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What Does Benchmark International Tell Clients in Terms of Timing Expectations?

Our seller clients know that we see quite a few offers come through every week, month, and year and they expect us to provide our input on the timeframes that are “market.” As this is a buyer-seller neutral point and a strong set of mutual expectations is productive to achieving a closing, we want to give you an idea as to what is happening on our side of the table.

Nobody is getting deals closed in less than 90 days.

Even well-funded, experienced buyers seem to require 90 to 120 days get from letter of intent (LOI) execution to close in the middle and lower-middle markets. 

A request for more than 120 days is exorbitant.

A third of a year is a long time to be off the market for an owner who is committed to selling their business.When the time comes, there may well be good reason to extend exclusivity but we know that our clients more often than not regret any grant of 120 days or thereabouts. We can work with them to set up specific grounds for extending exclusivity beyond 90 days where a situation warrants it, but blanket grants of 120 days, or even 90 days with a 30-day automatic extension, are something we highly discourage our clients from accepting.

Diligence should start quickly.

We encourage acquirers to use the offer letter to inform the seller about diligence timings, especially when the initial diligence list will be sent and, if possible, when the initial diligence visit will start. All too often, we see LOIs signed followed by a long pause in activity and that drastically alters our clients’ attitudes toward the buyer and the offer. We encourage or clients to have this expectation set at the time of signing and expect that there will not be a pause but rather an aggressive start, even if that start only covers a portion of the scope of the overall diligence effort. When this happens, we see diligence lists arriving within a week of signing and the first onsite (or the next face-to-face meeting) within three weeks of signing.  

 

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First drafts do not wait until the diligence is complete.

We understand that acquirers may not want to incur the cost of engaging counsel based solely on the information in the Confidential Information Memorandum and a meeting or two. But we also understand that waiting two months to engage counsel and get first drafts out does not lead to a high close rate. We all know that drafts can be sent “pending finalization of due diligence.” Our successful deal closings have the first drafts coming out within a month of LOI signing. Our clients know that if they have not seen a draft by then, the deal is not likely to close.  

The seller can really mess up the timeline.

Failure to provide prompt and complete responses to diligence requests, abnormal reservation of disclosure of “sensitive” issues until later in the process, going on vacation, or simply the lack of organized files are all things we have discussed with our clients prior to going to market (and again when the LOIs start to arrive). They know that they can be the problem when it comes to timing. 

But if the seller does not mess up the timing…

Our clients know that time kills all deals. And they know that if they have been prompt and thorough, and the LOI signing date is approaching triple-digit days in the rearview mirror, things are not going well. Our statistics show that few deals die in the first 100 days after signing and few deals close more than 100 days after signing. This is something we share with our clients—both to set their expectations and to motivate them to be prompt and complete. 

Questions should be responded to within three business days.

We instruct our clients that deals require momentum to close. Precisely when they are most exhausted by the process is when they must reply in an even more expedient manner. Being realistic, we feel that the seller owes the buyer responses to every question within three business days, even if the response is, “We are working on it. It’s been a bit difficult to get our hands on that data.” Similarly, we believe the acquirer should respond to the seller’s questions, and send their follow up questions, within three business days. Allowing sellers to feel that anything that has not yielded a follow up within those three days has a “soft close” around it and goes an immeasurable distance in keeping sellers motivated, focused, and responsive.  

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The Changing Landscape of Indemnification in U.S. Purchase Agreements

It has been very interesting to follow the changes in market norms for indemnification over the last two decades. As due diligence has escalated dramatically, especially in the U.S. lower-mid markets, over that time, indemnification terms have moved in equal measure in the opposite direction. It seems that acquirers believe that an ounce of prevention is worth a pound of cure. While this has significantly increased the time between signing a letter of intent and closing, it has also made the negotiation of the purchase agreements a bit simpler. First-time sellers—always attentive to post-closing liabilities—seem to be much more comfortable with the current market terms for indemnification than they did with those in practice at the turn of the millennium.

While Benchmark International does not provide legal advice to its clients (or to acquirers), we do rely on our viewing of hundreds of purchase agreements per year to offer our seller clients a perspective on what we see as the norms for their market. While this is a moving target, our insights have remained fairly constant for the last three or four years as follows:

  • We see indemnification for any item other than a fundamental representation being capped at between 10 and 20% of the non-contingent portion of the purchase price.
  • Acquirers are still alternating between both baskets and true deductibles. These are typically agreed at between one and two percent of the non-contingent portion of the purchase price with baskets being at the higher end and deductibles being at the lower end. These de minimis carve-outs are applied to fundamental representations in about half of all deals.
  • The obligations for everything but fundamental representations survive for between 12 and 24 months, with 18 months coming on strong as the mode.

 

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  • Fundamental representations are almost always capped at the entire purchase price and survive for very long periods such as seven years, until the expiration of the applicable statute of limitations, or indefinitely. This survival period is one deal point for which we would say there is no market norm at the moment.
  • The representations classified as fundamental have not changed much over the years: organization, capitalization, authority, no conflict, ownership of assets, brokers, environmental, tax, and ERISA.
  • Fraud continues to be treated like the fundamental representations.
  • We still see a few acquirers attempting to leave out the provision encapsulating the indemnification as the exclusive remedy. And we still see sellers’ counsel never allowing that to be absent in the final draft. Leaving it out of a first draft has become so rare that it is almost seen as painting outside the lines, poor sportsmanship, or the like by our clients’ counsel.
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Global Waste Management Outlook

The global waste management industry is expected to grow at a compound annual growth rate (CAGR) of 6% leading to 2025, with industry experts anticipating an overall value of $530 billion. An increase in environmental awareness, an increasing population, and a rise in urbanisation are all key to growth in the industry. Furthermore, implementation of stringent government norms towards dumping is anticipated to lead to further growth over the coming years. 

