Information Technology (IT) services encapsulate maintenance and security with regard toonsite and remote tech support,infrastructure, computers, servers, networks, workstations,firewalls, cloud services, web development, systems integration, telecom, patch management, software updates, big data, and virus and malware prevention.READ MORE >>
Around the world, the global education industry remains shaped by population growth and access to education, and driven by new technologies and service offerings.
- Solutions for professional education, teacher development, improved online and adaptive learning, and language training (especially English) are always in demand.
- Online learning technology and the need for corporate workforce training drives increases in corporate spending on outsourced training programs.
- Smartphone-only Internet users are reshaping learning models.
- Enrollment in pre-primary education continues to rise as it has proven to show positive long-term results.
- In primary and secondary education, technology investments directly impact school expenditures.
- Higher education is being forced to adapt in the wake of changes to jobs, skills and increasing student debt.
- Learning Management Systems are shifting the teaching focus away from content and onto learners.
- Newer offerings include cloud-based student information systems, digital tools and learning platforms, and data reporting and analytics.
The global education market is expected to be valued at $10 trillion USD by the
In today’s digitized society, as education becomes more globalized, it presents newforms of private, for-profit involvement. In the global education industry, less than three percent of overall education expenditure is spent on technology. This is expected to increase in the future, yet at an alarmingly slow rate, giving investors a favorable position to get in on
Mergers and acquisitions opportunities are heavily influenced by the possibilities created by new innovations in digital education, instruction, and credentialing. The global education sector’s biggest strategic performers are diverse companies that continue a shift towards digital services and away from print. Target companies within the education landscape that are in drawing investment include those that provide adaptive learning solutions and assessment products, such as software that facilitates testing and scoring. Other areas that appeal to buyers include education-market-focused infrastructure software and English language learning solutions.
Education Infrastructure Software
Modern education-focused infrastructure software has the power to transform learning environments for students and teachers both inside and outside the classroom by balancing technology across all locations. The approach is comprised of cloud computing, enhanced privacy and security, connectivity, storage, and manageability. Additionally, virtual infrastructure not only simplifies troubleshooting, but it can reduce costs for institutions by reducing overhead through the reduced impacts of having to frequently replace hardware. With support of more devices, teachers can better tailor learning experiences to students learning needs, and a more collaborative learning environment can be created.
Global English Language Learning Market
The global English language learning market is expected to exceed $22 billion USD by the end of 2025. These programs are in growing demand due to globalization, urbanization, and an appetite for improved education and job opportunities. The escalating numbers for student enrollment in graduate schools in English-speaking countries is deemed to be a primary contributing factor to growth in this market. In higher education, universities in the United States, the United Kingdom, Australia, and Canada require applicants to pass language tests such as the Test of English as a Foreign Language (TOEFL), Graduate Record Examination (GRE), and International English Language Testing System (IELTS). This drives students to enroll in English language training programs, leading to notable demand for them in countries (such as an India and China) where the number of graduates relocating to English-speaking countries for advanced studies continues to grow at a significant rate.
The global market for digital English language learning is comprised of both regional and international manufacturers. As the international companies expand their reach, improve quality, and lower prices, the regional firms struggle to compete. Such an intensely competitive market for innovation and service extensions increases the number of M&A transactions.
An Industry Continuing to Evolve
Innovation in education requires capital and government funding is limited even in the wealthiest, most developed countries. Private equity and M&A can strategically create and grow companies of scale in the education sector. Larger size means more attractive acquisition opportunities, more prevalence, and more potential for transformation in the industry and its subsectors.
Advancements that are impacting and will continue to impact this industry include:
- Artificial Intelligence, virtual reality, and unified data solutions
- Online education
- Specialized curriculum start-up companies
- Improved curriculum storage and peer-to-peer sharing platforms
- International schools
- Digital classrooms
- Chat bots and voice enabled hardware
- English language training
- Enhanced admissions management and student retention
- Global school networks
- Improved vocational training
- Alternate university models
- Online program managers
- Job training boot camps
- Primary education mobile apps
- Increasing availability and free access to academic publishing resources
- STEM and coding
- Gaming and simulation
If you are ready for a change, contact us at Benchmark International. We are committed to creating an impressive plan of action for your business. Schedule a call with one of our M&A advisors and start planning a more prosperous future for you and your company today.READ MORE >>
The engineering services sector is made up of Engineering Services Outsourcing (ESO) firms or Engineering Service Providers (ESPs) that specialize in planning, design, and technical work at each stage of a product lifecycle. ESO is commonly used by industries such as construction, automotive, telecom, energy, transportation, pharmaceuticals, and manufacturing. Among the services offered by ESO that are consistently in high demand are structural, architectural, civil, and electrical engineering.
Industry Growth Drivers
Growth in the engineering services industry is stimulated by circumstances that include:
- Increasing technical complexities regarding product development and manufacturing
- A need to reduce costs
- Shorter product lifecycles
- Demand for innovation
- Increasing tie-ups between ESPs and Original Equipment Manufacturers (OEMs)
The Demand for ESO
As clients demand more complex solutions and shorter product lifecycles, there is a growing need for the use of subcontractors through ESO. Shorter duration solutions result in renewed managed service contracts, helping ESO businesses to do well. Additionally, some engineering companies opt to use ESO as an extension of their own capabilities.
Other reasons that companies choose to use ESO include:
- Access to more cutting-edge technologies and more complex engineering services
- The ability to focus time and resources on other critical tasks such as marketing
- Need for less office space and lower office equipment costs
- Faster project turnaround that can result in improved client satisfaction
- Access to services on an as-needed basis
- Around the clock support services
ESO demand is also affected by the specific needs of individual industry sectors.
- ESO in consumer electronics is driven by consumer demand for enhanced mobility and entertainment, and the better exchange of information between devices for data and media.
- Both onshore and offshore ESO is used in the automotive segment in developing countries due to their high demand for passenger vehicles and economical cars. Demands in developed countries include car connectivity, advanced driver assistance, Vehicle-to-Vehicle (V2V) and Vehicle-to-Infrastructure (V2I) communication.
- Tech companies, OEMs and semiconductor companies look to ESO for assistance in developing next-generation smart devices. These businesses also employ ESO to stay competitive by focusing on product localization needs, new features, and industry best practices.
- The telecom industry accounts for a major share of ESO revenue as global telecom companies continue to expand their market presence around the world.
Adapting to the Tech Era
In today’s digital world, engineering services companies must adapt their business models to focus on emerging technologies and their integration with manufacturing and engineering services. This adaptation is crucial to realize the full potential of these growth opportunities. These technologies include data, sensors, the Internet of Things, embedded electronics, Machine-to-Machine adoption, and other digital transformative solutions.
The Need for M&A
As delivery methods for engineering services continue to change, engineering firms must either look to acquire new technologies, or diversify into higher value advisory services and focus on forming strong client relationships. Mergers and acquisitions are a resourceful path to establishing these services in a highly competitive market.
M&A strategies are also vital to creating growth and uncovering new strategic pathways. Larger companies look to acquire smaller companies in order to remain relevant, close talent gaps, expand to new regions, and strengthen their portfolio of offerings. This increased consolidation results in the prevalence of more one-stop service providers.
Because larger engineering services firms have more developed infrastructure and economies of scale, they are able to easily outbid smaller firms. This makes it problematic for the smaller firms that are trying to keep up and stay profitable. As a result of such challenges, many small engineering services companies are forced to rethink their options and consider partnership with larger firms through acquisitions.
M&A as a Succession Solution
Additionally, private engineering services companies may face succession issues because they typically have one or two founders who eventually plan to retire. When these particular business owners choose to exit the company, in many cases the next generation either cannot afford to buy out its departing leaders or is unwilling to do so. In these situations, M&A transactions are an ideal way for middle-market leadership to solve succession-planning issues, form a strong exit strategy, and set up the future trajectory for the company.
Please reach out to our cross-border M&A specialists at Benchmark International to start the conversation about selling your business or devising your exit strategy. We can offer unique perspectives, services and tools that work in concert to arrange a deal that delivers on your every aspiration. We think you will like what we bring to the table.READ MORE >>
The modern manufacturing industry on a whole is continually undergoing somewhat of a seismic shift in operations thanks to rapidly changing technologies, globalization, rising wages, and demands for higher quality standards, shorter timelines, and more customization. These factors reshape strategic imperatives and decision making, largely in part to emerging disruptive technologies in the machinery and equipment manufacturing industries.
Technology Driving M&A
As is the case with most industries in the 21stcentury, the availability of new technologies is driving major opportunities for mergers and acquisitions in the industrial-equipment manufacturing sector. Some of these game-changing technologies include:
- Data Centers: As the use of data centers becomes more and more prevalent in the machinery and equipment manufacturing industry, there is an increasing demand for mass power generation and back-up power generating systems. Because data centers consume a tremendous amount of energy, there is also a need for growth within the market of energy-efficient industrial solutions that have the capability to reduce operational costs. The data center construction market is forecasted to reach $45 billion by 2023.
- Sensors and Control Systems: Wireless sensor networks offer a cost-effective way for data center operators to implement system changes that reduce energy consumption. Sensors detect and log specific operating conditions such as temperature, pressure, torque, load, and lighting. Control systems ensure proper workflow and identify potential problems and hazards. The addition of these technologies expedites digital strategies and creates a solid platform for connected solutions in safety and maintenance. By the year 2022, the sensor market is expected reach $27.4 billion and the control systems market is projected to reach $50 billion.
- High-performance Computing (HPC): HPC is the practice of aggregating computing power in a manner that enables performance that is far beyond what is capable of typical desktop computers. It uses parallel processing to run advanced applications quickly and efficiently. Companies in the equipment-manufacturing sector are using HPC throughout the entire product lifecycle.
- Automation: Industrial companies are increasingly using automation and predictive analytics to overhaul processes, improve capabilities and rectify previous operational inefficiencies. Specifically, automation is playing a major role in the use of industrial machinery in the food and beverage sector, driving M&A transactions. The global factory automation market is expected to reach $368.4 million by 2025.
- The Internet of Things (IoT): The implementation of all of these technological advancements has led to a need for IoT networks that connect them across operational platforms. These networks enable machinery and equipment to communicate for the purpose of recording data, merging systems, and rooting out costly disruptions. The access to such knowledge gives companies the power to improve their manufacturing processes and the entire supply chain. The global industrial IoT market is expected to reach $933.6 billion by 2025.
Driving Acquisitions and Competition
Because it is simply easier for large industrial companies to buy smaller niche companies that offer specialized technological capabilities rather than attempting to develop them in-house, acquisitions in this sector are a favorable tactic. Additionally, the ability of a buyer to leverage new technology within its own operations and distribution channels gives strategic acquirers far better synergistic potential. Even in light of this fact, there remains growing interest on behalf on private equity investors, creating a competitive M&A environment in the machinery and equipment industry.
Target Company Attributes
Regarding M&A activity in the global machinery and equipment manufacturing industry, target companies that possess the following characteristics typically garner higher multiples:
- Predictable revenue stream
- Stable contracts with well-capitalized customers
- Long-term customer relationships
- Demonstrated sales diversification strategies
- Business lines that can withstand cycles and recessions
- Opportunities for growth
- New end-markets and geographical locations
- Cross-selling to existing customers
- Bolt-on acquisitions
- Growth-supporting infrastructure
- Ability to maintain projected revenues
- Long-term control over facilities
- Proper maintenance of equipment
- Technical product differentiation
- Strong and stable management
- Depth and continuity
- Cohesive culture
- Technology investments
- Strong finance management
- Post-enterprise resource implementation
- Dependable, quality data
It is strongly advised that business owners who are seeking M&A strategies partner with an experienced M&A advisory firm that understands the intricacies of the industry and has the kind of global connections and prowess that maximizes value.
Is it time to make a move? Our experts at Benchmark International are standing by, eager to partner with you on M&A strategies that can achieve all of your objectives for the sale or growth of your business. Please contact us at your convenience.READ MORE >>
Although prior knowledge of how to approach a particular problem helps us to some extent, it can largely hinder our decision making process. Instinctively, the human mind causes us to succumb to second guessing ourselves and making a decision out of fear, rather than from intuitive knowledge. Additionally, the human mind also has a predisposition towards cultivating an inside-view during decision making. An inside view considers a problem based upon the surface level information of the specific task at hand, and makes predictions based upon the narrow set data points relative to the problem. Comparatively, an outside-view draws upon similar or even distant analogies to the problem at hand, by purposely setting aside information relative to the problem, in a conscious effort to minimize biases.
We allow fear to control our actions and decision making. Sometimes, we may not even know it because we have done such a good job at convincing ourselves otherwise. We think of the future and obsess over adverse outcomes that can happen as a direct result of our actions. We are cautious and methodical, intentionally as to not make the “wrong decision.” This is how we involuntarily hedge our own personal risk. Often, this fear serves a constructive purpose, enabling us to safeguard our assets. But sometimes, this developed habit can act as a mental barrier to sound decision making when fear inhibits our ability to approach problems differently. Research suggests that approaching a problem with the same mindset developed from previous problems that are similar, may actuallyinhibit our ability to make the best decision or the correct valuation. Sounds counterintuitive doesn’t it? That’s because our brains are hardwired to draw upon our learned experiences when problems and solutions repeat. To approach a problem differently poses a risk, so naturally we develop a habit to approach the same problem in the same way despite how greatly the variables of each situation change. By critically evaluating past events, and applying previously learned knowledge gained from similar experiences, we are limiting our problem-solving abilities.
