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2020 Retail Sector Update

The COVID-19 pandemic and the resulting government responses have had a significant impact on consumer spending, with retailers closed for months and shoppers staying home starting in the early part of 2020, with the timing of closures varying by country. Many consumers continue to stay home, even as most businesses have reopened. Online shopping has surged due to the pandemic. In the U.S. and Canada, e-commerce orders are up 146%.

Household consumption increased over the summer and is forecast to continue. Certain consumer behaviors that were newly formed during the earlier stages of the pandemic are expected to permanently influence spending habits. Retailers will need to clearly understand these behavioral shifts as they navigate the immediate future, and into the long term if they plan to succeed amid the new normal.

Digital as Key Driver

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Key Steps For Expanding Your Business Into New Markets

As globalization becomes more common in our world, many businesses are choosing to take advantage of the growth opportunities that lie in expanding into new markets. But expansion can be a significant undertaking for small and middle-market businesses, with many moving parts. As a business owner, you need to fully assess and understand the risks and rewards that expansion can present for your company. The following steps outline areas on which you should focus, and which elements of your business you should have ready in order for an effective expansion into new markets.

Impact Assessment

Before expanding your company into new markets, you must have a comprehensive understanding of what the overall impact on your business will be. Conduct market segmentation and product gap analyses to assess whether your product or service will sell in the target market and do a SWOT analysis to see how it stacks up against local competitors. You need to know if there is a need for your company and if anyone will buy what you are selling. You will also need to consider how large the market is and how long it may take to reach your target sales numbers.

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Life Sciences And Biotech M&A During Covid-19

The COVID-19 pandemic has created an urgent demand for testing, treatments and a vaccine from life sciences and biotech companies. It has also changed the deal-making landscape in this sector. Advances in genetic sequencing have led to the development of new immunotherapies and approaches to medicine that has lowered risk and boosted M&A value and volume.

Over the past five years, biotechnology M&A activity has generated hundreds of completed deals and hundreds of billions of dollars in aggregate value. Leveraged buyouts accounted for one fifth of all acquisitions completed in three of the past four years. The compound annual growth rate of the biotech market is 7.4 percent, on pace to reach $727.1 billion by 2025. There are currently upward of 100 experimental COVID-19 treatments and vaccines in development, including 11 being studied in clinical trials.

The life sciences sector is the key to a solution for COVID-19, from testing improvements to vaccine candidates. In April, Moderna Therapeutics was given $500 million from the U.S. Department of Health and Human Services to accelerate development of its mRNA vaccine. Over the past ten years, public and private sector researchers across biotech have collaborated to greatly reduce the lag time between genetic sequencing of a virus and running human trials. With academia partnering with governments to speed up development, it is expected to be positive for the long-term strength of the sector.

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Guide To A Healthy & Wealthy Retirement

You have worked so hard to build your business and when retirement is finally on the horizon, it is a very exciting time. But it can also come with many questions. These tips will help you navigate the ins and outs of retirement so that you can live your best life.

Keep Making Plans

Just because you are approaching retirement, it doesn’t mean you are retiring from life. Keep planning for your future. Consider five-year plans and goals. Think about taking college classes or acquiring new skills you have always dreamed about. Getting another degree, learning something like playing an instrument, or learning a new language can be great ways to keep your juices flowing and open up new opportunities in life.

Explore the Best Places to Retire

The world is brimming with amazing places to consider for your retirement years. Maybe you are perfectly content staying where you are. But have you even thought about the possibilities? Check out our article about some of the greatest places to retire…and be inspired.  

Have a Solid Financial Plan

This includes investment options, taxes, and more. There are many ways to invest, such as mutual funds, stocks, bonds, real estate, dividends, CDs, annuities, and exchange-traded funds. Additionally, having an exit plan can ensure that your future is protected. Prior to exiting your company, mergers and acquisitions strategies can help you grow your business and maximize its value for a sale, laying the groundwork for worry-free retirement wealth. Experienced M&A advisors can help you make the most of this. You will also need to consider how much you will need to pay in taxes after you retire. This is something you will definitely want to get right. Some estimates suggest that for each 1% error in effective tax rate, you face an 8% error in your final savings balance.

Stay Structured

Maintaining a routine can be a major game changer for keeping your sanity in retirement. You no longer need to go to the office. So what do you do? It is easy to find yourself meandering and not knowing what to do with yourself. That’s why it’s important that you stay busy and have some sort of structure to your everyday life now that you are no longer on the clock. Engaging in activities such as volunteering, gardening, and exercising can keep you healthy, happy and regimented.

 

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Maintain a Youthful Perspective

They say age is just a number. And there are actually studies that support how mental attitude can improve overall health and even reverse the effects of aging. Thinking young can actually help keep you feeling and functioning as young. It helps to stay inquisitive, continue to develop and improve yourself and expand your horizons. Falling into a rut after retiring can be detrimental to your state of mind and your physical health. It can also be very helpful to maintain social relationship with younger people to keep up with changing perspectives, get inspired, and hear about more than gripes regarding the aches, pains, and medications associated with aging.

Map Out Your Legacy

In addition to the impact you will be leaving on the world through your professional endeavors, you will want to make plans for your estate to determine what you wish to leave for your heirs. This is when a financial planner can be of great help. You will need to think about estate taxes, appropriate inheritances, and the roles of your family if they will be taking over your business.  

Consider Catch-Up Contributions

You already know that there is a limit to how much you can save in your IRAs or 401(k)s. But did you know that once you reach the age of 50 in the U.S., the IRS allows you to make additional catch up contributions that are beyond annual contribution limits? It’s a way to make it easier for savers over the age of 50 to boost their retirement savings.

Understand How to Protect Yourself from Fraud

Fraudsters are known to target people over the age of 60, especially in today’s digital society. Stay educated on what scammers are up to and know how to discern between what may be real and what may be fake regarding emails, texts, phone calls, and the physical mail. A good rule of thumb is to remember that if it sounds to good to be true it probably is. Also, unsolicited offers can be common traps. Other things you can do include not answering robocalls, not clicking on pop-up ads or email attachments, being skeptical of free offers, and not paying up front for promises.     

Think Long Term

Today’s life expectancy rates are much higher than they used to be just decades ago. You should plan your retirement with a long future ahead. This is not only good for your mental wellbeing, but also important for your financial future. Consider that your savings will need to last longer. Your healthcare costs may be higher. Search for retirement calculators online to help you get a better picture of what your needs will be. 

Get a Dog

The many benefits of having a dog to health and wellness are well documented. Dog owners have been proven to enjoy lower blood pressure and stress factors, and need fewer doctor visits than those without pets. Having a dog can also help to keep you active and engaged with other people. Plus, all that unconditional love releases beneficial hormonal chemicals such as serotonin and oxytocin that are proven to fight depression and make you feel good. 

Ready to Retire?

Contact our M&A experts at Benchmark International to start the conversation about selling your company, planning your exit strategy, and getting on the road to a prosperous retirement.

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Middle Market M&A Valuation Gaps And Expectations

Many factors can impact middle-market M&A deal making, but one of the most significant issues that can affect closing is a valuation gap between the seller and buyer. This tends to be more common during a seller’s market because business owners with successful companies are inclined to wait for the best offer, versus a buyer’s market that occurs when there are fewer buyers, which motivates sellers to jump at an offer. Unrealistic expectations about valuation multiples often stem from the comparison of a mega deal to a middle market deal—a situation under which the same multiples are typically not going to apply.

There is also often a disparity between what a seller needs to maintain their retirement lifestyle and what value can be extracted at the time of the sale. There may be differences between a buyer’s offer, what they pay, and what the seller ultimately receives, as taxes are always a factor in a transaction. Additionally, the timing of the deal and the perception of risk regarding future growth and earnings flow for the business can play a major role in the size of the valuation gap. Selling a business is a highly complex process and it comes with great emotional implications for a seller. Emotional ties coupled with overt optimism can easily cloud one’s vision when it comes to the actual value. As a business owner, you put in a great deal of work starting your company and building it into what it is today. In contrast, selling that business is completely unchartered territory for most owners. When you are looking to sell, you need to be realistic regarding the company’s current value and its growth rate, and what the buyer will be getting out of their investment. Buyers are not going to recognize the hard work you put into starting the business in the same light that you do. All that work you did in the beginning is not on their radar—they are going to be focused on their returns.    

 

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Valuation gaps also result when private equity firms and strategic buyers compete for quality investments and relatively inexpensive financing is available. This can be both good and bad for middle-market business owners. Significant buyer interest creates considerable competition for quality deals, which is great. But at the same time, if the market is hot and demand is high, unrealistic valuation expectations and skewed perspectives can result in a valuation gap.

This is why a thorough evaluation of a business is so crucial to the M&A process. A good M&A advisor will take meticulous steps to best determine an accurate current business enterprise value, while also managing the seller’s expectations of a valuation range before going to market. So, if you are a business owner, and you plan to approach buyers without professional M&A representation, you need to understand company valuation gaps, your intrinsic risks as a seller, and how to bridge these gaps. This can require a great deal of education on your part and can be very time consuming. Or you can simply enlist professional M&A advisory expertise and have the peace of mind that the fate or your business is in the best possible hands. The best advisors will work diligently on your behalf to help you attain your goals for your business and your financial future. It requires a team with proven experience, resources, and best practices to successfully navigate the many legal, accounting, due diligence, and marketing considerations involved in arriving at an accurate and realistic company valuation and getting a quality deal done.

Engage Our Expertise

Our top-notch M&A analysts at Benchmark International can help you with your company, from creating growth strategies to selling it for maximum value. Set up a time to talk with us and we can determine what solutions are best for you and your business.

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Benchmark International Successfully Facilitated the Transaction Between Ultimate Medical Services, Inc. and UMS Holdings, LLC of WolfGang Capital

Benchmark International is pleased to announce the cross-border acquisition of Ultimate Medical Services, Inc. by UMS Holdings, LLC of the Wolfgang Capital group.

Ultimate Medical Services, Inc. is a provider of diagnostic medical imaging equipment and maintenance services for the South, Central United States market. Medical imaging equipment includes digital radiography, computerized radiography, X-rays, Ultrasound, MRI and CT. The company is a full-line imaging company that provides services for preventative imaging products as well as routine studies and emergency procedures.

Wolfgang Capital LLP purchases, develops, and manages businesses with revenues of £1 to £20 million. UK-based Wolfgang Capital is a solution-focused business committed to generating growth through acquisition.

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Kevin Fix, former owner and CEO of Ultimate Medical Services, Inc. said “Benchmark International stood with us through every step of the transaction process and we were impressed by their desire to search the globe to find a buyer. Their efforts ultimately paid off and they facilitated the close of our company with a buyer based in the United Kingdom. The Benchmark team placed a lot of emphasis on being able to help get a deal done in any condition, even despite the global Covid-19 quarantines and the subsequent economic crisis. The team’s persistence proved especially valuable in overcoming numerous obstacles ranging from having multiple potential buyers initially fall through to eventually juggling a complicated cross-border transaction to reach a successful close. Maxim Belov was particularly hands-on and helpful through every step of the sales process.”

