on local fisheries and species must be thoroughly conducted, and early communication with public officials is key.

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Any energy M&A transaction calls for a specialized level of expertise to ensure that the deal is done right. Finding a highly experienced global firm is in your best interest. If you desire to be on the sell-side of a deal, contact our M&A advisors at Benchmark International to begin the process of finding the perfect fit and solution for you, your family, and your company.

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