The trouble in using no more than one analogy, particularly if it is a similar situation to the problem at hand, is that it does not help battle the inside view since we make judgement on the narrowed details that are the most apparent to us. The outside view is deeply counterintuitive because it causes the decision maker to ignore unique surface features of the current project, of which they are the expert.
In 2012, University of Sydney business strategy professor Dan Lovallo conducted an inside-view research study, to test the idea that drawing upon a diverse range of analogies would naturally lead to an outside view perspective and improve decisions. They recruited investors from large private equity firms who regularly consider potential projects in a variety of domains. The researchers believed that the investors’ expansive experience might have naturally lent itself to the outside view. The private equity investors were instructed to assess a real project they were currently working on and write down a batch of other investment projects they knew of with broad conceptual similarity. The results showed that the investors estimated a 50% higher return on their own project than the outside projects they had identified as conceptually similar. The investors initially judged their own projects, where they knew all the details, completely differently from similar projects to which they were outsiders. This is a widespread phenomenon – the more internal details you learn about any particular scenario, the more likely you are to say that the scenario you are investigating will occur. Therefore, the more internal details an individual can be made to consider, the more extreme their judgment becomes. The results of the study suggest that broad conceptual similarities should be considered when making a decision. In Range, author David Epstein argues that referencing distant analogies relative to the problem at hand, enables the highest rate of successful decision making. The outside view probes for deep structural similarities to the current problem relative to different problems. One way to achieve sound decision making is to develop self-awareness of the natural inclination to make self-proclaiming assumptions, and the limitations of becoming buried in details that may inhibit optimum decision making.
Additionally, possessing a diverse range of experiences enables the decision maker to be better prepared to approach any given problem with a broader mindset. With the work world changing faster than it did in the past, it is essential to broaden your specialty in order to optimize your decision making ability and expand your knowledge across a variety of domains. The people who make the biggest impact have a diverse background of prior experiences within their intellectual toolbox to draw upon when determining the best solution for a problem at hand. In 2016, LinkedIn conducted a study to analyze the career paths of 459,000 members to determine who would become an executive. One of the best predictors is the number of different job functions an individual had worked within a given industry. The study concluded that each additional job function provides a boost that, on average, is equal to three years of work experience. Therefore, to optimize your decision-making ability and create competitive advantage in the ever-changing workforce, take on new challenges and roles to strengthen your weakest abilities and become as well-rounded as possible. For us to be the best for our clients, we must approach each problem with a broad and open mind, while being cognizant of the transferability of our past experiences. Each experience has added value to who we are and has shaped our unique insight. The reward of learning a new skill develops new habits, strengthens the mind to overcome the fear of doing something new, and enables us to become the best version of ourselves for our clients.
Transaction Support Associate
The provision of healthcare to patients is the delivery of interventions within an organizational or home setting, including medical services, devices, health insurance, pharmaceuticals, and facilities.
Healthcare Around the World
The provision of public healthcare was not a priority until the last 100 years. Prior to World War I, public healthcare expenditure on healthcare was less than 1% of all national incomes worldwide. Today, the countries with the highest levels of public healthcare spending commit nearly 10% of their national revenue to it.
Wealthier nations spend more per person on healthcare and, not surprisingly, they have longer rates of life expectancy.
In most countries, government is heavily involved in healthcare markets. And in most wealthy countries, such as in Europe and Canada, the government runs the healthcare system. Universal healthcare is achieved in these nations through:
- Government tax-funded systems
- Privately run but government funded systems
- Private insurance but with regulation and subsidies to ensure universal coverage and non-discrimination based on pre-existing conditions
The United States is the only industrialized nation with no universal healthcare option, where big pharmaceutical companies and insurance giants wield heavy influence on the industry.
Many developing countries make an effort to provide universal healthcare but face challenges associate with poverty, corruption, and inequality. There is also reliance on foreign aid.
A major difference between government-funded and market-based healthcare lies in the realm of medical innovation and advancement in new, effective treatments. Under government-financed systems, price and budgetary limits and other restrictions reduce investment in medical research.
Healthcare provision is extremely complex and is also subject to cultural, political, social, and economic conditions. This makes the sector very different from other business markets that operate based on supply and demand, especially when governments ensure that healthcare provisions are distributed in adherence with certain policies.
A New Era in Healthcare Provision
Healthcare spending makes up a growing share of the world economy. As the 21stcentury progresses, the provision of healthcare to patients is undergoing changes to the overall landscape. People are living longer and spending more on healthcare. Evolving technologies are changing every aspect of healthcare. Chronic diseases remain a burden on healthcare systems. And more integration is needed for the continued improvement of the provision of healthcare to patients.
New technologies, such as fitness monitors for example, are empowering people to take more control over their own health. There is an opportunity to further help patients play a larger role in symptom disease management and their overall health through continued innovation in the healthcare sector.
There is a massive opportunity to improve patient outcomes through the engagement between clinicians and patients. Healthcare facilities are being reimagined so that they are designed around patient experiences rather than the need of the providers. They are also being digitally equipped with interfaces that streamline admission processes and recordkeeping, improve the continuity of care, and ultimately provide better patient care. New digital frameworks are allowing facilities to be updated rather than entirely rebuilt when technology undergoes drastic changes.
Integrated care is a growing focus in the healthcare provisions sector. How communities work with facilities is being reexamined to formulate the right platforms for patients and alleviate the demand for inpatient beds.
Healthcare Provision and M&A
Mergers and acquisitions in healthcare tend to always be a topic of debate, as they can have a serious impact on the patient experience. And as M&A healthcare deals become more frequent, concerns over monopolies arise. However, structure changes can be quite vital for some companies to survive in an ever-evolving industry. Additionally, M&A can actually help patients have better access to quality care and improve costs.
- According to the American Hospital Association, certain mergers can boost access to capital and other resources, lowering costs for patients.
- When small independent facilities are acquired by larger organizations, they can remain open and patients do not lose access to care.
- Under a merger, it is common to streamline protocols, which can lead to enhancements and new standards in quality care. This can also reduce the instances of patients undergoing surgical procedures at a facility with limited experience in that area.
Is it time to make a deal? At Benchmark International, our expert M&A advisors are looking forward to your call. Together we can do great things.READ MORE >>
While still managing to avoid a downgrade in April, South Africa has found itself at a crossroads of uncertainty since Moody’s Investors Service’s bleak budget reaction that sparked junk status fears for the country.
The speculation about the credit downgrade has been amplified by the fact that South Africa is in the middle of an election year – a factor that has also been blamed for a decrease in foreign investors’ confidence in the South African market.
An analysis of mergers and acquisitions (M&A) activity pre-and-post downgrades in Brazil and Greece suggest that although foreign investment will not end, investors do adapt their investment portfolios to align to the parameters of their investment mandates.
Government bonds and treasury securities become largely un-investable instruments post a sovereign downgrade. However, statistics suggest that while capital outflows are a reality, some funds do remain behind in these countries, and new funds do flow in. These investments will naturally seek viable and alternative high-return investment opportunities – options often presented by M&A. One theory that emerges from this analysis is that mature economies have more stable but lower growth rates. While developed economies also represent a seemingly lower risk, they do not offer sufficiently high returns.
In order to achieve the required overall return on investment in a risk-on environment following a credit downgrade, fund managers will inevitably still require some form of investment in emerging markets.
In order to understand the impact a credit downgrade has on M&A activity in a country, we compared M&A activity as reported by Zephyr, a Bureau van Dyk company that offers a database of deal information.
We compared M&A activity before and after a credit downgrade in Brazil, which has a similar economy to South Africa due to slow growth and political instability in both countries, as well as in Greece. The raw data suggests that a catastrophic capital flight is unlikely because the sums invested may be lower and the investment profiles between the countries are different. But opportunity abounds and returns remain strong as there exists a direct correlation between risk and reward.
According to Trading Economics, Moody’s was the first to downgrade Brazil in September of 2014 for political and economic reasons. Fitch Ratings followed suit with a downgrade in April 2015. In July 2015, S&P downgraded the country too.
The Bureau van Dyk / Zephyr data looked only at transactions where the targets were Brazilian companies and considered deals that were both completed and announced each year. The transactions analysed include mergers, acquisitions, institutional buy-outs as well as venture capital and private equity.
It is evident from the data that the volume of transactions was relatively flat after the first downgrade by Moody’s in 2014. The volume of transactions decreased by approximately one-third after the remaining agencies downgraded the country in 2015.
While the total value of transactions reported also decreased, it is evident that the average transaction value in 2017 was similar to 2015. For example, the average value per transaction in 2015 was R973 million and R929 million in 2017. On a cursory view, transaction values held up well after the Moody’s downgrade.
Analysing the data for Greece, which was downgraded in 2010, the following graph illustrates the effect on both volume and values reported by Bureau van Dyk over a similar period to Brazil.
The data illustrates a clear downward trend in M&A deal values over the period of the financial crisis in 2008, 2009 and well into 2010. While there was an initial slump in volumes and a slight decrease in value immediately after the downgrade in 2010, it is only 2017 that has subsequently underperformed the deal values as they were similar to levels seen in 2010. Again, the average deal size in the period following a downgrade is shown to have increased.
The data analysed makes no currency or inflation-related adjustments. And the data, being Euro-denominated, indicates that the M&A sector remained resilient even after credit downgrade events.
Although Moody’s did not downgrade South Africa to junk, the data from Greece and Brazil does indicate that deal flow will not evaporate should this happen. Volumes may initially drop but average deal values can be expected to increase.
While we continue to work to avoid it and acknowledge the punitive impact thereof, the statistical reality is that a downgrade is not likely to be as detrimental for the M&A sector as otherwise perceived.
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Benchmark International’s South African office has experienced a sharp increase in deal flow and activity. The company reports having received 51% more non-disclosure agreements from interested parties and a 71% increase in the number of offers received for client businesses than in the corresponding period last year.
The volume of transactions concluded by Benchmark’s South African office confirms the positive trend identified in the recently published Intralinks Deal Flow Predictor, which relies on early-stage transaction forecasts compiled from data on M&A due diligence activity in virtual data rooms. The predictive models for the second half of 2019 suggested an increase in the number of deals to be announced in the order of 5% for the EMEA region.
Benchmark International—demonstrating this trend—is pleased to have facilitated the following transactions in recent weeks:
- The investment by way of share subscription in Shift South (Pty) Ltd, trading as SweepSouth, by MIH Holdings, trading as Naspers Foundry
- The sale of a majority interest in Counterpoint Trading 439 (Pty) Ltd to Shave and Gibson Packaging (Pty) Ltd
- The merger of two undisclosed prominent e-commerce companies
- The disposal of Groupline Projects (Pty) Ltd by Wonderstone Ltd who are in turn owned by the JSE listed group Assore Ltd to Mokoena Holdings (Pty) Ltd
- The sale of Muffin Mate Coastal (Pty) Ltd to Ekuzeni Supplies (Pty) Ltd
- The sale of Jordan Human Resources to Vinton Holdings (Pty) Ltd
- The sale of an undisclosed mining equipment manufacturer to an undisclosed Canadian equipment supplier
- The acquisition of Ciba Packaging (Pty) Ltd’s non-core flexible food assets by Lampac CC, trading as Packaging World
- The sale of Nology (Pty) Ltd and Nology Distribution (Pty) Ltd to a multinational technology holding company
Commenting on the transactions, Andre Bresler, Managing Partner at Benchmark International’s South African office, remarked, “The range of transactions is a testament to the maturing M&A landscape in South Africa as well as the depth of the Benchmark team as these nine deals represent a very broad spectrum of M&A activity—from a capital raise to a merger and both partial and full disposals. There are private equity and trade-buyer deals, cross-border and domestic transactions, an acquisition, and even the disposal of a non-core asset of a listed entity. It’s certainly an exciting time for M&A in South Africa with no significant slow-down expected; we anticipate a number of additional transactions to finalize in the last quarter too.”
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The Role of Mining in the World
The global mining sector employs millions of people worldwide and its role in the global economy continues to significantly evolve. Standard functions in the mining industry include production of metals, and metals investing and trading. Additionally, there is a strong correlation between the global mining industry and other industries. For example, elements such as copper, nickel, and aluminum are core components used in the construction, aviation, automobile and other industries. In areas where mining is more concentrated, the industry plays a more important role in local economies.
According to the International Council on Mining and Metals, at least 70 countries are extremely dependent on the mining industry, and most low-income countries rely on it to survive. The same study shows that in many low-middle income countries, mining accounts for as much as 60-90% of total foreign direct investment.
Increased populations and urbanization drive the demand for growth in mining activities, as there is more demand for cars, buildings, and consumer products.
M&A Challenges and Considerations
Mergers and acquisitions can be intense in the global mining industry. They are heavily influenced by timing, fluctuating commodity prices, supply uncertainties, and come with many variables depending on transaction size, volatile markets, and the geo-location of the mine. There are certain considerations that are unique to the industry:
- Mining projects can have limited lifecycles depending on the availability of deposits.
- Mines cannot be relocated to areas that may be more beneficial economically or politically.
- Because there are great technological and geological constraints, mining companies are not able to adjust production to increase revenue.
- Funding is less readily available, access to bank financing is limited, and investors tend to be more cautious and selective.
- Countries may have greater government regulations, and indigenous mining agreements designed to mitigate negative effects and to share the benefits from commercial mining activity.
- In some parts of the world, there are human rights concerns, increased policing for corruption, and environmental impacts.
- Once the ore is extracted, mine closure procedures can take several years, in turn, expending money and labor for activities that are not yielding any profits during that time frame.