Regarding the deal completion, Anthony Hernandez, Benchmark International Transaction Director, stated “the Benchmark Team is delighted to announce not just another successful closing, but to also announce the first transaction we have had the pleasure of facilitating in Louisiana, with several more surely following on its coattails. Senior Analyst Maxim Belov did an excellent job liaising between the parties to facilitate another cross-border transaction for the Benchmark International team.”

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2020 Apparel, Beauty & Home Furnishings Sector Update

The COVID-19 pandemic has brought about disruptions for businesses operating in the fashion, beauty and home furnishing sectors. This is because of complicated global supply chains and reliance on discretionary spending by consumers amid record unemployment levels. Keeping these types of businesses adaptive is crucial to their recovery and long-term success.

Supply Chain Disruption

“Nearshoring” is a term that describes the relocation of the production of goods so that they are moved geographically closer to consumer-dense regions such as the U.S. and Europe. This has been an attractive option for fashion and home furnishings companies, yet the cost of displacing established supply chains and vendor relationships have prevented them from making the move. But the landscape could be changing due to COVID-19, geopolitical turmoil, and antiquated supply chain practices.

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Benchmark International Successfully Facilitated the Transaction Between Hagan Heating & Air Conditioning, LLC and NearU HVAC Services

Benchmark International has successfully facilitated the acquisition of Hagan Heating & Air Conditioning, LLC (Hagan) by an affiliate of NearU HVAC Services. Hagan is a leading recurring maintenance, installation, repair, and service company specializing in residential and commercial heating, cooling, air quality control, and dehumidifying services. Hagan was founded by Paul Hagan and has been in operation for over 30 years. In addition to traditional HVAC systems, Hagan also services boilers, gas furnaces, and heat pumps.

The decision to sell Hagan was made after careful consideration. According to Mr. Hagan, “The thought of selling our 33-year-old HVAC business to actually listing it was overwhelming. After much research it was certain that we would need help. We narrowed down brokers and chose Benchmark International. The personal and professional attention we received exceeded our expectations. All members of the team provided the knowledge and expertise needed to get us from listing to closing with confidence, despite this occurring during the COVID pandemic, March-September 2020.”

Regarding their choice of suiters, Mr. Hagan added, “At Hagan, we have worked hard and honestly to always do right by our customers and employees. We chose to transition our brand to NearU because of our confidence in NearU’s vision for the HVAC industry.”

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NearU is a technician and customer-centric provider of residential and light commercial HVAC services. Hagan marks the fourth HVAC business in the NearU portfolio. Ashish Achlerkar, NearU’s Founder, Chairman and CEO stated, “Our portfolio in upstate South Carolina now boasts two strong and strategically-combined local brands: Carolina Heating Services in Greenville and Hagan Heating and Air in Anderson. We welcome the customers and employees of Hagan to the rapidly growing NearU family.”

Regarding the transaction, Senior Associate Nick Woodyard at Benchmark International stated, “We are excited to see the Hagan team begin this next chapter in the company’s legacy. It was an absolute pleasure working with Paul and Les Hagan and we’re excited to have facilitated a successful transaction.”

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2020 Business And Professional Services Sector Update

Business and professional services (BPS) firms are facing increased uncertainty amid the COVID-19 global pandemic. This climate is resulting in less investment and more reliance on revolving credit to maintain access to cash for operating expenses, and keeping priorities on payroll and workforce decisions. Companies with strong liquidity will shift to growth strategies and digital transformation. Also, with a greater need for mobility in a more remote-working world, there is a greater emphasis on cybersecurity, especially for government contractors and law firms.

Government Contracting: A Hot Market for Acquisitions

Government contracting is a significant moneymaker, especially in the United States. These firms rely on the needs of the government and the availability of financial resources for public investments. Government spending is often used to stimulate the economy during a slump. Through the first two quarters of 2020, government spending held steady, with health spending peaking along with the COVID-19 response, with billions going to national interest agencies and programs related to the pandemic.

The middle market in government contracting is comprised of several small, technically specialized service providers that offer high growth opportunities for larger companies that are seeking more capabilities and specific contract access. The pandemic slowed deal flow in the first half of 2020, but deals still happened with transactions expected to continue in the second half of the year. Private equity firms are seeking stable streams of cash flow and government contractors are relatively insulated from recession, making them a solid target for strategic investment and bolt-on acquisitions. M&A activity in the government contracting space is forecast to continue into 2021 as the sector (with the exception of aerospace) has been less impacted by the coronavirus and there is a need for more consolidation in the market.

 

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Cybersecurity is paramount for government contractors for obvious national security reasons. In July of 2020, the U.S. Department of Defense issued the Cybersecurity Maturity Model Certification (CMMC) to build upon cybersecurity best practices from established industry standards with the goal of reducing cyber-risk among its contractors. Other departments of the government will likely do the same, prompting contractors to prepare for it in advance.

The big commercial tech companies typically draw the top tech and cybersecurity talent, making it challenging for government and its contractors to attract talent and offer competitive salaries. During times of increased unemployment due to a pandemic, many skilled workers are seeking out less risky positions. Government contractors should jump on this opportunity to attract young, tech savvy talent.

Law Firms: Challenges and Opportunities

Due to the pandemic, law firms have had to deal with furloughs, layoffs, pay cuts and reducing expenses while finding new ways to boost revenues while working remotely. Liquidity equals agility in uncertain times, so firms should seek to expand their credit lines while making the most of government assistance options.

Human capital remains the single biggest asset for law firms. Working remotely has brought about new challenges for attorneys and staff as they juggle the demands of working, parenting and caregiving. Investing in programs, technology, and other ways to support staff is more important than ever. Amid cutbacks and a lack of contact with colleagues, talent needs to know they are still valued and connected to the firm’s success. Firms also need to take this time to assess what lessons have been learned from remote working regarding obstacles, delays and infrastructure needs and how they can address needs, especially in regard to digital support.

Security and privacy are major issues for law firms operating remotely as they need their files and records to be accessible from outside the office. A digital security strategy is key even once the pandemic has passed, as no one knows for sure what the new normal will look like. Once security is implemented and established, focus can shift to maintaining client relationships and creating revenue growth into the future. Investment in mentoring programs and empowerment of staff can help grow the business and identify new opportunities to support the firm once the pandemic is over and the economy is ready to bounce back.

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If you are thinking about a merger or acquisition for your business, please reach out to our M&A dream team at Benchmark International to discuss how we can help you accomplish great things.

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The Impact Of 5G On M&A

Next-generation 5G networks are widely viewed as one of the most impactful and anticipated technological developments in current times. With super-high speeds of 100 times faster than that of 4G networks, 5G is expected to bring broadband connectivity to 10 times the wireless devices and usher society into a digital industrial revolution that will open up new possibilities, innovative applications, reduced energy consumption, and economic growth.

The Impact of the 5G Value Chain on the Global Economy for 2020-2035

  • Up to $13.2 trillion of goods and services through 2035
  • $2.1 trillion in GDP growth
  • 22.3 million new jobs
    *According to a study commissioned by Qualcomm Technologies, Inc.

When Will 5G Finally Be Available?

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Should You Consider Cross-border M&A?

The world economy’s appetite for cross-border mergers and acquisitions continues to grow in popularity amid globalization and the emergence of new technologies. These types of global deals offer their fair share of risks and rewards. So how do you know if it’s the right strategy for your company? While there is no magical equation to answer that question, you can take the time to understand what you will be faced with in a cross-border transaction, how it may make sense for your particular business within your sector, and what precautions you will need to take.

Motivations for Cross-Border M&A

There are several different reasons that business leaders turn to cross-border deals to address their needs and benefit their companies. These objectives include:

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Benchmark International Successfully Facilitated the Transaction Between HireVergence LLC and Job.com

Benchmark International has successfully facilitated the transaction between HireVergence LLC and Job.com.

HireVergence, based in Tampa, Florida, is a highly specialized staffing firm providing experienced cybersecurity and IT resources to clients of all sizes nationwide. The founders of HireVergence, Mark Tuszynski, Dave Gilden, and Julio Sanchez, bring more than 50 years of combined experience in information technology.

Job.com is a digital recruitment company with a unique perspective: delivering technology and capabilities that shake up the market by bringing together a data-driven approach based in AI and machine learning with high-level human capital delivered solutions, designed to efficiently attract and retain the right talent and provide consumer-level user experiences throughout the hiring process.

According to the company’s announcement, “We're delighted with the acquisition of HireVergence, their fantastic team, and to work with their loyal customer base. This is a major step towards Job.com's vision of a digitized staffing industry, delivering a hiring experience to the jobseeker that moves away from transactions and focuses on career journeys," says Arran Stewart, co-founder, and Chief Visionary Officer.

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"We are excited to be joining forces with Job.com. Our shared vision of leveraging technology to reshape the recruitment industry will provide immense value for our customers and exciting opportunities for our team. The three of us are looking forward to continuing on the journey we started nine years ago with Job.com," says HireVergence founders Mark, Dave, and Julio.

Regarding the transaction process, Dave Gilden commented, “As founders, we were very pleased with the pipeline of qualified buyers that Benchmark was able to produce. We had multiple options to choose from, each with a unique upside to consider. Ultimately, it is highly unlikely we would have found any of these opportunities on our own.”

Senior Transaction Associate Sunny Yang Garten at Benchmark International commented, “It was a pleasure to represent HireVergence in this strategic transaction. Dave, Mark, and Julio are engaging and always responsive to diligence requests. We’re excited to see that their legacy will be preserved and enhanced through this transaction with Job.com. On behalf of Benchmark International, we wish both companies continued success.”

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2020 Industrials Sector Update

The industrials sector has had to adapt to significant disruption due to the global COVID-19 pandemic, and the challenges associated with it. While 2020 started on a very positive note with rapid growth for the global manufacturing sector, manufacturing output plummeted throughout the beginning of the year and into May due to shutdowns around the world. Output, new orders, exports, and purchases all fell to levels not seen since the 2008 recession. Many large manufacturing countries were under lockdowns into April, but restrictions were eased in May, which helped deter the overall rate of decline. In the wake of the crisis, many companies have found ways to evolve and use digital solutions to transform their business models, discovering changes that will continue to be beneficial in a post-COVID world. This adaptability is crucial to the survival and future relevance of these businesses.

Industry Highlights

  • Automation and connective worker technologies have become even more important to boosting productivity.
  • Migration to the cloud allows companies to be more flexible in dealing with disruptions.
  • The auto manufacturing industry is growing more resilient due to greater supply chain visibility.
  • For oil and gas companies, advanced digital technologies are a vital investment.

The Fourth Industrial Revolution

Industrial companies that made prior investments in digital technologies and IT infrastructure were able to operate efficiently during the earliest phases of the pandemic. The Fourth Industrial Revolution, also known as Industry 4.0, has enabled manufacturers to evolve their traditional supply chains and processes into highly interconnected systems. Leading organizations have been investing heavily in developed digital platforms specific to the industrials sector, pivoting business models towards being more software-centric. Additionally, smart manufacturing technologies are now transforming traditional manufacturing processes and paving the way into the future. More and more companies will be exploring digital technologies to enhance their flexibility and operate more innovatively. Robotics and 3D printing are among the most popular operational solutions that are expected to see continued heavy investment.

While remote work has become a relatively easy and normal option for many employees across different sectors, the industrial manufacturing sector is not one of them simply for logistics reasons. For example, machines need operators to keep them running. However, it has been demonstrated that technology can help limit the number of people needed to maintain operations. 

 

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Connected worker technologies are helping to streamline and hasten solutions. Typically, machine repairs require operators to contact service technicians, sometimes located in different facilities or at the original equipment manufacturer. Also, training new or existing workers has typically been face to face. Augmented reality is helping to eliminate in-person interaction for the purposed of repair, service and training and empowering workers to be more independent through digital on-demand access to manuals, instructions, and other resources.

While manufacturing companies tend to be more hesitant about migrating operations to the cloud, these organizations are realizing that cloud technologies enables them to move inventory, work smarter, customize products, and shift resources in much more flexible manner. The cloud is also an effective asset-performance tool that gives supervisors a remote window into facilities, production lines, and individuals.

Robotics and automation have significantly increased productivity for manufacturing processes. By replacing manual processes with automated alternatives, it helps to mitigate workforce availability challenges and reduces the impact of low-cost labor decisions.

Additive manufacturing and 3D printing continues to evolve and has shifted from the production of prototype applications to finished products. These manufacturing technologies are gaining more traction and offer efficient value chain solutions that enable on-demand production, less working capital, reduced supply chain complexity, fewer tools or parts needed, and less frequent human intervention.

The Auto Industry

Technology and connectivity is now the third most cited investment priority for the

automotive manufacturing industry. The future lies in edge computing, monitoring software, and the Industrial Internet of Things. Companies are able to collect and analyze data on site and in real time, connect applications to essential equipment, and conduct advanced monitoring and remote controls.

Another result of the pandemic for the auto industry is a need for more transparency in global supply chains. Thanks to AI, there is a shift from existing models in equipping automakers so that suppliers can use analytics to respond to changes in real time. For middle-market companies that have been known to underinvest in tech, this shift is especially important. Investment in IT infrastructure will help establish a more nimble and scalable environment, and will create more valuable data. The sequentially distributed databases of Blockchain technology are also changing supply chain management and adoption is expected to increase greatly into the future.

The Oil and Gas Sector

Digital technologies are also being adopted by oil and gas companies in order to bolster cost and operational efficiencies, improve safety, and reduce environmental impacts.

Robotics, AI, cloud solutions and Blockchain are all being used more and more to advance the industry. According to Bloomberg, oil companies are expected to spend $1.3 billion on advanced analytics alone in 2021. The big oil and field services companies with more experience aggressively adopting innovation and that are in favorable cash positions are more likely to continue investing in new tech. Human intervention is being scaled back. Maintenance procedures are being automated. Drones are being used to monitor real-time conditions and detect leaks. AI sensors are monitoring conditions such as temperature and vibration. At the same time, small and mid-size companies that were less mature coming into the pandemic are likely to focus spending on technology that helps them keep their businesses running.

Contact Us

No matter what sector your business operates within, Benchmark International is here to help. Contact us to discuss how we can help you grow or sell your business for maximum value.

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Benchmark International Successfully Facilitated the Transaction Between Hall Building Products, Inc. and Reddi Industries, Inc.

Benchmark International is pleased to announce the acquisition between Hall Building Products, Inc. and Reddi Industries, Inc.

Hall Building Products provides an array of building supplies to commercial and residential works, primarily servicing customers in Oklahoma and the northern Texas region.

Reddi Industries is a Wichita, Kansas based home and commercial services company that added Hall Building Products to its growing business portfolio and geographical reach.

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Zack Stevens, co-owner of Reddi Industries, Inc. stated “Oliver with Benchmark recently helped us with a multi-state business acquisition. Throughout the entire process, Oliver did a great job keeping the deal moving and communicating with us on updates. There are obstacles in every acquisition we have completed and this one was no exception. Oliver helped us work through those to the finish line. I’d highly recommend Oliver and Benchmark.”

Benchmark International Transaction Director Anthony Hernandez noted, “The Benchmark International team is delighted to have facilitated the sale of Hall Building Products, Inc. to Reddi Industries, Inc. Reddi Industries, a family-owned and operated professional home and commercial services company, proved to be the perfect buyer for Hall Building Products, Inc. The Benchmark International team did an excellent job bringing Reddi Industries to the table to execute a swift transaction with the seller.”

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Benchmark International Successfully Facilitated the Transaction Between Sportfit Support Services Limited and Tristone Healthcare Ltd

Benchmark International is pleased to announce that it has completed a transaction between Southampton-based care providers Sportfit Support Services (Sportfit) and Manchester-based buy-and-build company, Tristone Healthcare.

Established in 2010 and incorporated in 2012, Sportfit is a specialist emergency, domiciliary and short break active care provider offering high-end support to 16-19 years olds with developmental delays, backgrounds in abuse and those with family relationship breakdowns. Sportfit offers bespoke plans for service users, providing affordable and active care. With 120 employees, Sportfit supports 502 young people.

Tristone Healthcare, owned by Tristone Capital, is a privately owned buy-and-build company that invests in profitable businesses with enterprise values of up to £20 million, have a good market share and prospects for growth, and are led by managers with both strong commercial and operational judgement.

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The acquisition will allow the combined team to support more vulnerable young people and deliver outstanding services to local authorities, said Yannis Loucopoulos, Tristone founder and CEO. The acquisition increases the number of vulnerable young people currently supported by Tristone to 98 with capacity to support 116.

Following the transaction, Managing Director of Sportfit, Ashley Vickers, will continue to manage the business and retains a minority shareholding.

Commenting on the working with Benchmark International, Mr Vickers said:

“Benchmark were outstanding throughout the sale of my business. The process took time but, Benchmark, led by the great efforts of Paul Wilson [and] supported by excellent office staff, Oliver Taylor in particular, meant the deal was completed. My best interests were at the heart of every negotiation throughout, and the intricacies of formulating and completing the deal deserve the highest praise. To say I was impressed with Paul’s efforts, and those of Benchmark, would be a huge understatement. Indebted would be a better description.”

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Benchmark International Has Successfully Facilitated the Transaction Between BTech Manufacturing Inc. and a Private Investor

Benchmark International has successfully facilitated the transaction between BTech Manufacturing Inc. and a private investor in the Houston, Texas market.

BTech Manufacturing Inc. is a component manufacturer and distributor of machined products. The company provides necessary components to the oil and gas industry, brazing stations, and other machined parts to air conditioning manufacturers and repair services. The company serves a wide array of industries such as HVAC, heavy industrial and manufacturing, and oil and gas.

BTech Manufacturing Inc. was purchased by a private investor looking to own and operate the business with the hopes of taking Mr. Bui’s foundations to the next level.

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Mr. Bui, President of BTech Manufacturing Inc. said regarding the recent transaction, “Benchmark International sourced a buyer that was motivated to get something done and pointed every party involved in the right direction. The team at Benchmark International understood my business and knew exactly what market segments to target. If I would do this again, I would without a doubt choose Benchmark as my partner in the sale process.”

Benchmark International’s Transaction Director, Luis Vinals stated, “BTech Manufacturing is a great company, and Mr. Bui’s story is one of resilience and is a testament to his entrepreneurial tenacity.  We are excited to have been able to facilitate a deal that will give Mr. Bui the flexibility to pursue his interests while maintaining his legacy.  The fact that we were able to quite literally close the chapter of one entrepreneur’s story and facilitate the opening chapter for another entrepreneur is proof that Benchmark International can work on all levels of the lower and lower-middle markets.  We wish Mr. Bui and the new ownership of BTech Manufacturing Inc. much success in the future.”

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2020 Real Estate Sector Update

The real estate industry, both commercial and residential, is undergoing transformation due to the effects of the COVID-19 pandemic. People are working from home, traveling less, and some are migrating to smaller cities. Digitalization is becoming more prevalent, as owners, developers and managers of properties are seeking out virtual and touchless solutions to ensure safety and boost efficiency in a competitive market. Middle-market companies that keep up with the demand for innovation are poised to thrive under these new-normal conditions. 

Real Estate Trends Expected to Continue

  • Office spaces are being reconfigured to offer more space for each worker.
  • Remote work is facilitating home purchases farther away from large cities that are home to corporate headquarters.
  • Virtual touring experiences are becoming standard for home sales.
  • Hotels are adapting to new measures to ensure guest safety.
  • Retail properties are being used for other commercial uses.
  • Leasing arrangements are becoming more creative to improve liquidity and cash flow.
  • The inability to have in-person property experiences are hampering due diligence efforts.
  • The construction sector will continue to employ virtual tools such as 3-D modeling and site management platforms.

 

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Remote Working and the New Office

As millions of office workers have been working remotely to help avoid spreading the COVID-19 virus, employers were somewhat surprised to see that workers were more productive while working from home. Analyses show that average workdays increased in hours and big tech companies announced that remote working would continue into the long-term future. A result of this is that companies are:

  • Looking to reduce the cost of office space.
  • Providing more space per worker for any necessary in-person collaboration.
  • Using video conferencing setups in small team rooms to bridge home and office work.
  • Implementing thermal scanners, improved ventilation, UV light for cleaning and other safety measures.

Property owners and managers of office spaces have been able to continue to collect rent payments during the pandemic. However, as unemployment rises and the economy remains uncertain, it could impact the financial markets, making property and mortgage payments more difficult. Additionally, pension fund managers for large unions often invest in office markets due to their stable rents and cash flows, but if tenants cannot pay rent, pension payments may be cut.

Residential Real Estate

Residential home buying is also changing due to the coronavirus. Prior to the pandemic, Millennials were already willing to sacrifice job opportunities to buy homes in secondary cities in search of affordable housing. A study by Redfin showed that more than 50 percent of workers in major tech hub cities would move elsewhere if their company offered a remote work option, with the desire to live someplace less expensive. New tech advancements in a more remote-work-driven world are enabling these workers to pursue both dreams. Major tech companies are recognizing the cost burden that comes with maintaining sweeping campuses in major metro areas and are leading the way in the trend to shift to remote working as more professional services companies follow suit.

How homes are being purchased is also changing. Online home shopping by Millennials was already on the rise before the pandemic, causing realtors to adapt their selling processes. Virtual reality tours and 3D floor plans are becoming standard practice. Appraisers are using drones for exterior photography. Paperwork is reduced and replaced by electronic filing and signing.

Retail Real Estate

Retail property owners have many tenants that have been forced to close due to COVID-19 restrictions and many of these tenants are refusing or unable to pay rent while closed, forcing landlords to devise workarounds and, in turn, struggle to pay their own bills. Retailers were already struggling pre-pandemic due to increasing e-commerce popularity. Now landlords are providing rent abatement periods, rent waivers, flexible payments, and interest-free repayment in order to aid in their tenants' survival.