Gold Mining Sector
The gold mining industry is known for placing a high premium on growth. As of 2019, analysts reported that the leaders of gold mining companies say that they find mergers and acquisitions to be an easier path to growth than exploring for new untapped deposits underground. Modern M&A deals in the business of gold mining now focus more on capital efficiency and operational excellence, with heavy emphasis on evaluation of the management team.
Copper Mining Sector
Copper is an essential metal needed by industrial economies. Globally, the copper mining industry is one of the leading metal mining markets. The continued innovations in battery technology continue to attract investment into metals such as copper, which plays a critical component in the function of batteries.
Coal Mining Sector
Coal has been widely used to provide power since the Industrial Revolution in the 1800s. In the 21stcentury, coal mining faces new challenges alongside the pursuit and popularity of renewable energy sources. At the same time, innovation in the coal mining industry remains alive. New, state-of-the-art technologies are being developed. Sophisticated robotic mining machinery and computerized systems are being used to streamline mining and boost production to unprecedented levels. And industry leaders are looking into new uses for coal beyond its long-standing role in the energy sector. An example is the development of carbon fiber, currently used in the aerospace field, and potentially used in prosthetics, electrodes, 3D printers, and more.
Shared Buyer and Seller Risk
In the mining sector, both buyers and sellers alike face risks of deal failure, but are more likely to see success if a strategic plan is followed. Two of the most important factors are pricing efficiency and post-sale integration. Both buyers and sellers tend to be more cautious in this industry.
- Sellers should expect buyers to be on the lookout for the risk overpaying for your company, not being able to integrate the company as efficiently as possible, and dealing with issues such as uninsured legacy liabilities. Buyers may become interested in underperforming assets because they have more experience and access to financing that the existing owner, as well as better government relationships, a different risk profile, and the option of consolidation with existing mines or facilities.
- Sellers risk facing purchase price disputes and post-deal issues with warranty and indemnity claims. Plus, fluctuating markets, especially in mineral-rich regions such as Africa, can make valuation difficult.
If proper precautions are taken to understand and avoid these issues, overpayment or post-close surprises can be averted. Other benefits that come with proper preparation include improved sale and purchase agreements, smoother integration, and more efficient corporate governance. Enlisting experienced M&A advisors as early on in the process as possible can aid in significant mitigation of transactional risks.
Please feel free to call us at Benchmark International to set up a conversation with one of our M&A specialists if you are thinking about selling a business. We look forward to discussing how we can help you with growth strategies, exit planning, or any type of transaction advice you may need.READ MORE >>
The global information services (IS) industry employs integrated methods to gather, process, communicate and store different types of information for the purpose of improving efficiencies for society and organizations. IS data—which typically covers people, software, hardware and procedures—is used for study, analysis and better decision-making processes.
The IS landscape is comprised of companies that vary in size, including:
- Global multi-billion-dollar firms that cover several sectors
- Firms with hundreds of million of dollars in revenues and more concentrated areas of focus
- Smaller firms that focus on niche markets and specific geographic regions
M&A in the IS Industry
Many large IS companies use regular acquisitions to execute business strategies such as product enhancement, geographic expansion, keeping pace with changing marketplaces, and expansion into adjacent markets. Acquisitions in this sector can also serve as an alternative path to product development, allowing companies to purchase capabilities and content rather than create it themselves. IS companies typically look to acquire content that fits well within their existing offerings.
Synergy and Value
Value through M&A in this industry comes in the form of clear synergies and improved distribution capabilities. This is partially due to the fact that IS content can be used several times at no added cost. After a one-time integration of content and capabilities between the two companies, there is much versatility in how the content can be used. Synergies are especially important to M&A deals when they are part of a business owner’s exit strategy in order to maximize the value of the transaction and fulfill the business owner’s personal objectives and vision for the company.
Consolidation planning is key to company valuations. IS companies do not typically view acquisition targets as stand-alone enterprises, but rather as opportunities to consolidate acquired content into existing platforms, therefore gaining positive revenue, improved cost synergy, and reduced technology costs.IS transactions can happen at a higher price if earnings and product synergies can be pinpointed and their profitability is clearly identified.
Active IS Market Segments
In the IS industry, mergers and acquisitions activity tends to occur most in the following segments:
- Business Intelligence
- Financial Markets Information
- Legal, Tax & Regulatory Information
- Credit & Risk Management Information
- Marketing Information
Business Intelligence IS
The Business Intelligence segment of IS—defined as information on industries, products and services that help companies identify market opportunities, respond to competition, and plan new products—is a highly active area for M&A. These companies use acquisitions to increase their existing coverage and expand into adjacent markets.
Financial Markets IS
In the segment of Financial Market Information, acquisitions frequently focus on adding content and capabilities to their distribution platforms to serve large portions of rapidly changing financial markets. New data is always in demand and new types of analyses are needed. Companies seek innovation, new customers, and stronger financial market data versus that of their competition.
Legal, Tax & Regulatory IS
The area of Legal, Tax & Regulatory Information is subject to ever-changing laws and regulations around the world. Also, IS companies face added regulations with the expansion of cross-border trade. To adapt to the need for product changes, these firms turn to acquisitions to expand content and capabilities.
Credit & Risk Management IS
In this particular IS segment, it is most common to see specialized firms being active in M&A transactions, with their primary strategy being to obtain more individual credit content. Also, as new entrants emerge in this space, the major credit ratings agencies see buying them as a way to strengthen their existing credit rating models.
Marketing IS companies provide market research, audience management and other general marketing services. Companies in this diverse area use acquisitions for market consolidation, increased synergies, and the expanded mix of tools and information.
The Importance of Expert Guidance
As with any industry, it is recommended that business owners within the IS space engage the expertise of reputable M&A advisors to execute a deal in a sector that is subject to fast growth and high margins. These deals involve high levels of complexity and require the perspectives and resources of a partner that is committed to serving the best interests of the seller.
Choosing to sell your company is a big step. At Benchmark International, we understand what a life-changing decision it is. Our M&A experts are here to walk you through the process and provide the utmost peace of mind every step of the way. Give us a call so that we can embark on this exciting journey together.READ MORE >>
Two of the most transformative factors in the world of automotive and technological development have been the advent of ride-hailing platforms and autonomous vehicles. They each create various mergers and acquisitions opportunities both individually and in concert with each other in various capacities on a global scale.
Ride Service Companies
Ride services—also known as ride hailing and ride sharing—will continue to create opportunities for M&A in decades to come as their popularity around the world continues to increase. Uber, DiDi Chuxing, Gett, Grab, and Lyft are some of the leading firms in the market. As more companies emerge, the market becomes more and more fragmented. The right M&A transactions can help companies increase market share and improve service quality.
It can be relatively inexpensive to start up a ride-hailing company. After all, they depend on contract labor that does not rely on special skills or loyalty, and are powered by free mobile apps that easily bring their service to the public’s fingertips. While this makes it easy for more smaller firms to enter the space, it also creates ripe opportunity for M&A activity in an incredibly competitive industry that has been predicted to one day be dominated by only a couple of major players.
The ride hailing sector is not unlike other transportation industries, as it is subject to strict laws and regulations that can make M&A challenging, meaning that deals in this space require added due diligence.
A strong investment climate lies in the sector of autonomous or self-driving vehicles. Traditional auto manufacturers are investing billions of dollars and stepping up efforts to try to catch up with advancements already pioneered by the big tech companies. It is both faster and easier to acquire existing technologies than to try to reinvent the self-driving wheel. While they retain the advantage of being capable of the mass production of vehicles, it is expansion of their capabilities that is a major driver of M&A.
Companies at every level of involvement in the auto industry need to adapt their strategies, from manufacturers to suppliers to retailers. M&A is a necessary strategy for all existing industry players to maintain any foothold as newer digital companies transform the space. This includes rethinking business models and emphasizing innovation to establish themselves as a leader in the future.
Autonomous vehicles also present the possibility of major ramifications for other industries.
- Law enforcement: With self-driving cars programmed to obey traffic laws, fewer police resources may be needed on roads and less local revenue could be earned from citations.
- Insurance: With fewer accidents come fewer insurance claims, reducing the cost of insurance premiums.
- Healthcare: Ideally, fewer traffic accidents can reduce reliance on emergency services.
- Air & rail: Using autonomous vehicles for long-distance travel can mean fewer passengers on airplanes and trains.
- Advertising: Withdrivers turned into passengers, their attention can be shifted from audio to visual, and advertising could be targeted by location.
Many companies around the world have demonstrated enthusiasm over the prospect of disrupting public transportation as we know it, and have been eager to invest in companies that are focused on bringing autonomous vehicles into this realm. This includes robotic taxis, driverless shuttles, electric car ride services, and taxis that are not equipped with steering wheels or pedals.
Countries leading the way in the development of autonomous driving technology include Norway, Singapore, the United States, Germany and Israel.
Many challenges exist before the proliferation of autonomous vehicles on roads everywhere is a real possibility. While careful planning and programming goes into the technology that makes these vehicles both operational and safe, there are unexpected scenarios that are not easy to predict or take into account. These situations include other drivers’ errors such as going the wrong direction or making illegal maneuvers that can confuse the technology that a self-driving car relies upon. Essentially, the radar and high-resolution cameras in autonomous vehicles are able to detect and identify objects (such as a bicycle or pedestrian), but it cannot predict what those objects might do next.
These types of uncertainties, along with the strict regulatory environments surrounding self-driving vehicles, can also make the M&A market in this sector more complicated to navigate. It is prudent to consult with M&A experts regarding the opportunities in this area.
How can Benchmark International help you realize your dreams for your business? Give us a call and set up a meeting with one of our M&A experts. Whether you are looking to sell, grow, or formulate an exit plan, we are committed to helping you achieve what is best for you and your company.READ MORE >>
Four Colour Imports, LTD (“Four Colour”) of Louisville, KY has been acquired by Vivos Corp of Manassas, VA. Four Colour is a non-traditional printing and sales service provider specializing in book and catalog print. The company uses advanced technology to supply its clients with the highest quality pre-press, printing and book binding services.READ MORE >>
Benchmark International is pleased to announce the transaction between Yorkshire-based Group Management Electrical Surveys (GMES) and Nottingham-based Phenna Group.
Established in 1990, GMES provides specialist electrical services to international blue-chip clients. It concentrates on delivering independent electrical inspection and testing services in line with BS7671 and IET Guidance Note 3 for all types of new build electrical installations, in addition to thermal imaging surveys and electrical installation condition reports.
Phenna is a group of specialist businesses focused on the testing, inspection, certification, and compliance (TICC) sector. Its aim is to build a global portfolio of independent TICC businesses, with GMES representing Phenna Group’s fifth acquisition since its formation less than 12 months ago.
Steve Cressey, Managing Director of GMES will continue in his current role, alongside the company’s very experienced management team and highly skilled workforce.READ MORE >>
Hotel and hospitality brands have an insatiable appetite for rapid growth and there is an endless ongoing battle for global share. Because the industry is highly fragmented and brand driven (the top hotel brands only account for a third of rooms worldwide), mergers and acquisitions are always on the table as a key growth strategy. Since 1985, there have been more than 13,800 deals in the hotel and lodging industry, valued at $809 billion.
Studies have shown that, on average, lodging M&A is unique versus those in other industries because both the target and acquirer are better off following a merger.
Hotel M&A Value Drivers
There are several value drivers when it comes to hotel brand M&A.
- Strategic value drivers include more customer offerings, the creation of new markets, and further reach into existing markets.
- Operational value drivers include factors such as expanded loyalty programs, consolidated corporate teams, and improved technologies and reservation systems.
- Additional key value drivers of a hotel brand include the integrity of its global trademark portfolio, and the value of both existing and potential management/franchise agreements and real estate portfolios.
Clearing Hurdles in Hospitality M&A
It is not uncommon for various issues to arise during M&A transactions between hospitality companies. However, taking the proper steps can alleviate these concerns.
Clarify intellectual property.
Portfolio expansion through the acquisition of additional brands is a major reason for many M&A transactions within the hotel sector. In these cases, the target company's ownership of its intellectual property is very important to buyers, so it is just important to sellers. This is where third-party ownership claims can arise as an issue in a transaction. If a hotel brand shares valuable restaurants or other brands with a third party, and there is any chance that the third party could claim ownership of any interest in the brand, it can significantly devalue the brand and the target company. Ownership agreements must be adequately and clearly documented before entering into an M&A transaction. It is going to be crucial to the accurate valuation of the company.
Protect your data.
Technology is integral to every step of the hotel booking process, which is why, as a seller, you can expect buyers in M&A transactions to heed the risks and liabilities surrounding the target company's data protection and cybersecurity practices, and its compliance with governmental regulations. There are web and mobile bookings, check-ins, complicated reservation systems, and even customer review websites to consider. Due diligence in regard to detailed data protection and cybersecurity at length is imperative. In order for a target company to maximize its value, management should thoroughly review its current compliance with existing regulations and take all precautions to ensure best practices are in place to minimize exposure to potential data breaches.
Minimize withdrawal liability.
Large hoteliers and hospitality companies typically have unionized employees covered by collective bargaining agreements that require contributions to one or more multi-employer plans. Withdrawal liability can occur when an employer has a significant reduction in union workforce, a complete union workforce reduction, or a withdrawal of all employees from a pension plan as a result ofthe event of a change in management or a sale of a hotel. Labor laws vary by country, but it should still be noted that there could be issues with determining whether the hotel owner or manager is the employer by legal definitions in that reason (for example, the Employee Retirement Income Security Act of 1974 [ERISA], in the United States). Multiemployer plans have the ability to disagree with who is considered the employer, and assess withdrawal liability on the party it determines is the employer. To mitigate the risk of withdrawal liability, all parties should consider who is the employer for labor law purposes, and who bears the liability under the management agreement.
Working with an experienced M&A advisor is a game-changer in minimizing risk and closing a successful deal. We look forward to hearing from you about your interest in M&A as a seller of a company in any industry. Our global M&A experts are waiting for your call.READ MORE >>
The construction drilling industry is a very diverse market that handles various private and public contracts that include infrastructure expansion, excavation, road boring, poly piping, trench work, geotechnical drilling, and foundation drilling.
The key drivers for mergers and acquisitions in the construction drilling industry for most companies include:
- The objective to grow and diversify the businesses
- Expansion of services and capabilities
- The need to address qualified labor shortages in an industry where talent is increasingly difficult to find
At the same time, labor shortages can also be a reason that some drilling businesses may hesitate to make a major acquisition, as they do not have enough young leader talent to make it work in their favor.
The sectors that continue to be ripe for acquisition activity are civil infrastructure and industrial. Organic growth and access to labor is challenging for both of these areas.
Consolidation is also driven by a customer demand for large companies that offer integrated, single-source solutions. This includes the collaboration by design and construction firms looking to vertically integrate and expand their delivery capabilities. Additionally, strategies are about more than the creation of better solutions for clients in the construction drilling industry. They are also motivated to create a better platform for employees. In what is a very competitive labor environment, offering a solid growth platform is just as crucial to employee retention as it is to customer satisfaction and shareholder value. Employees can benefit from the advantages and growth possibilities that come with being part of a larger infrastructure company.
The interest of buyers in the drilling sector is partially driven by the need to remain competitive by adding capabilities and scale in a market where competitors are acquisitively expanding their own capabilities and scale. With a divide between large integrated firms and smaller niche providers, those that are not growing at the same rate as their competitors risk getting lost somewhere in the gap.
Horizontal Directional Drilling (HDD)
Horizontal Directional Drilling is a trenchless procedure that is utilized to install underground pipes, cables and conduits along a pre-determined route by using a surface-launched drilling rig. It has gained great popularity in the industry because it causes minor damage to the topography of the adjacent areas.
The opportunities for growth in the HDD market are strong because of the high demand that comes from the telecommunications sector. As telecom companies take action to expand broadband service availability, it increases the demand for the installation of cellular towers. As digitization is steadfast in both developed and developing countries worldwide, cable, broadband and fiber companies are expanding networks to serve the growing demand. The growth of the HDD market is also heavily supported by the steady demand from utilities such as electric, water and natural gas distribution. Utilities account for more than half of the overall revenue in this market.
Some of the unique challenges this industry faces are related to a lack of contractor review for construction assessment prior to starting projects, and the hiring of unqualified engineers and consultants with no prior experience.
The HDD market sees significant activity in North America, with telecommunication and energy amassing a major share of the revenue. Other major markets that have a high demand for utility installations and broadband access include China, India, Australia, and Japan.
The world is full of opportunities and Benchmark International has the connections to help you effectively grow your business or sell your company whether it is domestically or across borders. Set up a call with one of our M&A experts and we can begin to delve into what how we can maximize your value and make the markets work for you.READ MORE >>
The electronics industry manufactures electronic equipment used within industrial electronics such as semiconductors, as well as consumer electronics such as televisions and smartphones.Companies in this sector design, develop, manufacture, assemble, and service equipment and components.
By the year 2024, the global consumer electronics market is expected to reach
Growth within the electronics manufacturing industry is driven by the following factors:
- The demand from emerging market economies
- Investment in foreign production of electronics, which results in new factories and factory expansions
- Increased consumer spending
- Increased competition that drives down production costs and expands the availability of affordable electronics products
- Development of new technologies
The Semiconductor Segment
The semiconductor industry creates products such as memory chips, microprocessors, integrated circuits, and specialized processorsfor a wide variety of uses in electronics and computers. Primarily, large companies dominate this particular industry segment, but smaller, niche players are carving their place in the market.
The semiconductor industry is highly influenced by new technologies and global economic cycles. When product prices are high, companies produce more of them. This saturates the market and prices drop. As a result, some companies choose to produce less, gradually driving prices back up. The industry also requires a great deal of capital, and research and development, and is subject to long lead times from concept to production.
Because there is much reliance on economic environments—plus there is the high degree of risk due to cost of R&D—smaller companies and startups tend to prefer to be acquired by a larger semiconductor company as a more realistic strategy to create steady future growth.
Next Wave Tech
Over the next couple of decades, printed, flexible and stretchable electronics will continue to represent a massive opportunity in the future of tech, as well as M&A activity. These electronic innovations include:
- E-textiles, smart clothing, and wearable electronics
- Flexible displays and screens
- High-performance, low-power electronics
- Wearable and mobile health monitoring tools
- Flexible, foldable, roll-able batteries and photovoltaic technologies
- Miniaturized components
Automotive Electronics Evolution
As software and electronics play an increasingly essential role in vehicles, the communication technology giants have been aggressively investing in the automotive industry. At the same time, traditional auto manufacturers are actively seeking to partner with technology companies in order to be more productive at digitizing and innovating their offerings. These market dynamics and adaptive strategies are key drivers of M&A in the automotive electronics sector.
The market for automotive electronics is expected to exceed $100 billion by 2025.
Restructuring through M&A enables these companies to better integrate, reconfigure, and pool resources, gain new and specific knowledge, and enhance overall capabilities.
Integration of cultures can be an important challenge when a smaller tech firm converges with a giant conventional automaker. For M&A to be successful, both companies in the transaction must be mindful of how greatly differing cultures need to be integrated with care.
Achieving Successful M&A
Beyond cultural integration, other important considerations in an M&A transaction between organizations include:
- Proper targeting and vetting of both companies
- Identification and mapping of internal processes of both organizations
- Evaluation of the structural fit for each organization
- Locations of all global and regional offices and facilities
- Synchronization of the data, applications, and types of technologies used by each organization
- Assessment of how their legacy systems and languages might conflict or be enhanced
It is also critical to the deal that both parties are kept on track and expectations are properly managed. This is where the partnership with an M&A advisory firm can make all the difference in a smooth transition and the ultimate success of the deal. This valuable partnership can also save significant time and financial resources.
If you wish to formulate a plan to sell, grow or exit your company, contact us at Benchmark International today. Our experts are uniquely qualified to coordinate deals that deliver on every single wish and stipulation expressed by the business owners with which we form long-lasting partnerships.READ MORE >>
By investing in the transportation and logistics sector, global companies open up the opportunity to advance the flow of goods throughout the world. Businesses in this industry, both domestic and international, benefit from integrated supply chain networks that connect companies and consumers through multiple transportation modes within industry subsectors.
- Logistics services include the management of fleets, warehousing, order fulfillment, logistics networks, inventory, supply and demand, third-party logistics, and other support services.
- Air and express delivery provide accelerated end-to-end package delivery services, as well as infrastructure for exporters. Growth in this subsector is greatly driven by the expansion of e-commerce.
- Freight rail moves high volumes of heavy cargo and products long distances via rail network.
- Maritime includes carriers, ports, terminals, and labor involved in the transportation of cargo and passengers via water.
- Trucking moves cargo over the road by motor vehicles over short and medium distances.
The transportation and logistics industry is consistently a highly fragmented sector. This is largely due to the fact that most fleets are small and there are few barriers to entry when it comes to starting a small fleet. Another major factor is that larger carriers have difficulty retaining drivers and achieving organic growth. Owners are always looking to gain efficiencies, optimize routes and spread fixed costs across more operations. In order to do so, they must create greater scale. It is common in the transportation and logistics sector for acquisition strategies to revolve around broadening service offerings, branching out the customer base, and expanding geographical reach.
Economic and Industry Factors
Burgeoning economies drive demand in the transportation and logistics industry. More freight demand stems from strong consumer confidence and upward surges in manufacturing, resulting in more loads and vehicles on roads. When this climate is met with driver shortages, it increases transportation costs, which can reduce margins.
The Impact of Amazon.com
Amazon has greatly raised global consumer expectations when it comes to rapid fulfillment. This demand has shifted distribution patterns, pushing companies to move warehouses closer to customers. Getting products to consumers faster increases the number of touch-points along the freight network.
The introduction and evolution of new technologies in the transportation and logistic industry are addressing over-the-road challenges such as driver shortages. Long-haul robotic trucks are being developed and tested. Driverless and remotely piloted deliveries are being incepted, such as aerial delivery drones. Experts expect it to be a very long period of time before these advancements face more mainstream use, but someday in the future, the possibilities they hold will be very real.
Artificial intelligence, the Internet of Things, data collection, machine learning, and blockchain are all being used within the transportation and logistics industry to gain major competitive insights and advantages, and therefore make better decisions that improve the performance of the company.
Transportation and Logistics M&A
In the 21st century M&A market, transactions in the transportation and logistics industry are often driven by specific demographic, macroeconomic, and regulatory factors.
Sellers are motivated by:
- The desire to take advantage of a strong overall M&A market
- Volume limitations due to driver shortages, tight labor markets, aging drivers and increasing hiring costs
- Aging ownership without a succession plan in place (usually companies with <$50 million in sales)
- Unease about industry regulations around safety, driver hour limits and logging devices
- The use of cross-border deals to counter negative impacts on operations, access new markets, and protect supply chains, as remaining agile in a globalized market is critical
Buyers are motivated by:
- Leverage of economies of scale in order to maintain profitability
- Capitalization on domestic economies with strong growth potential
- The need to hire drivers while facing tight labor markets and rising hiring costs
- Acquisition of smaller companies that expand service offerings
- Use of various asset models to free up capital and invest in better equipment
A high level of activity in M&A in the transportation and logistics industry is contingent upon suitable timing in a growing economy, low interest rates, and widely available capital. It usually takes up to nine months to complete an M&A transaction, so timing and forward thinking should be considered when deciding to take your company to market.
Are you considering selling your company? Even if you are merely exploring the idea, our M&A specialists at Benchmark International can help you decide if and when a merger or acquisition may be right for you. We’ll work closely with you to ensure that you never have to compromise value or timing, and that you are only matched with the most suitable opportunities.READ MORE >>
Benchmark International is pleased to announce the transaction between online supplier of catering equipment, RG Distributors (trading as eCatering), and private investor, Headway Point.
eCatering is an online supplier of commercial and domestic catering equipment such as refrigerators and cooking and food preparation equipment to restaurants, cafes and hospitals, as well as to end-users. It is also involved in the secondary supply of UV sterilisers directly to hairdressers, tattoo artists and dog groomers. Operations are conducted from offices in Cumbria with 40,000 sq ft of warehousing facilities in Kendal and Manchester.
Headway Point is led by Duncan Evershed, a private investor.
On behalf of everyone at Benchmark International, we would like to wish both parties every success for the future.READ MORE >>
The renewable energy industry is one of considerable expansion. Global efforts to cut back on the use of non-renewable energy and to reduce carbon emissions are proven to stimulate investment and growth.As the world’s energy needs continue to change, the opportunities for mergers and acquisitions continue to evolve. And as the big technology companies get involved in renewable investments, major oil and gas companies follow their lead.
M&A activity in renewable energy is driven by traditional energy businesses striving to acquire new capabilities, institutional investors seeking stable returns, public demands to address climate change, and countries working to integrate cleaner energies into their existing energy mix. The European Union expects to achieve 32% of renewable energy consumption by 2030.
Established, traditional power companies must rely on M&A to fill gaps in capabilities because they do not possess needed skills that were never part of the mix in traditional grid-based power systems.
Once viewed as a luxury form of energy only used in developed countries, renewable energy is now being adopted worldwide and in many developing countries, such as those in Africa and Latin America. Fossil fuel energy can be costly and difficult to transport and distribute in remote areas, making locally sourced renewable energy a practical option.
There are also other areas of continued development in the realm of renewable energy that offer M&A opportunities for investment and growth. These include the further development of electric vehicles, the electricity storage market—particularly battery technology—extending from technology manufacturers into the mineral supply chain and storage control systems. Digitization of the sector also presents the types of abundant opportunities that are inherent to technology and data in the 21stcentury.
Business Valuation As a Factor
Among the deal-specific factors that influence the valuation of individual renewable assets are:
- Asset quality
- Finance costs
- Regulatory stability
- The state of the wholesale energy market
- The competitive environment
- The lifecycle stage of the asset relative to the prevailing subsidy regime
- Curtailment risks beyond the control of the asset owner
Many governments offer incentives and subsidies for renewable energy production and use, strengthening the value of companies of this sector.
Key Due Diligence Areas
In the acquisition of a renewable power project, the following due diligence topics must be considered:
- The venture must have an energy generation license (or exemption from a license) and adhere to the terms of the license. It is also important to know if there has ever been a breach of the license.
- There must be assessment ofthe project’s profitability and any credit support requirements.
- It must be determined whether there will be any government subsidies for the project, which can affect its funding.
- Property rights and planning permissions must be documented, ensuring that the correct leases, easements, planning permissions, and consents are in place and compliant.
The following key contracts are specific to the renewable energy sector and will be needed:
- A shareholders’ agreement or joint venture agreement
- Power purchase agreement
- CFD or capacity agreement
- Fuel supply agreement (in the case of biomass or biofuel generating plant technologies)
- Engineering, procurement and construction contract
- Operation and maintenance (O&M) agreement
- Connection agreement
- Financing documents
Because completing an M&A transaction in the renewable energy industry is extraordinarily nuanced and complicated, and embroiled in tedious due diligence processes and paperwork, it is highly advised that you seek the expertise of an M&A advisory firm before attempting to broker a deal.