Hospitality Real Estate

The pandemic has limited non-essential travel, as business travelers are working from home and many leisure travelers are choosing to stay home for safety reasons. The hospitality sector has taken a massive hit under these circumstances amid changing restrictions and stay-at-home orders. As economic loss negatively impacts the hospitality industry, operational priorities are shifting from personal guest experiences to the safety of guests. Economy lodging is being less affected than larger, upscale hotels because essential construction workers are still traveling to job sites in smaller markets while large conferences are cancelled and professional group business travel is being limited. Investments in new technologies by hotel operators are also crucial to the hospitality real estate industry as extensive safety measures are needed. Typical in-person processes are being replaced by digital options. Common areas are being reassessed to offer social distancing. New cleaning and ventilation measures are being implemented. These changes are expected to aid in the economic recovery in this sector.

Construction

A new era of technology is playing a major role in the construction industry. Enhanced safety protocols are being implemented in existing commercial buildings. Construction companies are embracing new technologies in the development and management of new projects. Prefabrication and modular buildings, as well as virtual construction methods, are seeing accelerated growth amid the new circumstances due to the pandemic. A recent survey showed that construction executives foresee double-digit

increases in single-trade and multi-trade prefabrication assemblies, as well as permanent modular construction, over the next few years. These construction techniques offer better project schedule performance, lower construction costs, and improved construction quality.

Considering M&A?

No matter what sector your business operates within, our M&A experts at Benchmark International are eager to discuss your future with you, whether it’s selling your business, growing your company, or devising your exit or succession plan.

 

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2020 Technology, Media And Telecom Sector Update

As the COVID-19 pandemic continues to impact everyday life, the technology, media and telecom sectors are playing critical roles in keeping people connected, working, and entertained. As more people work remotely and home school, the services provided by tech and telecom companies remain in peak demand by families and businesses.

  • Acquisitions are driving growth in the tech sector, and there is more investment in innovation and R&D.
  • Collaborative tech is expected to see sustained growth.
  • As tech companies embrace working-from-home, talent is being spread out more geographically.
  • Telecommunications companies are being relied upon for connectivity more than ever during the pandemic, and the focus on 5G-network implementation is a major priority.
  • Broadcast TV faces challenges amid declines in advertising and fewer live sports, but ad revenue is expected to increase as many major sports are returning to play. Digital streaming and retransmission fees could also offer new opportunities.
  • As video gaming and e-sports have undergone dramatic growth spurts during the pandemic, acquisition activity is expected to increase.
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10 Things To Do During This Slowdown If You Plan To Sell In The Next Three Years

The explosion of the tech bubble, popping of the telecom bubble, 9/11, the financial crisis, now this. One of the benefits of working on mergers and acquisitions through unfortunate times is that you gain a good perspective on what lies ahead after the crisis passes. More specifically, you learn how acquirers will react and this in turn teaches you how to minimize the damage during the crisis. Every crisis is different but with four or five now under the belts of our senior staff, Benchmark International has been able to identify the acquirer behaviors almost certain to appear after this – and the next, and every other – dip in the inevitable rise of the middle markets.

To be clear, the dip here is not one of buyer interest or even multiples being offered to this point. As we near the fourth quarter, we continue to close deals, sign letters of intent, and bring clients to market. Please see our earlier post What is Covid-19 Doing To The M&A Markets Now?which continues to accurately describe the conditions we are seeing. What we mean by “dip” is the likely drop in your company’s revenue and all the other financial metrics that influences - and to some degree controls.

It is no secret that acquirers’ primary tool for determining their interest in, and their valuation of, a business is its financial performance. Businesses with growing revenue, healthy margins, and consistent performance sell for the highest multiples.

The situation we now face likely threatens all three of these characteristics and if your business has otherwise had a stellar historical performance concerning these three metrics, you may be extremely concerned that its performance during this period of the global slowing will forever mark its luster and lower its sale price.

While it is true that recapturing lost growth (i.e., growth that is not occurring at the moment) is hard to do, this is distinct from the real issues here – preserving the high multiple your business deserves. Fortunately, our experience indicates that your deserved multiple is salvageable – if you know how to do it. Yes, getting those record-high multiples for businesses at the end of the company sale process will be more complicated for the next few years, just as it was in 2009- 2012, but with the right preparation now and process later, you should have no reason to believe your multiple will be subpar in the future just because of the current financial setbacks.

Here are some key things to do and remember:

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2020 Healthcare Sector Update

As we reach the middle of Q3, a look back at the past several months in the healthcare sector indicates certain key trends for the industry and how it is expected to undergo transformation into the future.

Continued Innovation

Even during a pandemic, innovation and development continues. Pharmaceutical, biotech, healthcare IT and medical device companies are persevering with new and highly advanced mechanisms that will impact outcomes and patient experiences. From specialty drugs to artificial intelligence applications and from 3D printing to virtual reality, the healthcare and life sciences sector is expected to remain an attractive investment area into the future.

Under the demand for COVID-19 testing, contact tracing, and the race to find a vaccine, governments are shifting more of their budgets to healthcare services. Also, in vitro diagnostics testing (IVD) will continue to increase as major players such as CVS and Walgreens build it into their location infrastructures.

Healthcare IT companies have lofty aspirations for enterprise-grade artificial intelligence platforms that can predict pandemics, forecast patient volumes, authenticate reimbursement, and enhance drug management and self-care. Big data in healthcare also continues to draw interest and grow at a high CAGR.

Elective Procedures

Social distancing and COVID-19 has resulted in the deferral of elective and non-urgent medical procedures. According to a study by JP Morgan:

  • 13% of respondents will be postponing elective procedures until there is a vaccine available.
  • 15% will be waiting until a treatment is developed.
  • 40% said they plan to wait until within a few months of the crisis subsiding.

 

Ready to explore your exit and growth options?

 

Telehealth

The use of telehealth services continues to grow in popularity as patients prefer to avoid in-person visits due to pandemic concerns. Prior to the pandemic, telehealth saw slow growth due to a lack of state and federal reimbursement, physicians’ resistance to adopting the new technology, and patient unfamiliarity with virtual visits. COVID-19 and changes to reimbursement have resulted in a massive uptick in telehealth visits over the past several months, growing at a rate of 7.9 percent. Telehealth is also being used more frequently for virtual urgent care and ER visits, as well as for mental health.

Healthcare Jobs

The healthcare labor market has been impacted by the current recession and other factors. 1.4 million healthcare jobs were lost as of April but 380,000 jobs were added back in May. Hospitals lost an additional 26,000 jobs. Many clinicians not treating COVID-19 as well as administrative staff are working remotely for the first time in an industry that has typically resisted virtual work. A certain level of virtual work is expected to remain in place into the future.

M&A Deals

Because of the global pandemic, many private equity firmshave a heightened focus on their own portfolio businesses. However, the majority are still open to looking at quality opportunities; in addition, strategic buyers such as health systems and hospitals are considering M&A plans in the medium term. Overall, deal volumes are expected to increase between now and H1 of 2021.

Ready to Make a Move?

The M&A experts at Benchmark International are eager to start the conversation about your future, whether it is growing your company, selling your company, maximizing its value, or planning your exit strategy. We are committed to getting you results that fulfill your ambitions and exceed your expectations.

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Overview Of Steps In The M&A Process

The processes behind mergers and acquisitions can be quite complicated. Each deal is unique and has its own level of intricacies. However, all M&A transactions tend to follow a basic framework of steps. Most M&A advisory firms follow this basic framework, but bring their own methodologies to the table. This outline will give you a rudimentary view of the process.  

What Are The Steps In The M&A Process?

1. Target List Creation

In order to engage in the selling or buying of a business, you must have potential buyers or sellers. Suitable M&A targets can include competitors, vendors, or customers. This is also a good time to consider how much geographical factors should be taken into account.

2. Contact Initiated

Once the target list is established, contact is made and discussions begin to gauge the interest level of the buyer or seller.

3. Sending of a Teaser

A teaser is a document that sellers send to buyers. It supplies just enough information to entice the buyer into wanting to know more. It showcases topline info such as the company’s product or services, its unique selling points, industry overview, ownership structure, potential areas of growth, and high-level financials.

4. Confidentiality Agreement Signing

This ensures that all sides in the deal agree to keep all discussions and materials confidential.

 

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5. Sending of the Confidential Information Memorandum (CIM)

The CIM serves is drafted by the sell-side of a transaction and serves as a type of handbook. It provides all the information a buyer needs to ascertain whether they want to make an offer, such as company management, operations details, financial data, future projections, customer diversification, market opportunities, competition, and other relevant specifics.

6. Submissions of Indication of Interest (IOI)

Upon their review of the CIM, the buyer then expresses interest in moving forward by submitting a non-binding written offer. An IOI typically provides a valuation range for the sale price, transaction structure, timeframe, and other important details. It limits the buyer’s time and financial resources devoted to the deal if the proposal falls short of expectations and other bids. For the seller, an IOI helps them to measure the market appetite for the company, compare different buyers’ views on value, and perform preliminary due diligence on the buyer’s ability to complete the transaction.

7. Management Meetings

After the initial communications that establish interest on both sides, it is time for the buyer and seller to meet and take the conversation further. Both sides take this time to learn more about each other to get a better idea of compatibility and whether it is a good fit.

8. The Letter of Intent (LOI)

The buyer submits a detailed document with a price and deal structure that details items such as closing dates and conditions, an exclusivity period, any break-up fees, management compensation, escrow, and so on. These are usually non-binding, but they can be denoted as binding.

9. Formal Due Diligence Process

This important phase is when all documentation and records are compiled by the seller and provided to the buyer. The findings help the buyer assess their risk and improve the decision-making process. Due diligence examines an extensive level of information on the company, including all financials, intellectual property, customer base, management, talent, synergy, outstanding litigation, technology, infrastructure, stockholder issues, production, inventory, supply chains, real estate, marketing plans, and anything else that is relevant to the business.

10. The Purchase Agreement

A Purchase Agreement supersedes any previous IOI and LOI. This binding document lays out the final terms of the deal including the purchase price, a detailed list of definitions used in the agreement, timeframes for the delivery of final statements, executive provisions, representations, warranties, schedules, indemnifications, closing conditions, and break-up fees.

11. Pre-Closing Period

Sometimes there is a pre-closing period during which the seller and buyer prepare all deliverables and fulfill closing conditions such as government approvals and third-party consents. The duration of this period can vary depending on the closing conditions.

12. Closing

Once all of the closing conditions are met, the transaction is ready to close. Funds are exchanged and the buyer assumes possession of the business.

13. Post-Closing Period

After the deal closes, there are usually post-closing financial adjustments and integration topics to be addressed between the seller and buyer.

Ready to Make a Deal?

Our M&A experts at Benchmark International would love to hear from you regarding your company and its potential. Our world-renowned team offers the unparalleled transaction experience, remarkable resources, and global connections that you need in your corner to in order to get the most value possible out of your M&A deal. Learn more about our unique Benchmark Fingerprint Process here.

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Benchmark International Successfully Facilitated the Transaction Between DevelopScripts LLC and Awection Inc

Benchmark International has successfully facilitated the transaction between DevelopScripts LLC and Awection Inc, a SaaS company in the Dallas, Texas market. Awection Inc is the most recent business endeavor undertaken by entrepreneur, Alex Guiva.

DevelopScripts is a Texas-based company that offers a white-label, subscription-based digital platform allowing users to organize, manage, and conduct auctions through a centralized medium facilitating business transactions as well as fundraising efforts. The company also provides peer-to-peer marketplaces for e-commerce platforms. The Company serves customers in the automotive, equipment, pet, liquidation services, collectibles, event planning, and other industries. DevelopScripts’ founder, Rajesh Rajaram, has built a unique platform in the auction software category and successfully expanded his customer base and offerings year after year.

Mr. Rajaram commented regarding the deal, “Benchmark International really pulled their weight in getting this deal done.  I was very impressed by every team member’s tenacity to get this deal across the finish line.  Most importantly, the Benchmark team always took the time to listen to my concerns and feedback and were open to working on this deal with my best interests in mind.  Benchmark International ultimately found the perfect partner to escalate the Company’s growth and take DevelopScripts to the next level.”

Ready to explore your exit and growth options?

Alex Guiva, President of Awection Inc, has been growing businesses for over 20 years and is experienced in a wide array of industries. He said in relation to the deal, “Having closed over 30 transactions, I can attest that it is rare to find an intermediary as knowledgeable as Benchmark International. They truly focused on the important aspects of deal making and consistently made an effort to get to the finish line without creating disruptions for the organization during the process.”

Benchmark International’s Transaction Director Luis Vinals stated, “Working with a client like Rajesh is like working with the American Dream. Rajesh has such a rich and interesting story, which was a joy to learn about. Throughout the entire process, Rajesh was communicative and collaborative. With the Benchmark International team by his side, Rajesh was able to procure the deal he desired that would allow him to meet his personal and business objectives. Open communication allowed us to have strategic conversations that ultimately led to our team finding the ideal cultural fit for our client.”

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What’s Unique About Selling a Government Contracting Business

Every business is unique and grammar experts will tell you that you cannot place a modifier before the word “unique”. That said, selling government contracting business is a very unique art. Here are some insights from Benchmark International’s extensive experience with these engagements. 

What makes selling a government contracting business unique?

Most importantly, there are far fewer financial buyers (e.g., private equity funds, family offices). This means the potential buyer population is both smaller and skewed toward strategic buyers, such as competitors, suppliers, and businesses in adjacent sectors. Therefore, the buyer outreach effort must be more robust, the marketing strategy, as with all writing, must focus on the proper intended audience, and each potential buyer that reaches out must be treated with extra care.

What keeps other buyers away from government contracting businesses?

The main issue is customer concentration. Many companies rely on one specific government or one specific agency for the vast majority of their revenue, for example, the Department of Defense or their state’s Department of Transportation. Knowing how to address this issue is not only key to attracting buyers on the edge of the process but also to stoking interest in all potential buyers in the process. “Customer concentration” is routinely cited in buyer surveys as the number one concern in the early stages of target selection. Thus, failing to address this issue head-on and intelligently can greatly reduce the buyer pool.

Do these businesses trade at a lower multiple than others?

No, there is no “government contractor discount.” These entities are viewed as “counter-cyclical” so when the economy is falling or expected to fall, they can demand a premium over their counterparts that only work with private sector clients. 

The business itself may have characteristics – such as customer concentration – that can impact value, but the same is true of any business with any client base. And, to the contrary, the payment history of governments is far better than that of private sector companies and the reliability of these collections gives government contractors a boost on their multiples. This reliability premium moves inversely with the number of bankruptcy filings nationwide.

 

Ready to explore your exit and growth options?

 

What type of government contractors get the highest multiples?

To a degree, the same factors that affect any business matter here – defendable intellectual property, long-term customer relationships, moats around the business, the strength of the management team that will stay on after the deal, the stickiness of the product or service offered, reputation, etc.

Additionally, the actual customer contracts draw an excessive amount of attention in these deals. 

The longer the contract is the better. For service businesses, a dollar of revenue from a maintenance contract tends to yield more dollars in the sale than does an implementation or repair contract. 

Some buyers place a higher value on fixed cost contracts, others on cost-plus or time and materials. Primes tend to get higher multiples than subs but not always, depending on the sub’s specialty. For smaller businesses that will likely have fewer open contracts, the length of time remaining on each contract and its rebid/extension terms are often points of high interest.

Lastly, whether or not the person who has relations with the government office is staying on or not is a big deal. If you are leaving and you have those relations, the sale process must be structured around this fact. This means customization of the type of buyers that are targeted and the story that is initially told to the market. Some buyers won’t mind so they would need to be the primary targets and those that will mind needing to be told at the right time and in the right manner.

What about preserving the set-aside nature of the business?

This is a question that all clients ask but few buyers care about it. We find that most clients don’t use their set aside status to win the majority of their work. More importantly, though, most government contracts do not require the prime to update the government in the event of a loss of status by one of their subs or even by the prime itself. The contracts tend to be “shoot and forget” in this regard. While it can affect some extensions or renewals, we often see that not being the case.

And buyers just don’t care. Today’s multiples are too high for buyers to win company sale processes just because they are looking for a set-aside business. If they aren’t paying for the brainpower, the relationships, the cash flow, or any other standard deriver of value, they aren’t making offers our clients will accept.

Is selling a government contracting business harder than selling a similar business serving the private sector? 

Yes, for all the reasons above it’s a bit smaller of a needle to thread. But with the right process, a good deal team, patience, and a motivated attitude on the part of the owner, the process is entirely doable, and these businesses sell every day of the year.

What’s the market like at this minute? 

As of the end of July 2020, the market has never been better. We are seeing multiples for all business types staying up at their pre-COVID record levels across the board. Also, we are seeing buyers that previously passed on government contractors reaching out specifically to see what government contracting companies are currently available.

 

To see a selection of our completed government contracting deals, please click here

Author
Clinton Johnston
Managing Director
Benchmark International

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

 

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2020 Mid-Year U.S. Economic Outlook

The COVID-19 global pandemic is having a significant impact on economies across the world and business owners are understandably concerned. In these times of uncertainty, many are asking what can be expected in both the short and long term for the United States economy.

Looking Back at Q1 and Q2

After several years of economic expansion, the U.S. gross domestic product (GDP) dropped 5% in the first quarter of 2020, and plummeted 52.8% in the second quarter. The National Bureau of Economic Research (NBER) declared that the U.S. economy officially entered recession in February. 

  • Consumer spending was down 13.6% in April, slightly rebounding in May, up 8.2%.
  • In May, U.S. employers added 2.5 million workers back to payrolls and housing rebounded moderately.
  • The Federal Reserve cut interest rates and rolled out a $2.3 trillion effort to help local governments and small- to mid-sized businesses, and the U.S. government approved nearly $3 trillion in aid.
  • 8 million jobs were added in June, while more than 19 million Americans were still receiving unemployment insurance benefits.
  • June retail sales jumped 7.5%.

 

Ready to explore your exit and growth options?

 

Forecasting Q3 and Q4

Goldman Sachs forecasts U.S. GDP growth of 25% in the third quarter, down from a previous forecast of 33%. The NBER Conference Board expects a 20% rebound in quarter three, with growth slowing to 1% in quarter four.

The manufacturing and construction sectors continue to recover, with predictions of 8% growth in the fourth quarter. Additionally, existing home sales have rebounded at a record pace.

Consumer confidence is going to depend on how rapidly the virus is brought under control. In July, coronavirus cases spiked in many areas of the country, causing some state and local governments to step back on reopening plans. The recent resurgence in cases has slowed expected consumer spending, as many Americans are unable to visit certain places due to state restrictions. Markets will likely remain erratic until there are solid indicators for increased confidence. The economy will recover, it is just a matter of when, keeping in mind that recoveries tend to be longer and stronger than downturns, and returns are usually highest after the market bottoms out. As of late July, September is a hopeful target for a bounce-back in spending.

Even once restrictions are lifted and businesses are able to operate as normal, the recovery will hinge on how willing Americans may be to participate. Consumer demand is expected to remain sluggish through the latter half of the year, but there are positive long-term investment opportunities that arise out of such an environment, especially for companies that have shown that they can adapt under dire circumstances.

New developments in COVID-19 clinical trials indicate that a vaccine could be available by 2021. A vaccine or treatment will be critical to boosting consumer confidence and economic growth.

Finding Opportunities Within a Crisis

While the virus has had devastating impacts across several sectors—especially travel and hospitality—it has also created opportunities for certain industries. Types of businesses that have seen strong growth during the pandemic include telemedicine, online retail, food and grocery delivery services, home improvement, educational services, gaming, cleaning products, RVs, and even puzzle makers.

With people working and schooling from home, people’s lives are now more digital than ever. Demand for cloud-based services has skyrocketed. Streaming services and mobile payment services are increasingly popular, and reliable broadband is a must-have. During mandatory lockdowns, consumers became more likely to try things for the first time, such as grocery or alcohol delivery, and may opt to continue to use them following the COVID-19 pandemic. These types of outcomes could translate into even healthier e-commerce growth potential in the future, not just in the U.S, but also globally.

There will also be possibilities for partnerships through mergers and acquisitions. Prior to the crisis, private equity was sitting on an estimated upwards of $1 trillion in dry powder and will likely play a key part in the revival of the economy. M&A opportunities are expected to be in the most resilient sectors post-pandemic, and bidders are predicted to become aggressive in seeking out company valuation bargains in the hardest hit industries such as the transportation, hospitality, and energy sectors. Additionally, in the more stable sectors, deals could be driven by the need to vertically integrate and address supply chain issues to get back on track. There is also the possibility for stock deals to become more appealing as equity prices fall.  

Schedule a Virtual Valuation

Contact the M&A advisors at Benchmark International to discuss the possibilities for the future of your business. We are here for you, even throughout the pandemic, getting deals done and making great things happen in the most trying of times. You can even schedule a Virtual Valuation in order to practice social distancing while gaining an understanding of the current value of your company.

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What is COVID-19 Doing to the M&A Markets Now?

What’s the latest effect (as of late-July) COVID is having on lower middle-market M&A in the US? 

Some deals have fallen out resulting in some new buyer requests emerging. As with stock in the publicly traded markets, we are seeing what you might call a “sector-rotation.” Any time you have a change in the macro-environment, whether favorable or unfavorable to the economy overall, you see buyer preferences shift.

Is activity shrinking?

Demand has moved and it takes time for supply to catch up. Also, it takes upwards of three months to close an M&A deal, even in the smoothest of times. So, replacing those deals that fell out that were in the middle or even their end phases will require some time. But the buyers still keep calling. We aren’t seeing a deeper trend, which would be concerning, about money being pulled out of private equity. So, the ship has taken a roll but there is no sign it's taking on any water.