If you are considering selling your company, or even looking to plan an exit for your retirement, please call our M&A experts at Benchmark International to see how we can help you formulate a winning strategy. We are eager to get to work.READ MORE >>
If you are a seller or buyer that doesn’t have a lot of experience in the world of M&A, it can be frustrating and confusing trying to understand the terminology that is used. As much as we try not to confuse our clients, it is many times more efficient to use the specialized terms of the profession. To help, we have put together a list of common M&A terminology that we hope will assist you and make the process smoother if you are buying or selling a business.
Acquisition: One company takes over the controlling interest or controlling ownership in another company.
Add-On Acquisition: A strategic acquisition fit for an existing platform/portfolio company.
Asset Deal: The acquirer purchases only the assets (not its shares) of the target company.
Confidential Information Memorandum: Sometimes called “the book,” pitchbook or a deck, the Confidential Information Memorandum is a description of the business including products, history, management, facilities, markets, financial statements and growth potential. This is used to market the business to potential buyers.
Data Room: Secure online website that contains information including contracts, documents, and financial statements of the business being sold. These online data rooms can track who views the information.
Deal Structure: May include seller debt, earn outs, stock, or other valuables besides cash.
Due Diligence: Part of the acquisition process when the acquirer reviews all areas of the target business to satisfy their interests. This includes viewing the internal books, operations, and internal procedures.
Earn-Out: A type of deal structure where the seller can earn future payments based on certain achievements or the performance of the business being sold after the closing. These are often based on revenue targets or earnings.
EBITDA: Earnings before interest, taxes, depreciation, and amortization.
Goodwill: An intangible asset that comes as a result of name, customer loyalty, location, products, reputation, and other factors.
Indication of Interest (IOI): A letter from the buyer to the seller that indicates the general value and terms a buyer is willing to pay for a company. The letter is non-binding to both parties.
Letter of Intent (LOI): A document that lays out the key terms of the deal. LOI’s are typically non-binding for both parties except for certain provisions such as confidentiality and exclusivity.
Multiple: Common measure of value to compare pricing trends on deals.
NDA: A confidentiality agreement that prohibits the buyer from sharing the confidential information of the seller. This is usually signed before the seller provides detailed, sensitive information to a buyer.
Purchase Agreement: The contract that contains all the specifics of the transaction and the obligations and rights of the seller and buyer.
Representations and Warranties (reps & warranties): Past or present statements of fact to inform the buyer or seller about the status and condition of their business and its assets, employees, and operations.
Search Fund: This is an individual or a group that is seeking to identify a business that the individual or group can acquire and manage. Usually, search funds do not have dedicated capital but instead, have informal pledges from potential investors.
Teaser: An anonymous document shared with potential buyers for a specific business that is for sale.
Working Capital: A financial term used as a measurement of a business’s ability to meet its financial obligations over the coming business cycle (which is 12 months for most businesses). It is not defined under Generally Accepted Accounting Principles (GAAP). However, it is commonly calculated using this formula: Working Capital = Current Assets – Current Liabilities.
If you are thinking about buying or selling a business, Benchmark International has a team of specialists that can help answer your questions. A simple phone call or email to us can start the process today.
Waste disposal and recycling companies provide essential services to global communities, giving this sector a relatively high level of resistance to changing economic cycles. Urbanization, increasing populations, and consumer spending drive the ever-growing demand for waste and recycling services.
By the year 2050, global waste generation is expected to rise from 2.01 billion metric tons to 3.40 metric tons - an increase of 70%.
Of the massive amounts of waste created globally, less than one third of it is recycled. Canada and the United States lead the world in waste production, followed by Europe.
The management of sustainable materials, including recycling, can help conserve resources, reduce waste, and minimize the environmental impacts of materials. An increasing number of regions of the world are using sustainable management practices for regulation. National governments are developing long-term strategies that assess their country’s current waste situation and are setting targets for recycling, sustainability, citizen awareness, and rehab of contaminated sites. There is also a movement in low-income countries toward better recycling, and waste disposal in controlled or sanitary landfills.
A sub-sector of the environmental services industry is environmental consulting. Environmental consultants ensure company compliance with environmental regulations.
With the world’s heightened focus on environmental issues, this global market continues to expand. A relatively small group of firms dominates this market. In order for other firms in this industry to remain competitive, they need to focus on specialized expertise, targeted M&A activity, and dependable client relationships.
Waste and Recycling M&A
In the waste and recycling sector, mergers and acquisitions activity is stimulated by quality and consolidation. Positive debt financing and public equity performance drive M&A valuation higher for waste and recycling companies. Investing in waste management and remediation is especially attractive to private equity for several reasons, including:
- Lower risk through essential services
- High barriers to entry
- Demonstrated track records
- Modest capital investments outside the recycling sector
- Large number of industry players
From a seller perspective, you should be aware of the three most common considerations for M&A deals in this sector.
- The buyer’s strategic rationale: Does the transaction tap new markets, complement existing markets, or deliver new service offerings?
- The health and growth of the target company: Does it have favorable contracts and strong assets that will not require a significant infusion of capital?
- The company’s management team: Can the buyer be confident in a smooth transition and a good post-acquisition relationship?It is not uncommon for waste management companies that have more impressive management teams in place to garner higher valuations.
Owners should focus on removing any uncertainty surrounding their company. In the months leading up to a possible sale, contract negotiations are key. Owners should also be aware of the possibility for anti-trust issues to arise, even when the geographic impact is limited to a single local area. These issues can impact the timing and outcome of a deal so an anti-trust risk assessment should be conducted prior to going to market.
When to Sell
As a seller of a waste management company, determining when to sell can be a difficult decision, but certain factors should be considered.
- Are contracts secure with favorable terms?
- Are revenue streams are diverse and trending positive?
- Is the fleet is in good condition?
- What are the conditions of the market?
Procure M&A Experts
Company owners in this sector who enlist experienced M&A advisors are less likely to leave money on the table in a sale. It is important to choose the right buyer, get proper valuation of the business, and exit at the right time.
Industry lenders have reported that there are many more unannounced deals in the waste industry than those anyone hears about. For this reason, it makes perfect sense for a buyer to partner with an expert to seek viable acquisitions. The waste industry is highly fragmented and, other than the top three major players, most companies post less than $20 million in annual revenue. Typically, they do not have the knowledge or bandwidth to blindly jump into the M&A market. The right M&A advisor can identify quality companies not being offered on the market and negotiate a successful sale.
If you are thinking that the time has come to sell your business or to formulate a growth strategy, contact us at Benchmark International today. Whether you are in the waste industry or any other industry, we can connect you with the right buyer. Our approach is proven to get results that exceed our clients’ expectations time and time again.READ MORE >>
Population and economic growth drive the global demand for energy. Nuclear energy is the world's second largest source of low-carbon power and it makes up 11% of the world’s electricity generation. Around 50 countries use nuclear energy, and there are hundreds of nuclear reactors in operation around the world.
There are also around 225 research reactors under operation, with more under construction. These reactors are used for research and training, and produce medical and industrial isotopes.
As the world increasingly focuses on ways to reduce carbon emissions, nuclear power has the potential to play a more pivotal role, yet the industry is seeing the state of things go both ways. Following the Fukushima nuclear disaster, Japan shut down 48 of its reactors, and Germany began phasing out its nuclear program. And in several countries, the creation of new reactors is facing delays and cost issues. However, there is a bit of a dichotomy, as France still obtains 75% of its electricity from nuclear power, and the United States generates about twice as much as France.
The United Nation's Intergovernmental Panel on Climate Change has warned that reducing emissions will be far more expensive without the availability of nuclear power.
A single nuclear power plant is capable of generating a significant amount of electricity. It also requires very expensive components. For this reason, markets see drastic fluctuations from year to year. But there is still a great deal of optimism for the nuclear energy sector.
A strong appetite remains for companies that are of service to the nuclear industry. Acquirers and investors recognize the value that companies can gain from the multitude of services or products that are needed to keep the sector operational. This particular industry generates significant spending year after year in order to keep nuclear power plants compliant with the scores of federal, state and local regulations that exist. These companies must also keep up with increases in power production, which translates to regular spending on equipment and services. This type of reliability represents a quality investment opportunity. In general, the industry itself is always facing uncertainty, but the companies that have a history of serving this sector remain a solid investment.
As the energy industry transitions toward more sustainable cleaner energies, power companies are forced to alter their business models, and are faced with consolidations. Mergers and acquisitions have the power to streamline this very fragmented sector. Some companies are simply incapable of organically achieving the level of change they need. Plus, the nuclear energy industry has to compete with the increasingly popular natural gas industry.
Also, a new class known as small modular reactors (SMRs) has been introduced to the world and is garnering a great deal of enthusiasm and support.SMRs are less expensive, more efficient, offer more flexibility for utilities, and are easier to finance. This represents a stellar opportunity for growth and investment in the nuclear power industry.
There is also another sector that wholeheartedly relies upon the operation of nuclear reactors, and that is nuclear medicine. While nuclear medicine has existed for some time (widespread clinical use began in the 1950s), later 20th-century developments increased its role in healthcare (diagnostic imaging), and it is seeing an entirely new renaissance in the 21st century. Conventional pharmaceutical companies are eagerly seeking to get in the game of radiopharmaceuticals, radiotherapeutics, and radiotheranostics. In fact, it is predicted that by the year 2030, radiotherapeutics will account for more than 60% of the market and nuclear medicine will be worth $26 billion. This represents a staggering opportunity for M&A activity.
Nuclear Energy M&A Expertise
Any energy M&A transaction requires a specialized level of expertise in order to avoid pitfalls that can blow a deal. Finding the right company broker is advised.
- Knowledge of the industry and the nature of the markets are key
- The ability to identify areas of risk is imperative. The due diligence required for deals in this sector is exceptionally painstaking
- Complex regulatory issues must be firmly understood. Laws and regulations in the energy industry go beyond the energy regulatory governance to include environmental, health, safety, tax, employee benefits and property issues
- Cross-border transactions require global and local understanding of the market and the regulatory differences and how it plays into the company valuation
At Benchmark International, our global M&A experts are eager to help you make the next big move for your company and your future. Whether you wish to sell your business or plan your retirement, we have the strategies, connections, and technologies to make great things happen for you.READ MORE >>
Even though consolidation in the pharmacy services industry has been ongoing for several years, ample opportunity remains for mergers and acquisitions activity. It is inevitable that people will continue to need treatments for illnesses, which means that the demand for pharmaceuticals is always a robust market, and that directly correlates to the pharmacy industry. High demand translates to unique opportunities for sellers.
If businesses plan to stay competitive in the pharmacy industry, there are certain areas of focus in which they will need to remain vigilant.
- The pressures of an increasingly on-demand society and getting medications to patients faster
- Transparency must be clearly demonstrated when it comes to costs and start-ups are poised to capitalize on this market
- Enhanced offerings to patients such as improved medication compliance or unique services that will help maintain a competitive foothold within an aggressive industry
The subsector of specialty pharmacy has been a burgeoning industry and includes pharmaceuticals that are subject to certain criteria. They are used to treat chronic, rare, or complex conditions, and they typically come with a high price tag. Availability for these specialty treatments is only through exclusive or limited distribution and they can often require special handling, storage, or administration requirements. Their safety is under continuous monitoring and patients who require these treatments also require significant education regarding their use.
Therapies categorized under specialty pharmacy are often injections or infusions, but can also include oral biopharmaceuticals. The types of diseases typically managed by specialty pharmacies include cancer, multiple sclerosis, rheumatoid arthritis, HIV/AIDS, and hepatitis C.
It has become common for specialty pharmacies to collaborate with hospitals, retail, and manufacturers. Such collaborations can improve patient access and patient care. It has also become more common for specialty pharmacies to consolidate for growth of market share and enhanced capabilities. New technologies play a large role in specialty pharmacy scalability. While scale is a clear marker of success, growth spans beyond the biggest companies to mid-tier pharmacies. Independent retail community pharmacies are finding more cost-effective ways to serve customers by creating collaborative networks that also make them more appealing partners for manufacturers. When it comes to M&A in the arena of limited-distribution drugs, strong capabilities and payer relationships are key to gaining exclusive access to these higher-priced therapies.
Infusion therapies are already a major driver of revenue growth, and are seeing more attention in the specialty pharmacy market to boost margin growth amid a slowdown in the introduction of new drugs. Additionally, more and morepatients are being treated in outpatient settings and in their own homes. Herein lies a major opportunity for specialty pharmacy to establish complementary strengths in infusion therapy.
Nursing homes, hospitals and hospices that do not have an on-site pharmacy rely on institutional pharmacies to repackage and deliver prescription medications and other services for administration. Demand in this sector grows as the population ages, and there is a need for nontraditional revenue streams such as patient therapy evaluations, regulation compliance strategies, and clinical management programs that employ newer technologies.
In this multi-billion-dollar market, institutional pharmacy providers are faced with a particularly intricate set of organizational and regulatory challenges. Navigating these issues requires innovative solutions for institutional pharmacy providers across a multitude of topics that range from pricing to compliance.
Keys to Successful M&A in the Pharmacy Sector
Innovation is driving the charge to unlock rapid growth in this space with focus on smart, actionable data, lower cost-of-care workflows, and better technology platforms. A skillfully executed M&A strategy makes all the difference in achieving meaningful growth aspirations.
A solid integration strategy plays an important role in pharmacy M&A to ensure that the structure creates advantages and retains talent while aligning corporate cultures, values and objectives. M&A transactions in the pharmacy space require careful planning, due diligence, and attentiveness to manage the intricacies of integrating multiple systems, processes, and organizations. Aspects that should be evaluated include relationships, clinical platforms, therapeutic areas, IT capabilities, business development, marketing, and sales.