Why haven’t buyers dried up?

Institutions and wealthy individuals invest in private equity and turn into the lower middle-markets because they need a place to set their money to work for them. 

Globally, governments have slashed interest rates in response to the pandemic. That made every other class of investment less attractive. Coming into 2020, we were concerned that rising interest rates would make those other asset classes more attractive, and we would see the historic record inflows to private equity dry up. But that has now been deferred for another year or so. Once governments recognize the need to pay off these massive bills they’ve just created, probably at the end of the next budget and tax cycle, we will see interest rates rise, perhaps even faster than we had expected as governments raise taxes and attempt to inflate away their debt.

 

Ready to explore your exit and growth options?

 

That’s fine for financial buyers but what about strategic buyers? 

Yes, some have headed for the sidelines for the time being. But operating companies, as always, need to grow their revenue and the healthiest businesses will continue to look for growth opportunities. In the present scenario, we also have companies that weren’t as healthy or as growth-oriented that now need to replace some revenues and that need to, in a way, reinvent themselves or find alternate routes to market. We also are seeing trade buyers entering the market because they have lost key suppliers or are worried about losing key suppliers, and they are looking to integrate upstream. Fortunately, larger companies went into this situation with overall corporate debt at record lows. That means there are companies out there that have the room to borrow even if their operations are not going gangbusters at the moment.

But are banks lending? 

Debt is tightening at the moment. Lenders don’t like uncertainty. This is part of the reason that deals that were negotiated pre-COVID are falling out. Buyers use as much debt as possible and if interest rates go up (which they did for M&A debt even though no-risk and low-risk interest rates were brought down), then the math of the deal gets reshuffled and someone backs out. But banks adapt and as the risk-free rate hovers near zero, they find ways to get comfortable with handing out M&A debt. Seeing senior debt on deals now brings them around 6% and mezzanine debt 12-14%, is helping them adapt faster at the moment. We are seeing deals carry a little less debt over the last few months, but bankable deals are still getting debt. Unfortunately, though, lenders are a little more investigative and slower than normal, so we are seeing this add perhaps a month to many deals.

What effect does this have on the price? 

So far buyers are being creative, and those that are not are losing their deals. The good buyers are coming back and tinkering with the deal structure to keep the overall multiple up rather than lose the deal. We are seeing them ask for more seller debt and more rollover. Deals that used to have a 20% rollover component now might have 30 or 40%, leaving the sellers a bigger second bite at the apple while still satisfying their need or desire for a transaction. 

So, is it still a good time to enter the market? 

The best time to enter the market if you are selling ice is the summertime. But the amount of time it takes to get a company to market is longer than the range of our visibility at present into where the market will be when the company is truly at the step of “entering the market”. So that question carries a bit of a false pretext. The real question is: “Is it time to start the process?” 

The answer to that question is: “It’s always time to be ready to sell.” And because of today’s added volatility, to the extent, an owner is trying to time a window they are going to have a better shot at it if they get started, get their marketing materials made, learn the process, and stand ready to enter.

Is it really all about market timing? 

No. You can sell ice in the winter, and you can sell it for the same price as in the summer if you know what you’re doing. You just have to work harder and maybe be a bit more patient, creative, or flexible. You need a solid process, broad market outreach, and a good M&A team around you. I’ve known too many owners that waited for the right wave and by the time they realized it had come, it was past. At least those that were sitting on their board out in the surf could try to chase that wave or ride the back of it, as opposed to those waiting on the beach. You can certainly sit out a solid tough spell but getting the right deal is not about hitting the market at just the right time. Buyers come and buyers go. There is always a quality buyer out there that needs the business and will pay top dollar if handled properly.

Final thoughts on the current situation?

Selling a business is too important of a decision to let any single factor decide for you. The business is usually the owner’s life’s work and therefore the considerations are infinite. Never will all of them fall into a perfect line. In other words, there are always reasons to not sell. Fortunately, starting the process and deciding to sell is not the same thing. Starting the process simply requires the reasons to sell being slightly greater than the reasons not to sell. Then, six months or a year later when the contract is on the table and the pen is in your hand, the relative importance of the pros and cons shifts. Our clients pass up offers all the time. Just because they pass on an offer does not mean that they should not have started or entered the market when they did. As long as they retain absolute discretion to sell or not to sell throughout the process, being worried about where the market is or where it might be going should not be a major concern.

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PBK Architects, Inc. Received Strategic Investment from DC Capital Partners

Benchmark International is pleased to announce the successful closing of DC Capital Partners’ investment in PBK Architects, Inc., and its subsidiaries. As the 23rd largest US-based architecture firm, PBK, based in Houston, Texas, and its subsidiaries in California, Beijing, Shenzhen, and Hong Kong employ over 500 architects, engineers, and related professionals.

“We are pleased that we were able to introduce PBK’s owners to the right partner, one who not only recognized the value and potential in the business but also saw the wisdom of leaving its management, best-practices, and award-winning culture in place; our clients' three most important criterion for taking this step,” said Dara Shareef, one of Benchmark International’s two Managing Directors on the transaction.

In addition to its Top 25 status, in 2019 PBK was ranked as the “#1 Education Design Firm” by Engineering News-Record (“ENR”), widely regarded as the engineering and design industry’s premier publication. Specializing in K-12 projects and, in particular, large public high schools, PBK has long been the go-to firm for sustainable design and next-gen integrations in particular. The company also focuses on two related building types - higher education and sports facilities. 

Ready to explore your exit and growth options?

DC Capital Partners was familiar with PBK’s government focus, already having made similar investments in architecture firms, AMA and Pond & Co., both of whom work predominantly with US federal government clients.  “Moving into the local government market was not a big step for DC Capital but one they appear to have not explored previously. When Benchmark International first contacted them with the opportunity, the timing was not right given their other ongoing projects at that point. Benchmark’s diligence and perseverance in circling back proved to be a key factor in achieving this successful result,” said Benchmark International Associate Jesse Crawford-Lang.

“In our industry representing government contractors is often seen as a niche specialty. Though we are sector agnostic, we end up closing deals for more government contractors each year than do most boutiques specializing in the field. A great business is a great business and PBK is a great business,” said, Clinton Johnston Benchmark International’s other Managing Director on the transaction.  This transaction follows closely on the heels of 11 other Benchmark International deals closed in the AEC space in the first half of 2020.

Closing a deal in the midst of COVID, particularly one with the unique international implication present here, was not without challenges, however. The deal was agreed in principle just before lockdowns began across the country. Despite the turmoil in the markets, both sides were able to hold up their end of the originally agreed bargain though not without a bit of mutually beneficial maneuvering. PBK Founder and Executive Chairman Dan Boggio commented, “Benchmark, along with our legal team at Nelson Mullins and our accounting team at Weaver, just kept plugging away no matter what was going on outside the deal. The number of issues that needed to be addressed, negotiated, and implemented in a deal like this was apparently endless. The ways that we and DC Capital had to come together to address some unprecedented events precipitated by the pandemic and the creative solutions our team generated were absolutely amazing.  My partners and I are so glad that we had the opportunity to work with this great team. I don’t know that this would have gotten done, even in regular times much less the first half of 2020, without them.”

PBK’s efforts were led internally by CO-CEO and COO Chris Cunico. He added, “We really appreciated the way Benchmark led us through this process. All the decisions were ours to make. They continuously provided the data, inputs, and experienced insights that set us up to make the best possible decisions throughout the relationship. They were patient with us when we wanted to move slowly and led the charge whenever we wanted to move ahead aggressively.”

DC Capital was assisted on the transaction by Arnold & Porter, Ernst & Young, and Aon Advisory. “When DC Capital comes to town, they bring the big guns. It was a pleasure to stand toe-to-toe as adversaries to negotiate and structure the best deal possible for both sides while never compromising on our clients’ list of non-negotiable issues. We like to test our mettle, and that’s what happened here.  In the end, this is the deal we were asked to get for our clients, and we are happy to have delivered for all 16 of them,” added Benchmark International Associate Director Deidre Ryan.

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Benchmark International has Successfully Facilitated the Transaction Between Brandon Consulting Limited and Nostra Technologies Limited

Benchmark International is delighted to announce the transaction between a cybersecurity and compliance IT solutions company, Brandon Consulting, and managed IT services partner, Nostra.

Founded in 1998 by Tom O’Neill, Brandon Consulting provides managed IT services to clients across a range of industries.

Do you have an exit or growth strategy in place?

Nostra, established in 2006, offers a suite of IT managed services solutions to a variety of sectors such as finance, hospitality, manufacturing, and motoring. As Ireland’s leading managed service provider, it has over 200 customers and provides services in the UK, the Benelux region, Germany, Poland, South Africa, Australia, and North America.

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Why You Should Consider Expanding Into New Markets

If your business is successful in your geographical region, it could be time to look at moving into new markets. Expanding your company into new markets can be a powerful solution for creating growth for several reasons. If your business is based in the United States, just stop and consider the fact that 96 percent of the world’s consumers reside outside of America’s borders. Globalization is becoming more and more common for brands, and it is here to stay.

Gain New Customers and Boost Revenue

When a business is performing well, it is not uncommon for its growth opportunities to become exhausted within its home market. By turning to expansion strategies, new markets open up significant potential to reach a broader customer base, in turn increasing sales and revenue. In fact, reports show that 45 percent of middle market companies make more than half of their revenue overseas.

Diversify

By taking your company into new markets, you have the opportunity to diversify, making revenue more stable. Say your domestic market is slowing. By being in a more global market, you gain the advantage of having it as a protective measure during slower economic times at home.

Enhance Your Reputation

When you provide your product or service to customers in new markets, it bolsters your reputation both abroad and at home. A favorable reputation inherently attracts new customers. Expansion also builds name brand recognition and gives your business more credibility on a larger scale.

 

Ready to explore your exit and growth options?

 

Get a Competitive Edge

This one is simple. Get into new markets before your competitors do. This is especially important if you are operating in a saturated market. If you get there first, you get the customers first and can take measures to retain them. This is much easier than being the second or third in the new market and trying to lure customers to switch to your business for similar products or services. This is why it’s no surprise that nearly 60 percent of middle market companies include international expansion into their growth strategies.

Access More Talent

More geographical reach means a bigger talent pool. It also means adding valuable advantages such as language skills and varied educational backgrounds. It also allows you to employ local talent that has the expertise to effortlessly serve and communicate with your customers in the same time zone. This can be a key strategy if your company is older and has decades of experience operating in your home market.

Save Money

Believe it or not, expanding can actually lower your company’s operational costs and save you money, especially if your business involves manufacturing. In other markets, you may find lower costs of labor and more affordable talent. Also, advancements in e-commerce and logistics have lowered the cost of doing business overseas. And lets not forget about taxes. Several countries around the world offer tax incentives to companies looking to expand internationally because it brings new business opportunities to their homeland.