Market timing is key, and you must have a concrete plan for how to partner effectively to expand capabilities. These deals demand a clear vision and organizational leadership focus across multifunctional disciplines in order to achieve M&A synergy.
Are you ready to sell your company? Even if you are not sure, it is a great idea to have a conversation about your future with our M&A specialists. We can offer you expert strategies for how to grow your business, create a winning exit strategy, and executing a lucrative deal.READ MORE >>
Over the years, we’ve collected the questions acquirers most often ask about our relationships with our clients. We hope you will find working with us to be a beneficial experience and invite you to learn a bit more about our relationship with our clients by looking over these most frequently asked questions.
Do you ever represent acquirers? No, we are and always have been a 100% sell-side shop. Many of our team members have significant buy-side experience but we prefer to have a very narrow specialty and we take all our fees from the seller. We have, from time to time, been asked by serial acquirers to search for targets with specific criteria. We are happy to do this and when we do, we do not seek engagement by or fees from the acquirer. Instead, we work to sign up the seller as a client and then bring them to the inquiring potential buyer for a pre-market first look.
Is the relationship with your client exclusive? Yes, all of our contracts are executed on a sole and exclusive basis. The financial investment we make in each of our clients is far greater than the typical broker in the mid and lower-mid market. The process only works if we work on this basis. For the same reason, we do not co-broker with other sell-side brokers.
How are you compensated? We require a one-time retainer from all clients upon engagement and we have a success fee due upon (and at) closing. The one-time retainer is significant enough to ensure that our client is serious about undertaking the process but not large enough to muddy the waters as to our incentive. For us, the profit is in the success fee. Our success fee is a percentage of the total benefit our client will receive from you as a result of the transaction, subject to a smaller fixed minimum amount. Our contract states that it is to be paid at closing by the acquirer out of the purchase price (on behalf of the seller) on the funds flow memo.
What authority do you have? We never have authority to bind our clients in any manner. We have authority to release the teaser, which they will have previously approved of in writing, as we see fit. Following the execution of a NDA by an acquirer and our client’s written sign off on that NDA and acquirer, we are authorized to release the Confidential Information Memorandum and have wide latitude to discuss anything relevant to a potential transaction.
Are your clients tied to you for a fixed term? No. If one of our clients no longer desires to sell, they can terminate our contract by written notice. Termination is not valid if delivered while engaged in negotiations with an acquirer. In exchange for this right to come off market at any time and to defend the exclusive nature of our engagement, we have tails that we feel are industry standard.
What visibility do your clients have into the exact size of your fee? We will provide a pro forma invoice to our clients at any time. All they need to do is ask. This may be upon presentment of proposed letter of intent (LOI), upon execution of an LOI, upon review of the first draft of the definitive agreements, or even the day before closing. Our contract obligates us to do this and we believe it is the most productive way to handle the issue of fees. We encourage our clients to ask early and often. Our accounts department can typically prepare these within 24 hours of the request and they are, of course, subject to modification if and as the deal develops or changes.
What notification and information rights do you have? Our clients are obligated to keep us informed of their negotiations and provide copies of agreements relevant to the calculation of our success fee for any transaction for which we may be due such a fee.READ MORE >>
Benchmark International has advised on the transaction between remediation specialist, Ecologia, and environmental and engineering services specialist, RSK.
Founded in 2000, Ecologia provides services in the area of contaminated land consultancy, site investigation and remediation, and specialised support for environmental claims. With headquarters in Sittingbourne and further sites in Stafford, Devon and Bologna, Ecologia employs a workforce of 45.
RSK is an integrated environmental, engineering and technical services consultancy, which has 36 international offices, more than 2,700 employees and an annual turnover of £200m. It is currently investing in the development of new businesses, bolt-on complementary businesses, equipment and capabilities to increase its services and expand internationally.
With Ecologia previously supporting RSK on projects, most recently in Africa and the Dominican Republic, joining forces will enable RSK to strengthen its internal site remediation resources and equipment, grow its remediation capability and expand into new markets. As well, with Ecologia’s base in Italy and extensive international experience, the company also strengthens RSK’s international expansion across Europe.
Ecologia will join RSK’s contracting division under the direction of RSK Divisional Director Claire Knighton but will continue to be led by current Managing Director Giacomo Maini.READ MORE >>
Benchmark International is pleased to announce the transaction between Kent-based Maitland Medical and London-based The Doctors Clinic Group (DCG).
Established in 1995, Maitland Medical is an occupational health advisory/consultancy, supporting businesses with recruitment, the promotion of wellbeing at work and absence management. It has a strong team of occupational health specialists delivering tailored, high quality clinical advice and support for corporate clients, SMEs, schools and academies.
DCG provides a comprehensive range of affordable GP services, including consultations, health screens, blood tests, diagnostics and some common secondary care pathways, from 15 locations throughout London. It provides affordable and easy access for individuals, corporates and insurers to private GPs.
The acquisition is part of a strategy to become a national healthcare services platform in the UK, allowing both companies to extend their geographical reach and allow DCG to offer additional services such as absence management and ‘fitness for task’ medicals.READ MORE >>
Benchmark International Represented Provenance Consulting and Its Owners in the Sale of the Company’s Assets to Trinity Consultants. Provenance Consulting is headquartered in Borger, Texas with an additional location in Houston, Texas.
Provenance Consulting utilizes innovation and technology to provide information management systems to track, monitor, verify, and sustain data that personnel use in the operation of oil, gas, chemical plants, and facilities. They specialize in process safety management, software implementation, and custom software development. They not only implement and maintain information systems and processes, but they also build the foundation of these systems to ensure the data utilized is accurate. We appreciate the value a sustainable system brings and ensure the maintainability of every system for
the long haul.
Founded in 1974, Trinity Consultants is an environmental consulting company that specializes in industrial air quality issues. With offices located nationwide, in China and in the Middle East, they help organizations comply with applicable environmental regulatory requirements and optimize environmental performance for long-term sustainability. Trinity provides value to its clients in the areas of regulatory and sustainability consulting, environmental modeling software products and services, EH&S staffing assistance, and EH&S data
Benchmark International’s Managing Partner, Kendall Stafford commented, “Benchmark International ran a lengthy go-to-market process to ensure that we identified all potential acquirers for Provenance Consulting. The team at Provenance Consulting had their pick of options, including national and international acquirers. Ultimately, Provenance Consulting agreed that Trinity would be the best option for the company, its employees, and its customers. We wish both parties the best of luck with their future endeavors.”READ MORE >>
When companies seek to enhance their margins and better serve their customers while reducing the cost of providing services, they outsource non-revenue producing functions to outside business services providers, known as business process outsourcing (BPO) companies. In the area of recruiting, it is a form of BPO, commonly referred to as Recruitment Process Outsourcing (RPO).
The business process outsourcing industry is valued at nearly $1 trillion USD. The United States leads the market with 40% share worth more than $400 billion, followed by Europe and the Middle East with a market valued at $300 billion. The global RPO market is valued at around $5 billion.
Technology has greatly expanded the capabilities in this sector, as it is not uncommon for companies to have virtual contact centers where employees work from their homes, or to have offshore centers where support staff works from another country or continent. It is less efficient for companies to have functions performed in-house that require overhead costs. This is a major driver of growth in the BPO industry and represents a relatively still-untapped opportunity in many countries that use little outsourcing.
There are also several other benefits that companies gain by outsourcing services.
- It frees up the time and energy of internal resources to focus on bigger picture strategic goals.
- There is no time or cost associated with training new staff members.
- It offers access to regulatory experts to ensure compliance in an increasingly regulated world.
- There is no employer liability.
- Administrative services can be paid for when they are needed, as opposed to employing someone full time and having them be under-utilized.
- The interviewing and hiring processes can be avoided, saving additional time and money.
- Employers do not need to pay benefits, leave or holidays for outsourced staff.
- It also opens up the opportunity for smaller companies to carve out more market share by increasing their global reach.
Office Administration Outsourcing
A large and growing segment of this outsourcing is office administration. Essentially any company in operation has administrative tasks that must be accomplished to keep the day-to-day operations running smoothly. Administrative functions that are often outsourced include payroll, accounting, human resources, data management, employee benefits, insurance claims management, and client support.
RPO companies emerged from traditional recruiting needs, but are designed to work differently. All or part of a company’s recruitment processes is assigned to an external service provider. RPO services differ from that of staffing companies in that they do not simply find candidates to fill job openings. They focus on the overall improvement of a company’s recruiting process as more of a strategic, consultative partner. They study factors such as turnover rates, technology, scalability, and how much time it takes to fill a position.
Many companies choose RPOs to improve recruitment efficiency, reduce cost, make hiring more scalable, improve the quality of hires, meet the talent needs of short-term projects, and improve workforce analytics and planning.
The industry sectors with the largest market shares are technology, telecom, finance, insurance, healthcare, biotech, pharmaceuticals, and medical equipment.
BPO M&A Activity
As the use of BPO services becomes more common around the world, the M&A activity surrounding them increases, with a large concentration in the middle market. There is a tendency for customers to prefer fewer vendors with more diverse service offerings, motivating BPOs to use M&A to diversify to increase customer wallet share.
In this highly competitive market, BPO companies typically acquire target companies in order to gain:
- More capabilities for broader service offerings
- Exposure to higher growth end-market verticals
- Broader geographic reach to offer more global services
- Economies of scale to lower proportion of fixed costs
RPO M&A Activity
RPO companies are becoming increasingly globalized as a result of mergers and acquisitions. To be successful in this growing market, RPO providers have found different ways to distinguish themselves.
- They specialize across geographic regions, vertical markets, related jobs, and buyer segments.
- They offer value-added and technology-based services, such as analytics and mobile recruiting.
For an M&A deal to be successful, sellers should conduct an all-encompassing assessment of their value proposition and how it ultimately aligns with the buyers’ interests.
M&A Due Diligence
Conducting due diligence for a merger or acquisition is always a time-consuming undertaking, and this is especially true when the target is a BPO company. Location analysis of the target company should be performed for any potential acquisition to help form an accurate purchase price and avoid costly post-closing issues. It assesses site location, economic development, competition, real estate markets, workforce issues, saturation levels, historical attrition rates, recruitment, and retention viability. Partnering with a specialty company broker who has this type of experience is advised.
If you are ready to take the next step with your business, whether it is selling, expanding, or retiring, contact our M&A specialists today. Our expertise, global connections, and proprietary technologies are here to guide you to a prosperous future.READ MORE >>
Benchmark International facilitated the transaction of Gene Larew Lures, LLC in Tulsa, Oklahoma to PRADCO Outdoor Brands.
Gene Larew Lures, an Oklahoma-based company, was purchased by owner Chris Lindenberg in 2006. The company became a market leader with the Gene Larew brand synonymous with bass baits, the Bobby Garland brand, and the Crappie Pro brand.
Benchmark International proved its value by finding a buyer with experience in the industry through its proprietary multi-medium marketing strategies. In addition, Benchmark International incorporated several campaigns with local, regional, and national associations.
Owner Chris Lindenberg commented, “I retained the services of Benchmark to help market my company to the public and had very positive results with the right fit with the buyer and a satisfied client.”
Deal Associate, Amy Alonso commented, “Benchmark International added value by negotiating this deal. We saw throughout the entire process that the buyer, PRADCO Outdoor Brands, was a perfect fit who stood to benefit greatly from the manufacturing experience, industry knowledge, and fishing expertise 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 in a swift and expedited manner. We wish Gene Larew Lures and PRADCO Outdoor Brands the best of luck in their future endeavors.”READ MORE >>
Benchmark International facilitated the transaction of Hair Are Us, LLC, a Los Angeles based hair extension brand. They ship worldwide and are well-known in the industry as one of the leading hair experts of human hair extension. They specialize in various extensions, including Indian Wavy, Brazilian Curly, and Kinky Straight.
In addition to a quality product and superior brand, the company has a strong social media following with over 347,000 followers on Instagram and over 5,500 followers on both Twitter and Facebook.
Hair Are Us is a Los Angeles limited liability company established in 2011 by Ashley Williams and Khat Abdur-Rabbani. They started as a mobile business but quickly found success and grew rapidly into an online store and three locations with a fully operating warehouse. Given this success, the company engaged Benchmark International’s help in finding a partner to help take the company to the next level. With the assistance of Benchmark International, Hair Are Us found the right collaborator and agreed to bring on an equity partner in August 2019.
Transaction Director at Benchmark International, Luis Vinals commented, “We are excited to have facilitated the sale of Hair Are Us, LLC a company that designs and retails custom hair extensions and wigs through an online portal and storefront to a private investor. The company serves both individual clients and hair salons, has a national presence within the hair care industry, and serves a number of celebrities. Understanding the intangible assets of the business, such as its social media following of over 300,000 followers was a key aspect that our team heavily focused on. This is a testament to our team’s ability to adapt and apply new innovative skillsets to the successful sale of our clients’ businesses.”READ MORE >>
New technologies are constantly reshaping industries, and global investment banking is not immune to these impacts, as newfinancial startups create technologies that cut into the relationship-based work that investment banks do.In order to continue to thrive, the big investment banks must keep up with innovation.
The underwriting of initial public offerings (IPOs) has always been a major source of profit for investment banks. Prominent investment banks play a large part in IPOs, as they come with prestigious reputations that instill confidence among public investors in the legitimacy of a deal.
However, tech companies have changed the game by negotiating lower fees, exploring alternatives to IPOs, and simply electing to not go public at all. Technology companies are usually the highest-returning public offerings. When venture capitalists and sovereign wealth funds put more cash on the table, some startups are able to remain private, providing challenges for investment banks.