Contact Us

If you are a business owner looking for ways to grow your company, talk to our M&A experts at Benchmark International. We have extensive experience, a massive network of global connections, and plenty of great ideas. You can take comfort in knowing that everything we do is predicated upon doing the right thing for you and your business.

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10 Important Post-merger Integration Tips

Having a solid integration plan in place for your company merger is critical to the future success of your business. These tips can help prepare you for the process.  

  1. Begin planning from the earliest possible point in time. Outline all of your goals and objectives, employ best practices, and identify any gaps in your plan. Make sure all the key parties involved in the merger are in agreement on the integration plan. You should start implementing the integration process before announcing the deal. This enables you to begin integration immediately versus rushing to make important decisions at the last minute.
  2. Create an integration team and clearly communicate the strategy for moving ahead with all necessary parties involved. Assess your key areas of value and designate the teams or persons responsible for these areas, making sure they understand the exit criteria they will need to meet.
  3. Make sure leadership roles are clearly defined during and after the merger. You may even want to consider bringing in leadership from outside both companies to benefit from a neutral perspective. Insist that leadership is committed to both the big picture for the company and the details of getting integration done right.
  4. Synergy is important in all aspects of the business, but especially in its culture. Commit to one culture and take measures to ensure that it will be preserved.

 

Ready to explore your exit and growth options?

 

  1. You are going to want your staff to be positive and excited about the merger, rather than nervous and/or cynical. This means you are going to have to sell the deal to them, ensuring they understand why the move will be good for them. Craft an internal communication plan that makes sure that no one is left in the dark at any point along the way. You will want to make sure you keep the overall messaging consistent to manage expectations properly.
  2. Have a solid plan for all things IT. This is a critical component of any business. How the technology will be integrated must be completely planned out to avoid any communication breakdowns or loss of important data. Implement a structure to track progress and identify potential risks so that they can be addressed in a timely manner.
  3. Understand what type of deal you are making and how it will dictate the days ahead. For example, a scale deal is an expansion in the same or overlapping business. A scope deal is an expansion into a new market, product or channel. All of your integration decisions will be based on this.
  4. All sorts of things can crop up and slow down or sidetrack an M&A transaction. Do your best to stick to the timetable you outlined while ensuring that you make smart decisions rather than just following the process for the process’s sake.
  5. Just like easing the minds of your employees, you will need to do the same for your customers. Make every effort to ensure minimal disruption for all of your customers and clearly communicate your plans with them to address any concerns.
  6. Remember you are still running a business. Avoid becoming so distracted by the transaction that you neglect business priorities such as your customers’ needs. You must keep the company on track and running smoothly if you expect the deal to be a success.

Finally, be sure to celebrate your successes. After an arduous process, employees should feel that their work is appreciated and everyone should share in keeping the momentum going moving forward.

Contact Us

At Benchmark International, our highly esteemed M&A experts are eager to roll up our sleeves and get you a stellar deal for your company. Reach out to us at your convenience.

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How Biden's Proposed Tax Plan Could Impact Your Company's Exit Strategy

Tax implications could be drastically different 18-24 months from now and M&A markets are preparing to react to increased liquidity events in 2021 and beyond. The implementation of the proposed Biden Plan would have negative tax consequences which would cause a significant impact on net proceeds from any potential M&A transaction. Taxes on capital gains could rise to 40 percent for proceeds of a business sale over $1M. Individuals can expect a reversal of at least half of Trump’s signature tax cuts to pay for the plan.

For business owners generating over $1M in the sale of the business, expect to have earnings (“capital gains”) taxed as ordinary income under the Biden plan. Today, capital gains are taxed as income. A capital gain is a profit from the sale of a capital asset, such as a stock or home, from the time that asset is acquired until the time it is sold. Taxpayers pay the difference on the purchase price of the asset (“basis”) less the sales price.

Three Major Components Of The Plan

The plan has three major components: raising the corporate income tax rate to 28 percent, revoking the TCJA’s income tax cuts for taxpayers with taxable income above $400,000, and imposing a “donut hole” payroll tax on earnings in excess of $400,000.

The Biden Plan has considerable impact to business owners; careful consideration to the timing of an exit and liquidity strategy needs to be at the mind’s forefront as the 2020 election quickly approaches. If endorsed, the plan impacts owners directly through the implementation of new tax obligations or the elimination of tax benefits. This includes a 19.6 percent increase on the tax rate of material long-term capital gains for those with adjusted gross income (AGI) exceeding $1M, and a 7 percent increase in the overall corporate income tax rate as noted in the table below.

Example: Assume a $2.0M EBITDA business receives a valuation multiple of 10x for a total transaction value (taxable gain) of $20.0M. Under the Biden Plan, the seller would lose $3.92M in the sale. To receive the same net proceeds, a multiple of 13.2x would need to be secured.

Independent of the 2020 election, taxes are being reevaluated at the state level. This includes increased tax burden on transaction proceeds. The adoption of the proposed graduated income tax rates proposed in states such as Colorado, Illinois, and Michigan would result in a higher state tax burden for high earners. California has already adopted this measure and has a 13.3 percent top marginal tax rate for individuals with income above $1.0M.

 

Ready to explore your exit and growth options?

 

What If I Want To Transfer My Wealth?

The step-up in basis for inherited capital assets may cease under the plan. This elimination translates to more taxes on wealth passed to heirs and ending favorable tax rates on capital gains for anyone making over $1M.

How Are My Stocks Affected?

The 2017 tax reform law dropped the corporate income rate to current 21 percent level. The proposed plan increases the corporate tax rate from 21 to 28 percent.

For people that earn $300,000 a year, you more than likely own shares in publicly traded companies. Under the plan publicly traded companies will be paying higher taxes which means less cash available for dividends to stockholders. Biden is suggesting a 15 percent minimum tax on large corporations. Goldman Sachs has projected that Biden’s tax plan would lead it to reduce its 2021 earnings estimate by 12 percent.

The tax rate on Global Intangible Low Tax Income (GILTI) earned by foreign subsidiaries of US firms will double from 10.5 percent to 21 percent.

How Is The Overall Economy Affected?

Experts suggest this plan would shrink the size of the economy by 1.51 percent due to higher marginal tax rates on capital and labor. A decrease of 3.23 percent in capital stock and reduction of 0.98 percent to the overall wage rate would lead to 585,000 fewer full-time equivalent jobs according to the Tax Foundation’s General Equilibrium Model.

Over the course of the next 12 to 24 months sellers and buyers alike will be keeping a pulse on the results of the 2020 presidential election and the possibility of a significant tax overhaul. It is important to note the reality of the Biden Plan coming to fruition can be driven by not just a Biden election; other drivers can include Democrat control over the U.S. House of Representatives or a change in control in the U.S. Senate from Republican to Democrat.

With the 2020 election on the horizon, it is crucial that business owners contemplate the potential tax consequences and consider crafting an exit strategy now to be ahead of the tax changes.

The recipient should consult their own tax, legal, and accounting advisors before engaging in any transaction. This document has been prepared for informational purposes only and is not intended to provide, and should not be relied on, for tax, legal, or accounting advice.

Sources: Tax Foundation, Kipingler, Houlihan Lokey and Yahoo Finance

 

Author
Emily Cogley
Director
Benchmark International

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

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The 2020 U.S. Election And M&A

Past presidential elections in the United States have coincided with macroeconomic circumstances that affect markets. For example, in 2000, the dot-com bubble burst. In 2008, America was in the midst of the Great Recession. And now in 2020, we are in the middle of a global pandemic, dealing with the impacts of the COVID-19 virus, coupled with sweeping protests regarding racial injustice and the repercussions that forced closures have on businesses. In the wake of all of this, four months remain until the November election. Unfortunately, we cannot predict the future, but we can take a look at how the M&A market has been impacted in the past.

M&A activity is cyclical in nature, subject to underlying circumstances that include changing technology, electoral politics, and regulatory changes. As the current M&A cycle winds down, it is worth noting that the dealmaking wave that ceased during the financial crisis actually got started during a slowdown in 2003. Leading up to the 2008 election, M&A activity in the U.S. was strong and it did not bottom out until later when the worst of the recession had passed. Two major relief packages, the Emergency Economic Stabilization Act of 2008 enacted by the outgoing administration, and the American Recovery and Reinvestment Act of 2009, enacted during the first year of the new administration, boosted recovery in capital markets and helped companies adapt to adverse macro conditions in the near term, and eventually paved the way for a new M&A cycle because the cost of capital was reduced to historic lows, injecting liquidity into equity and bond markets.

The level of dealmaking activity in the multiquarter period leading up to the 2012 election compares favorably to the financial crisis period that coincided with the 2008 election at $802.6 billion in 6,087 deals, topping activity for the same period the year before. In the first three quarters of 2012, M&A activity saw a combined $837.5 billion in 6,864 completed deals. The JOBS Act was enacted in 2012, designed to encourage small businesses to become public companies. As a result, the SEC made the filing process easier to manage.

 

Ready to explore your exit and growth options?

 

M&A activity peaked in Q4 ahead of a decline in 2013 Q2 that bottomed out at $241.3 billion in 2,049 transactions. In mid-2013, M&A activity accelerated and the cycle expanded, partially stimulated by strategic buyers contending with financial sponsors armed with record levels of dry powder. Private equity has kept that cycle going from 2013 to 2019. Volume met or exceeded 900 completed transactions and at least $70 billion in value over the same timespan.

Certain conditions that were a result of the financial crisis spurred expansion of the M&A cycle and have proven favorable for private equity and venture capital dealmaking, such as enterprise restructuring around developing regions, expansion of business portfolios, and optimization for tax benefits and accessing cash outside the U.S.  

During 2014, completed transactions grew 26% year-over-year, while deal value increased by an additional $500 billion. This cycle of completed transactions peaked in 2015 at 12,523 deals of $1.9 trillion in value. Annual volume remained above 11,000 transactions with deal value at around $2 trillion for each of the past five years.

Leading up to the 2016 election, M&A activity was pushed to its highest levels per quarter in a decade. In the first three quarters of 2016, 8,825 transactions worth a combined $1.6 trillion closed. Activity dropped in Q4, but rebounded in 2017. Since 2018 began, M&A has steadily declined and Q4 2019 posted the lowest total since Q2 2013. 2019 saw levels return to those last seen in 2013. On June 8, 2020, the National Bureau of Economic Research announced that the U.S. entered into a recession in February of 2020.

While the global pandemic has undoubtedly been costly and detrimental to many businesses, it has also opened up opportunities for growth for some companies as consumer behaviors adapt to a changed world. Global supply chains were massively disrupted, hampering global trade, all of which has a negative impact on dealmaking. How it will play out in the later half of 2020 and into 2021 will depend partly on if there is a second wave of the virus and the availability of a vaccine. Technology remains a continuously evolving area of opportunity and the pandemic has changed the ways that we work and collaborate. Environment, social and corporate governance practices will continue to designate the convergence of technology and regulation. How the election will impact M&A markets remains unknown, but history has shown that emerging out of a recession tends to spawn accelerated M&A activity well into the future. Every M&A cycle develops in response to different conditions, yet all have emerged during periods of economic recovery combined with improvements in capital markets after consecutive quarters of underperformance.

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Now Is The Time

If you are thinking of selling in 2020, now is the time to get to market. We are in an unprecedented time making it challenging to run a business but also to sell a business. 

The M&A market is changing daily and many factors are affecting deals in 2020. We do not have a crystal ball however there are a few trends that if you are considering selling your company in 2020, then now is the time.

  • This year is a presidential election year. As we begin the second half of the year, we begin to think about Q3 and Q4 2020. Buyers are actively seeking acquisitions and deals are still being completed. However, the closer we get to November, buyers will begin to focus more on the election and want to revisit their acquisition plans after the election is over. As we go into the end of the year, planning for 2021 will begin. One would anticipate that the end of the year will be quiet for the M&A market as companies, financial buyers, and others will want to see what lies ahead in 2021.

  • PPP forgiveness will take place soon. Once the loans are forgiven, if the businesses have not improved their performance, we would anticipate that layoffs will continue and potentially at a higher rate than what we are currently seeing at this time. If this happens, it will continue to harm the economy as additional businesses will also fail.

  • The credit market is changing daily. We are seeing lenders backing away from term sheets based on their bank’s industry exposure, small discrepancies that emerge during due diligence, and more conservative underwriting. There is talk within the market that lenders may continue to tighten their lending standards making it harder to obtain credit for acquisition. This may have a direct effect on multiples.

  • While we know that the tax environment is today, we can only anticipate that long term, taxes will increase. With the various US federal initiatives related to COVID-19 and the economic decline, we suspect that the US will have to raise taxes to overcome the growing debt burden that has been created in 2020.

All these factors contribute to the M&A market, valuations, and deal structures. The best time to sell is now.

Author
Kendall Stafford
Managing Partner
Benchmark International

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


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Benchmark International Successfully Facilitated the Transaction Between Andy Newell Limited and a Private Investor

Benchmark International is delighted to announce the sale of Buckinghamshire-based Andy Newell Limited to a private investor.

Andy Newell was established in 1988 and is a specialist plumbing and heating contractor providing complete design and installation for a number of building contractors and developers.

The company has been acquired by a private investor who plans to acquire several small businesses over the next five years.

Ready to explore your exit and growth options?

Tristan Woolcock, Associate at Benchmark International, commented: “We are pleased to achieve the sale for Andy and it’s great to see the client get along so well with the buyer, but it is a bittersweet moment to end our working relationship. We wish both parties every success for the future.”

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Benchmark International Has Successfully Facilitated the Transaction Between Rivertop Contracting, Inc. and The Greenery, Inc.

Rivertop Contracting is a comprehensive landscape management service company with a strong presence in upstate South Carolina. The company offers lawn maintenance, new construction landscaping, and paver work.  Benchmark International worked with Rivertop Contracting to identify salient business metrics that present the fundamentals and prospects of the business. We marketed these metrics to key interested parties, negotiated multiple letters of intent, and ultimately facilitated the transaction between the two companies.

Owner and CEO of Rivertop Contracting, Inc. Rob Atema commented, "It was a pleasure working with the Benchmark International team. Their expertise, persistence, and knowledge of creative deal structure negotiation led to a mutually successful transaction and a newfound relationship for both sides of the deal. I know who I’ll be calling when I decide to sell my other business."

Ready to explore your exit and growth options?

The Greenery, Inc. was seeking to strategically purchase market share in the area that Rivertop’s South Carolina operations were located. Those goals aligned with the seller’s desire to divest and focus on other established locations of the business.

The Greenery was first established on Hilton Head Island in 1973 by Ruthie and Berry Edwards. Today, it has developed into a multi-location full spectrum landscaping and contracting firm that is employee-owned and continues to expand throughout the East Coast region of the US.

Benchmark International's Transaction Director, Don Rooney commented regarding the deal completion, “Benchmark International is happy to have successfully facilitated the transaction between Rivertop Contracting and The Greenery. We look forward to assisting Rob in the sale of his other companies when the time comes.”

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Benchmark International Has Successfully Facilitated the Transaction Between Alliance Air Solutions, Inc. and Climatech Mechanical Services, Inc.

Benchmark International has successfully facilitated the transaction between Alliance Air Solutions, Inc. (“Alliance Air”) and Climatech Mechanical Services, Inc.

Alliance Air was incorporated in 2006 as a commercial and industrial HVAC installation and service company. Since its inception, the company has maintained a strong reputation within its market as a quality heating and air conditioning service provider. The company’s approach, centered on quality and integrity, ensures each client is treated well and each project is delivered in a timely and efficient manner.

Climatech is a full-service mechanical contracting company serving customers in several states. Over the past 48 years, they have grown into one of the largest contractors for heating, ventilation, air conditioning and refrigeration in their served regions. The acquisition creates additional capacity and geographic expansion to an already successful service model.Ready to explore your exit and growth options?

“Alliance offers an exciting opportunity for Climatech to expand its service offerings in a variety of different areas” explains Brad Taback, CEO of Climatech.  “This acquisition will provide significant growth opportunities and strengthens our management team so that we are able to achieve our goals in the Florida marketplace.”   

Regarding the deal completion, Senior Transaction Associate Sunny Yang Garten at Benchmark International commented, “It was a pleasure to represent Alliance Air in this strategic transaction. This acquisition represents a tremendous opportunity for both businesses and their teams to strategically accelerate the rate of growth. On behalf of Benchmark International, we wish both companies continued success.”

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Benchmark International Successfully Facilitated the Transaction OF Software Enterprises (UK) Limited & Global Rosters Limited to Totalmobile Ltd

Benchmark International is delighted to announce the sale of Birmingham-based company, Software Enterprises (known as Global Rostering System – GRS), to Totalmobile.

Established in 1995, GRS is a software development company that has produced its own computerised rostering system which builds efficient staff rosters and ensures the right staff are assigned to the required locations and shifts. The product is best suited to the emergency services and 24/7 operations with customers predominantly hospitals, police forces and ambulance services. Solutions are currently being used to roster over 100,000 emergency services field-workers in the UK.

Totalmobile develops and supplies enterprise application software that manages the workflow of mobile workers. It is backed by private equity company, Horizon Capital.

Ready to explore your exit and growth options?

Going forward, GRS’ software will be rebranded and integrated into Totalmobile’s comprehensive suite of SaaS field service management products.

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Be Wary of EBITDAC

Nick Hulme, Managing Director for Benchmark International’s Manchester site, wrote an article pre-Covid around company valuations based on ‘multiples of earnings’.

Recently, articles around ‘EBITDAC’ have emerged – a measure of Covid adjusted earnings, and while he agrees that there is some great literature about EBITDAC, Nick warns that we need to be wary when negotiating so it doesn't take over.

In this blog, Nick summarises the most important takeaways from Covid, and what we can look forward to post-Covid.

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5 Tips For Preparing Your Company For Sale

When the time comes to sell your company, you obviously want to get the most value and the highest possible price. There are several steps you can take before going to market to increase the likelihood of you cashing out for more in a merger or acquisition.

  1. Focus on Profits and Growth

You will want to increase your net revenues and profits, keeping in mind that buyers will focus on EBITDA (earnings before interest, taxes, depreciation and amortization) for valuation. This is the number you want to boost because the higher your EBITDA, the higher your sale price will be. Your company’s growth potential will also be important to acquirers so you should put extra effort into growing your sales, even if it means hiring more sales talent (as long as it justifies the costs—adding salaries and benefits need to be worth the results).

  1. Get Your House in Order.

The M&A process will certainly include a comprehensive audit of your financial records and any other business concerns. It is key to get all of your documentation in order before embarking on a sale. The more complete and orderly your record keeping is, the more confidence it will instill in potential buyers. This also means you should address any unsavory topics, conflicts or legal issues. Getting any discrepancies resolved will prepare you to honestly answer difficult questions and demonstrate your commitment to getting a transaction done. Buyers do not want to be faced with surprises during the due diligence process.

 

Ready to explore your exit and growth options?

 

  1. Do a SWOT Analysis. 

Take the time to assess your Strengths, Weaknesses, Opportunities and Threats. You need to understand where your company stands in the current market, how it stacks up to competition, and how to maximize its strengths. If you have a complete understanding of your SWOT profile, you can take the necessary measures to position your company to buyers in the best light possible by uncovering growth opportunities and being proactive against any impending risks.

  1. Trim the Fat. 

Think about any areas of your business operations that could be tidied up, such as redundancies or costs that do not add any value to the company. Can you justify everyone that is on your payroll? Would outsourcing be more cost effective? Can you spend smarter when it comes to equipment? Are you carrying outdated inventory? Is there property that you are paying taxes on that you really do not need? What can you do to avoid adding new expenses? This doesn’t mean you should cheap out on anything that affects your core competencies. But sometimes simply reallocating resources can help you optimize the financial health of your company.

  1. Get an M&A Advisor. 

M&A advisors handle a significant amount of the complicated work that goes into the lengthy deal process. Their exclusive connections will get you access to quality potential buyers. They will help you prepare and market your business effectively, finding ways to make it more enticing to buyers. Another benefit of an M&A partner: not only will buyers know that you are serious about selling, but you will also know that they are serious about buying. They will also help you organize your due diligence documentation and present your financials, coordinate meetings, help with exit or succession planning, and ensure that you have peace of mind through such a momentous time in your life.

If you are ready to sell your company, please contact our M&A advisory experts at Benchmark International to get you on the path to a deal that meets all of your aspirations.

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Benchmark International Successfully Facilitated the Transaction Between Vertex Software Corporation and Level 5 Lab

Benchmark International facilitated the transaction between Vertex Software Corporation and Level 5 Lab.

Vertex Software Corporation is a web-based solutions business specializing in building online, browser-based software applications. Vertex brings traditional software engineering methodology and discipline to web development, delivering robust solutions to its clients quickly and efficiently.

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

Ready to explore your exit and growth options?

President of Vertex Software Corporation David MacDonald commented, “Benchmark International’s team delivered on finding a buyer for my business that would take care of my team as well as would carry on the high level of service after the sale that our customers have come to expect.”

Deal Associate, Amy Alonso commented, “Benchmark International added value by negotiating this deal.  We saw throughout the entire process that the buyer, Level 5 Lab, was a perfect fit who stood to benefit greatly from the experience, industry knowledge and high-quality service that they would gain from the existing owner. With this knowledge, the team was able to negotiate a deal that would allow for the existing owner to successfully transition the business to a capable buyer.  We wish Vertex Software Corporation and Level 5 Lab the best of luck in their future endeavors.”

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Benchmark International Completes the Sale of Knowles Associates - Total Fleet Management Limited and Ensure UK Limited, to an EOT

Benchmark International is delighted to announce the successful sale of Essex-based Knowles Associates and Ensure UK, to an employee ownership trust (EOT).

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