Going public is a complicated legal process and most companies need the guidance of investment banks, which profit from the large fee that they earn to protect themselves from risk if the company’s stock underperforms.
Big investment banks have had to shift their strategies and turn to internal automation and technology in order to secure their competitive advantage in the world of IPOs. This allows them to hire fewer junior bankers, complete more IPOs in less time, and maintain high profit margins.
Asset management is a highly profitable financial service, but it has faced increased regulation since the 2008 financial collapse. These regulations make it more difficult for investment banks to trade with client money because of checks and balances that ensure the banks are not carrying too much risk. Dedicated asset management firms do not face the same regulations as investment banks, so they tend to be a more popular growth option for investors. Also, money management firms are able to drive returns at smaller fees.
Traditionally, mergers and acquisitions were solely viewed as a pathway to increase earnings per share for companies combining assets with similar businesses. Big investment banks were once major players in these transactions, prior to the shift in focus to more strategic M&A solutions that require less financial management and more product vision. Middle market M&A expands with more technology options and big investment banks become less relevant in a shifting process that calls for more concentrated expertise, strategic vision, and an interest in delivering on the goals of business owners rather than just collecting hefty fees. M&A advisory firms are more suited to achieving the individual aspirations of owners through the crafting of strategies that are carefully tailored to their needs.
M&A is a very relationship-driven industry. The biggest investment banks often do not garner a high level of trust among executives for M&A transactions, and are subject to more potential conflicts of interest than that of smaller banks or advisory firms—which are also able to conduct M&A deals more quickly and affordably.
As the industry landscape changes for big investment companies, they are being forced to adapt in different ways. Some banks are selling off dwindling operations and focusing on areas that are still profitable. Some are hurrying to launch new technology and digital products. Others are restructuring and hiring new workers in places where it costs less to operate. Overall, big investments banks must change the way they do business in order to fend off further decline.
When you need global M&A expertise to guide your business into the future, contact us at Benchmark International. We will leave no stone unturned when it comes to crafting the right kind of strategies that work for you.READ MORE >>
Benchmark International is pleased to announce the transaction between Counterpoint Trading 439 (Pty) Ltd (Counterpoint) and Shave and Gibson Packaging (Pty) Ltd (S&G).
Counterpoint is a leading manufacturer of food paper packaging products and industrial wipes, founded 14 years ago in Hammarsdale, Kwa-Zulu Natal. The company leverages long-standing and vital relationships with several leading retailers, wholesalers, and distributors and boasts a strong reputation for quality products and reliable service.
S&G, founded in 1981 by brothers-in-law Alan Gibson and Neville Shave, is recognized as one of South Africa’s largest privately-owned packaging and printing businesses, employing over in 500 staff. The business operates through its national infrastructure with its headquarters and manufacturing facilities strategically located in Mobeni, Durban. Further auxiliary sales and warehousing facilities are operated in both Cape Town and Johannesburg.
“We believe that Counterpoint will add significant value to S&G through the addition of further products which are required by our own customers. As people, we share similar values and corporate beliefs and we are confident that this partnership will be a major success in the years to come. Counterpoint will continue to manufacture their products from their existing factory and trade independently under their own name. We are confident that this will be a fruitful partnership, and we welcome Wim and Ruben and their team into the S&G Group of companies,” said Simon Downes, S&G Group Chairman.
On working with Benchmark International, Ruben Van Wambeke, shareholder and director of Counterpoint said “Having Benchmark International walking us step by step through this process was ultimately the key to success. Benchmarks’ ability to realign our perspective is what brought this JV to fruition.”
“The anti-plastic revolution has generated a rise in demand for environmentally friendly packaging alternatives. Strengthened by joining forces with S&G, the innovative paper packaging manufacturer, is well-positioned to capture this market. Having worked closely with the shareholders, we’re pleased with the incredibly strategic match and successful conclusion.” Says Benchmark International’s Transaction Associate Director, Raquel Naicker.
Energized by what the deal portends for the South African M&A industry, Andre Bresler the Managing Director at Benchmark International, added Shave and Gibson’s motivation for this transaction to extend product lines and partner with strong entrepreneurs is a recurring theme emerging in our industry, we are delighted for both parties as the agreed synergies will enable Counterpoint to capitalize on the growth opportunities that motivated them to explore a transaction in the first place.
Benchmark International would like to thank all parties involved and wish them all the very best of luck for the future.READ MORE >>
As the world calls more and more for renewable energy sources to replace carbon-burning fossil fuels, the industries of solar and hydroelectric power offer important alternatives, as well as opportunities for mergers and acquisitions.
Solar power converts energy from the sun into thermal or electrical energy. It is one of the cleanest and most abundant renewable energy sources available. In recent decades, the cost of solar power has decreased substantially.
Hydroelectric power uses turbine-driven generators to convert the energy of moving water into mechanical energy. As one of the oldest methods of creating power, today it is one of the most largely used forms of clean, renewable energy. Because the use of hydropower relies on flowing bodies of water, its use varies based on geographical locations and circumstances.
As the world seeks to turn to cleaner sources of energy, major corporations are also doing so as part of a larger growth strategy. For example, oil giant Shell has a plan to become the world’s largest power company AND cut its carbon footprint in half by the year 2050. To achieve this goal, a majority of the energy capacity added to its portfolio must be derived from renewable power sources.
Solar Power M&A
There are several factors that are proven to create opportunities for M&A in the solar energy market. Solar is still a relatively young industry, which opens up the opportunity for many newcomers to enter the industry and consolidate to grow in scale.
- In Africa, there is an abundance of access to solar power, but there are obstacles to financing. By 2050, Africa is expected to grow from 1.1 billion to 2 billion people, with a total economic output of $15 trillion. This money can be targeted to infrastructure, energy and transportation, and global investors are taking note.
- In the United States, the government makes it an attractive venture for companies to get into solar power through tax breaks, which translates to growth. In fact, in the U.S., solar power deals have already surpassed the $10 billion mark.
- In Europe, companies view M&A as a strategy to enter the U.S. market.
Other opportunities for M&A in the solar energy sector surround installation and manufacturing. As the industry evolves, installers grow in size, brand, and geographical reach and gain market share through consolidation. Regarding manufacturers, the outsourcing of panel production and assembly can motivate solar companies to sell those capabilities as an outsourcing strategy.
The solar power industry is quite a global market. In order to successfully complete cross-border transactions in this space, companies should wisely enlist the expertise and network of a globally connected M&A advisory firm.
Hydroelectric Power M&A
Hydropower may be a much older technology than other forms of renewable energy, yet there are still plenty of opportunities for the development of new facilities or expansion of existing infrastructure. Some of the positive aspects of hydroelectric power projects include their low operating costs, clean power generation, and lengthy service lives. On the downside, the regulatory approval process can be drawn out, and these projects call for significant early capital spending.
As in most industries, investment in hydropower is based on the project's risks and projection of future revenue. For developers to gain access to capital, they need to identify the revenue streams that will service debt (energy projects typically have several revenue streams), offer a return on investment, and have a plan to minimize regulatory and construction risks. It is typical for banks and other investors to only invest in new projects when there is certainty in the power purchase agreement.
The earlier investors are brought into the project, the more careful developers must be with regard to the terms offered. Investors may ask for ownership share or control that is excessive. Enlist the counsel of an experienced advisor to determine whether a proposal is fair. You may need more funding down the line, so the transaction must be flexible enough for more investors to get involved. The earlier you partner with an M&A advisor, the better you can plan the project’s future, and the more risks you can avoid in the long run.
Even the most encouraging and favorable hydroelectric projects can fall apart due to perceived risks. Any risks must be identified and addressed by developers as early as possible.Many issues can be environmental in nature. Research into the project’s impacts on local fisheries and species must be thoroughly conducted, and early communication with public officials is key.
Any energy M&A transaction calls for a specialized level of expertise to ensure that the deal is done right. Finding a highly experienced global firm is in your best interest. If you desire to be on the sell-side of a deal, contact our M&A advisors at Benchmark International to begin the process of finding the perfect fit and solution for you, your family, and your company.READ MORE >>
At Benchmark International, we work exclusively on the sell-side, so we would love to say, “The way to do a re-trade is to never do a re-trade.” However, when you have completed countless deals, there are times when we are tied so closely into those deals that we know the terms of the original offer do not stand up to the target company’s actual position following due diligence. In other words, we will admit when there is a legitimate reason to re-trade a deal term, including the price.
Our experience also tells us that these instances are rare when sellers have been through our process, and there is a right way and wrong way to do it if you want the deal to close. We encourage you to avoid blown deal costs by following these simple steps:
Step 1: Discuss it with us first. Yes, we are going to push back. Yes, we are going to support our client. But we will also be able to keep the deal on track by doing the following:
- In a best-case scenario, clarifying a misconception on your part that moots your need to re-trade
- Giving you a read on how our client will react
- Suggesting the best means of communicating the issue so that the reaction you receive best matches the severity of the actual change
- Providing our client our open and honest view of the change and the reasons for it before he or she has had a day or two to lock themselves into a position that may be based on less than the clearest picture possible
- Delving into our resources to convert what starts as a win-lose scenario to something closer to a win-not-lose-too-much scenario
Step 2: Have your data lined up. Very often we see re-trades supported by vague concepts and no numbers. These cause extra problems. If the amount of the re-trade can come over on the left side of the page with a numerical breakdown of the reasons for the re-trade on the right side of the page, and the seller can see that the two balance one another out—even if just figuratively—we are all in a much better position to get to the closing.
Step 3: Don’t wait. When you find something in diligence that looks like it is building to be the source of a re-trade, don’t save it all up and then dump it on the sell-side at the last minute. Conditioning the recipient of bad news is always the best way to get the most appropriate response to that news.
Step 4: Don’t overreach. Even in our smallest deals, we are not operating in a Turkish bazaar. There is no need to ask for $500,000 when you need $250,000. That type of negotiation works well in one-off trades but not when you are trying to build a relationship that is expected to hit additional bumps before the deal closes and likely needs some level of ongoing trust after closing.
Step 5: Be open to creative solutions. Regardless of how meaningful the problem is and how large a fix you need, your solution may not be the only acceptable one. It may not even be the best one for you. There are many ways to change a deal to address an unforeseen risk and provide the protection you need to offset that risk. The key to getting the transaction closed is often finding the amount of offset you need using the method of offset the seller can accept.
Benchmark International works hard with its client to avoid the need for re-trades. We collect extensive data on our clients prior to going to market. We run a very process-driven data room and often pre-populate it. We encourage our clients to get in front of disclosing detracting factors to avoid any surprises. We comb through every financial statement and tax return our clients can produce. In some countries, we are able to verify returns against official tax transcripts. Unlike many other brokers, we will even put known issues into our Confidential Information Memorandums. We attempt to place our clients with experienced M&A legal advisors. We understand—and make every effort to ensure our clients understand— that hiding an issue is not going to get them a better deal, may cost them a very good deal, and will never make it through due diligence.READ MORE >>
The Course of the Apparel Industry
Several factors have reshaped, and continue to reshape, the worldwide textile and apparel manufacturing industry. The paradigm has shifted into a digital market that demands speed and agility from industry players. These sweeping influences create drivers of increased mergers and acquisitions activity in this market.
- Online expansion, the reduction in brick-and-mortar store locations, and omni-channel shopping
- Sophisticated tech-savvy consumers and social media influencers
- Digitization of payments, points of sale, logistics and delivery
- Demand for fashion at lower prices
- A growing market for fair fashion and demand for increased sustainability as younger generations call for reduced impacts on the environment
- Cost-cutting measures and restructuring to focus on core brands
- Emerging markets of second and third-tier cities and the assertive expansion of fast-fashion retailers
The E-commerce Race
Becoming a go-to platform for customers in the apparel industry means that companies are forced to innovate and diversify their offerings to provide added value, relying less on retail margins. This not-easy task can be accomplished through internal research and development, or mergers and acquisitions.
Changes in Fashion Ownership
Consumers are becoming more interested in different ways to extend the lifespan of fashion items as new companies crop up that offer used clothing, refurbished apparel, and even clothing rental. As more of these new companies emerge, the existing fashion retailers must to adapt to embrace these new ownership models, which are being heavily driven by younger generations that still want new clothes but are more concerned with sustainability. Even luxury brands are embracing this model, but are buying resale or rental businesses so that they can maintain control over the marketing of their brands.
More and more consumers—and investors—are being enchanted by small brands with interesting and genuine stories. Younger generations prefer small brands and authenticity. Digital marketing changes how the brand narratives are conveyed and provides a cost-effective vehicle to reach larger audiences. And retailers want the differentiation that draws customers in and boosts their margins. Small brands are also able to cater to niche shoppers and more nimbly react to market trends. These small apparel companies are seeing billions of dollars in funding. The giant fashion brands must adapt to this shift in philosophy and add small brands to their portfolios.
Data analytics and automation have created a new market for companies that focus on made-to-order manufacturing of apparel. Small-batch production cycles are a result of the need for a more rapid response to changing trends and consumer demands, as well as a reduction in overstock.
From a financial viewpoint, on-demand fashion production has both benefits and drawbacks. It requires lower capital investment. It leads to smaller inventories, which means more agility. And faster turnaround cycles can ease demand uncertainties and make production more sustainable. In contrast, production and transport costs are typically higher because of the smaller batches.
Digital Textile Printing
Conventional textile printing methods (rotary screen or flatbed) are being abandoned for newer digital printing methods, especially in European countries. Digital printing allows textile manufacturers to respond to an increasing demand for fast fashion through shorter production runs and customization.
This tech-driven printing sector is drawing the attention of private equity and strategic investors. M&A deals in this space create companies that combine specialty technical mastery with the market and monetary reach of large corporations.
There are several reasons to sell a company in this sector. It can be too expensive to keep up with new trends in such a quickly changing operating environment. It can be beneficial to sell within a segment that has high valuation levels (such as affordable luxury or athletic wear). Additionally, brick-and-mortar retailers can sell assets to focus on the development of their flagship and online stores.
There are also many reasons to buy a company in this sector, such as the integration of the supply chain from manufacturers to wholesalers. It can also drive geographical expansion or growth into a new segment, especially emerging markets with developing economies. Another tactic can be to leverage existing brand equity to profit from a known brand that the current owner cannot afford to maintain or grow. Plus, the ever-changing technology landscape means new opportunities within tech companies that serve the industry.
Let’s talk about a plan to sell your business. Contact the experts at Benchmark International to start strategizing for a sale, growth, or your exit from the company. We are eager to get to work with you.READ MORE >>
The furniture manufacturing industry includes the design, production, distribution and sale of household, institutional and office furniture and related products. Global furniture sales are expected to increase 5% each year through 2025. According to Dun & Bradstreet, the countries that are home to the most furniture manufacturing companies are Brazil (72,063), China (62,832, Poland (22,389), with these three accounting for more than half of the world’s furniture manufacturers (54.9%).
Mergers and acquisitions deals in the furniture manufacturing industry are driven by a variety of factors:
- Healthy economies and housing trends
- Major retailers looking to tap new markets
- Vendors seeking category and price-point expansion
- Foreign manufacturers looking to grow geographical production
- Increased investor confidence due to Millennials approaching their prime spending years
- Family-owned businesses with aging management and no succession plan
Consolidation Within the Industry
Furniture needs are evolving and the industry is seeing overlap between residential, hospitality and commercial projects, creating increased appetite for acquisitions.
Strong, existing industry players are known to utilize M&A to expand their global footprints, product lines and price-point offerings. Building out helps companies to gain market strength and enhance shareholder value.
In some regions, labor shortage issues present a challenge. Therefore, companies with trained and skilled labor are able to command a premium in a sale.
Vendors that design furniture but outsource it from overseas are seeking competitive advantages. And those overseas producers are looking to increase their global presence. Geopolitical factors have a good bit of influence on how prosperous these M&A transactions can be so they are contingent upon global economic situations and trade relationships.
Large furniture companies that have a cash surplus from operations, reduced taxes, and funds recouped from offshore business, have liquidity that drives them seek out strategic acquisitions.
The Role of Private Equity
Private equity investors look to the furniture industry to create value within vendors and retailers, as well as add-on acquisitions that create platform companies. In the case of furniture production, manufacturers have assets that can be leveraged in a purchase, especially for the upholstery sector.
Consolidation at the retail level also increases investment interest in the furniture industry. As more retail store locations close their doors, private equity investors see opportunities for new retail concepts to replace them. And when larger investors show interest, smaller investors take notice. Consolidation also creates synergies of shared office, logistics and warehousing costs, which can lead to higher profit margins.
Value Drivers for Furniture Manufacturing Companies
- Online sales: In today’s world, the majority of furniture sales now take place online. Businesses must have a compelling and secure e-commerce platform and a strong online advertising and digital marketing presence in order to remain competitive.
- Factory maintenance: The actual manufacturing conditions are a key component in valuations. This includes equipment service and maintenance, inventory, and overall environment.
- Vendor relationships: Having a variety of healthy, trusted vendor relationships shows buyers that profits can be expected to remain steady due to changes in ownership.
- Skilled staff: The creation of high-caliber products and a company’s reputation hinge upon the craftsmanship and retention of the staff. Satisfied employees produce consistent quality, which translates into higher sales numbers.
- Safety measures: The furniture manufacturing industry is more prone to employee injuries than most because of its labor intensiveness, making on-the-job injuries a costly expense. Highly detailed and enforced safety plans can save businesses money, making prospects less risky and more appealing to investors.
Careful M&A Approach
A major challenge that furniture companies run into with M&A transactions is maintaining the day-to-day operations of the business throughout the course of a deal. A merger or acquisition can be a significant distraction that can put strain on financial departments and senior management, putting the everyday work on hold. For this reason, buyers typically look to target add-on companies. It is wise for business owners seeking M&A strategies in this industry to enlist the experience and guidance of a reputable M&A firm to facilitate a value-driven deal that allows for the sustained success of the company and takes advantage of proper market timing.
If you are a business owner and would like to consider ways to grow or sell your company, our M&A experts at Benchmark International are waiting for your call. We can even assist you with exit planning for your retirement. We look forward to hearing from you.READ MORE >>
Benchmark International facilitated the sale of Vintage Park VIP Lounge One, LLC d/b/a Barcelona Restaurant & Lounge in Houston, Texas. It has been acquired by private investor Holssam El-Assal.
Vintage Park VIP Lounge One, LLC d/b/a Barcelona Restaurant & Lounge, was founded by Mark Evans in 2014, at Vintage Park, one of Houston’s premier destinations for shopping and dining.
Benchmark International proved its value in finding a buyer with experience in the upscale dining industry through its proprietary multi-medium marketing strategies. In addition, Benchmark International incorporated several campaigns with local, regional, and national associations.
READ MORE >>
Owner Mark Evans commented, “Benchmark International’s team was able to accurately represent my business to the market and find a buyer that could continue providing the level of service our clients desire. Most importantly, they valued the confidentiality of the transaction deeply to not disturb any on-going operations. They were involved every step of the way and were able to deliver on their promise of bringing in a buyer that would take care of our team post-close.”
Deal Associate, Amy Alonso commented, “Benchmark International added value by negotiating this deal. We saw throughout the entire process that the buyer, Holssam, wanted to become involved with the restaurant and be a hands-on operator. 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 in a swift and expedited manner. We wish Holssam and Mark the best of luck in their future endeavors.”
Benchmark International has advised on the transaction between cloud-based CRM developer, BrightOffice, and ClearCourse Partnership, a group of technology companies, for an undisclosed sum.
BrightOffice was founded in 2004 and has developed a customisable, cloud-based software platform through which it delivers specialised CRM products for around 300 clients across a variety of sectors.
ClearCourse is a growing partnership of innovative technology companies providing membership and payments software platforms to groups, organisations and small businesses. A highly acquisitive company, BrightOffice marks ClearCourse’s 14th acquisition since October 2018 and the second CRM purchase after it acquired not-for-profit CRM Protech earlier this month.
ClearCourse has the financial backing of Aquiline Capital Partners, a New York and London-based private equity firm with AUM of approximately $3.5bn.READ MORE >>
Mergers and acquisitions in global government contracting (specifically the technology, aerospace, defense, and government services industries) is a market that tends to remain stable and ripe with opportunity. This sector offers many positive qualities such as revenue transparency and predictability. Strategic buyers seek products, services, sales channels, and geographical presences that broaden capabilities and make them more competitive. Companies with advanced technologies are in an especially advantageous position for acquisition.
Yet, even in an environment that consistently sees a strong flow of defense M&A deals, there is a heightened level of risk with plenty of opportunity for errors and setbacks. The business of government contracting is highly regulated and can be extremely complex, with a great deal of challenges. It is also subject to the effects of government spending budgets—and budget cuts.
Governments enforce intricate legal and regulatory requirements. Failure to adhere to these requirements can result in government actions that include contract termination, suspension, debarment, damages and penalties. Suspension and debarment, which means that a company can no longer conduct business with the government, can be a result of unfair trade practices, fraud, commission of crimes, and even a lack of business integrity or honesty. There is also a great deal of emphasis placed on conflicts of interest.
With so many possible risks, careful planning is imperative when considering a transaction in this space. It is recommended that sellers engage M&A experts with a strong reputation, transaction experience in their sector, and strong connections within the global buyer community.
It is also recommended that sellers prepare for a sale from the perspective of the buyer.
- Determine areas of exposure. Due diligence is always important in determining an accurate valuation of a company, and this is even more so in the case of government contractors. It demands a meticulous level of scrutiny. The company’s level of compliance can directly impact the valuation. Often, many contracting companies also run commercial businesses and have less strict compliance programs versus pure government contractors, yet carry the same risks.
- Assess risk and successor liability. Serious risk mitigation strategies are necessary when it comes to proper recordkeeping regarding compliance, including cyber-security and socio-economic topics, as well as a lack of negative factors such as prior suspensions or debarments, tax violations, investigations, and claims. Additionally, what is the exit strategy that is in place, and how can it improve the quality of buyer conversations and increase valuation?
- File regulatory notices and approvals. Be prepared for the filing of government notices, regulatory approval prerequisites, and post-M&A integration. These filings should be identified in the agreement, and the parties should preemptively agree to a process for securing government approvals.
Other important considerations regarding government contracts mergers and acquisitions that any seller should anticipate include:
- Analysis of existing and prospective government contracts held by the entity to be acquired and assignment of contracts to the buyer
- Any potential socio-economic impacts as a result of the transaction
- The transfer of facility and top-secret clearances, as well as intellectual property rights
- Assessment of conflicts of interest that could exclude the buyer from future contracts
- Whether the target company is compliant with specific government regulations
- Any existing subcontracts and teaming agreements
- Past performance of the target company and its impact on the buyer’s ability to win other government contracts
Foreign transactions may face additional challenges in completing M&A transactions in the government-contracting sector. These include more stringent due diligence processes, export law compliance, security clearances, cultural differences, and foreign investment scrutiny. This applies even further regarding higher risk regions, such as Africa.
In the case of cross-border deals, there are key concerns as to:
- Whether the seller is considered an inverted domestic corporation and no longer eligible for future government contracts
- If there should be inclusion of a board of directors as part of a mitigation plan to allow continuation of the seller’s facility clearance
Proper due diligence can identify risks in a transaction, create accurate representation and certifications, confirm that the adequate disclosures and indemnifications are obtained, and secure necessary government approvals, resulting in a successful and profitable acquisition.
If you are interested in making a move in this sector, please consult with our international M&A specialists, as we have the desired experience in transactions involving government contractors and companies that support them.READ MORE >>
The inverted yield curve is a situation that occurs when the interest rates on short-term bonds are higher than the interest rates paid by long-term bonds. It basically means that there is enough concern about the near-future markets that people move their money into less risky long-term investments. Any time this scenario arises, investors get nervous because it typically warns of a recession.
Short-term vs. Long-term Bonds
In thriving economies, bondholders demand a higher yield (profit) for longer-term bonds versus short-term bonds.
- Short-term bonds mature in less than five years and carry a lower interest rate risk. These funds do not yield large returns. They give investors a safe way to earn higher yields than they would with extremely low-risk investments and do not require money to be tied up for a long period of time.
- With long-term bonds, there is a much longer maturity period and people are required to invest their money for greater lengths of time. While these types of bonds yield higher returns, there is also an increased risk that higher inflation could reduce the value of payments, and that higher interest rates could cause the bond's price to drop. A longer-term bond also carries a higher risk of default.Basically, the longer it takes to be repaid, the greater the risk that inflation will swallow your investment.
- Most investors choose to have a mix of both short- and long-term bonds.
Government debt securities are known as Treasury bonds or T-bonds. These types of bonds are considered to be virtually risk-free. They earn fixed interest until they mature (a period of 10-30 years). Once they mature, the owner is also paid the face value of the bond. Treasury bonds make interest payments semiannually and the income earned is only taxed federally.
The Inverted Yield Curve
Treasury bonds help to form the yield curve, which includes the full range of investments offered by the United States government and diagrams yields by maturity. It usually curves upward, with longer-term bonds having a higher yield. The yield curve becomes inverted when long-term bonds are in high demand and the rates are shown to be lower than those of shorter-term bonds.Essentially, in this scenario, investors expect that they will make more money by holding onto a longer-term bond than a short-term one.
The yield curve inversion can also point toward expectations by investors that the Federal Reserve will cut short-term interest rates in an effort to boost the economy.
A Predictor of Recessions
Although it can happen months or years before a recession begins (usually an average of 18-22 months), the inversion of the yield curve has been a consistent predictor of every recession since the 1960s. For that reason, any time it happens, there is heightened anxiety and anticipation of slowed economic growth.
The last time the yield curve inverted was in 2007, prior to the financial crisis and recession of 2008, which was the worst recession since the Great Depression. The yield curve also inverted prior to the recessions of 2001, 1991, and 1981.
In this latest case, the yield curve first inverted in December of 2018, and inverted even further in March of 2019. Then, the 10-year yield hit a three-year low of 1.65% on August 12, 2019.On August 15, the yield on the 30-year bond closed below 2% for the very first time in history. Fears of the ongoing economic effects of the trade war between the United States and China are fueling the market concerns around the world.
The science of forecasting financial futures is never a 100% certainty, and while the inverted yield curve has proven to be a reliable indicator of things to come, it does not necessarily guarantee that a recession will happen. As of August 2019, the Federal Reserve has said that there is only around a 35% chance of a recession.
What It Means for M&A
An inverted yield curve can have implications for mergers and acquisitions, especially if you are aiming to grow your company.
For example, let’s say that part of your growth strategy requires funding for building expansion or new equipment. Under an inverted yield curve, short-term interest rates become higher than long-term interest rates. Some businesses may find this to be good news because they can lock in a good rate for the long term.
It may be impossible to predict financial futures, but enlisting the help of experience M&A advisors can help you formulate growth and risk management strategies for your company that make the most of available capital for expansion and lower your risk in all yield-curve situations.
Are you ready to make a move? Call our M&A experts at Benchmark International to start the conversation about your growth strategies and future opportunities.READ MORE >>