Where uncollected waste and dumping are impacting on health directly, this is expected to be another key factor leading to growth in the market. However, a lack of awareness and investment in developing countries is expected to hinder growth inthe industry inthose regions. With that being said, the general consensus is that the positive factors in the industry will exceed any negatives, hence the projected CAGR of 6%. Furthermore, emerging economies in Asia-Pacific, Latin America, Middle East, and Africa are contributing to growth in the industry through the implementation of solid waste management solutions, which will spread awareness in those regions and increase the number of regions developing them in the near future. 

Europe is expected to dominate the waste management market share over the coming years, owing to increases in favourable government initiatives, along with high-end technology adoption by management services. However, Asia is the region that is expected to drive the demand for waste management services, due to the presence of densely populated countries such as China and India where an increase in urban penetration is being witnessed. Moreover, as with Europe, government initiatives in the region are expected to increase the demand for waste management services.

 

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Key Industry Factors

  • In 1960 the United Nations found that the global urban population was just 34% revealing plenty of potential growth, last year that figure stood at 55%. Furthermore, estimates by the World Health Organization predict the figure to increase by approximately 1.84% every year until 2020, at a rate of about 1.63% per annum from 2020 to 2025, and around 1.44% per annum from 2025 to 2030. Naturally, as the urban population increases, the amount of waste being produced will also increase – in-fact the amount of municipal solid waste (MSW), a crucial by-product of urban lifestyle, is growing at an even higher rate than that of urbanisation.

 

  • The World Bank found that in 2016, the world’s largest cities generated 2 billion tonnes of solid waste, which amounts to a footprint of 0.74 kilograms per person, per day. With rapid global urbanisation, annual waste is expected to increase by 70% from 2016’s figure to 3.4 billion tonnes in 2050.

 

  • Increasing levels of environmental awareness regarding factors such as renewable waste management systems or rising carbon dioxide emissions are expected to lead to further growth opportunities in the industry. Businesses in the industry have been pivotal in ensuring as much MSW as possible is recycled and are conducting programs for non-hazardous industrial waste management to reduce pollution and mitigate environmental hazards. Moreover, untreated waste and dumping affect health directly and indirectly by spreading infectious diseases, thereby boosting the demand for waste management services. 

There are plenty of factors that give us reason to be confident about the future of the waste management industry. With no sign of urbanisation slowing down, waste management will continue to be an integral part of the global economy. 

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The Ultimate Checklist For Buying A Business

Acquiring an existing business can offer great advantages over starting a new business from scratch, especially if the target business is thriving and holds more opportunities for growth. When considering the purchase of a company, you should take certain steps so that you can be confident that you are minimizing your risk and making a smart move. Use this comprehensive checklist to help you ask the right questions and guide you through the process. 

 

☐ Is the Target Company Financially Healthy? 

This is a question you must ask yourself before considering anything else about the business. You will want to carefully comb through the business's financial statements for the past five years (at least) to identify if anything appears out of the ordinary and to assess how the numbers compare with standard performance in that sector. Also, request to see the tax returns for the same years. This will help you determine whether the owner has put personal expenses through the company books and give you a more complete picture of the company's actual value. You also will want to know if you will be taking on any existing debt, and exactly how much.

 

☐ Will You Be Able to Generate Cash Flow?

It is crucial that you know whether you will be able to generate cash flow immediately upon purchasing the business. If not, are you in a position to carry the business until that time comes? No matter how attractive the company may seem, you must ensure that you are not getting in over your head. Take a thorough look at sales records to assess past and future performance. You must also find out if any existing clients or customers are planning to part ways and what you can do to retain their business. 

 

☐ Does the Company Have a Good Reputation? 

Doing a quick Google search can reveal quite a bit about a business. You will want to see how the company is perceived in the world. Does it have a lot of negative reviews or bad press? Are there any customer complaints, and do you know how they were handled? Get a comprehensive look at the business's reputation because you are going to need to see if you have work to do in order to turn it around. This could include a complete rebranding and marketing effort, which costs money. 

 

☐ Have You Done Your Homework on the Staff?

When you acquire an existing business, you are also acquiring its management team and employees. You should know the skill levels and proficiencies of any staff you will be inheriting, and whether you are going to be faced with the task of replacing key staff members. Do all team members plan to stay with the company? Have they been made any promises by previous ownership that you will now be expected to fulfill? Is anyone retiring or planning to go on extended leave? Is anyone disgruntled about the sale? When you know the answers to these questions, you'll be best prepared to address any issues. 

 

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☐ What is the State of the Inventory?

If inventory is applicable to the business in question, everything should be itemized and given a carefully determined value. Will any inventory lose value with time, or only have a value at certain times of the year? Will it be adequately stocked for when you take over the company? When you are investing in a company, you're going to want to have everything you need on hand to generate revenue from its operation. 

 

☐ What is the State of the Physical Property?

First things first: you need to know if the business owns the property on which it resides or if there is a lease agreement in place. Then seek out answers to the following questions. What are the details of the lease and the reputation of the landlord? How much is the rent, and is it due to increase? Is the property in good condition, or is it in need of repair? If the business owns the property, what are the real estate taxes? Is the property able to accommodate any planned growth? Is it legally zoned? Is the location appropriate? Are you going to need to make changes, or find a new location altogether? This is an area where you cannot be too thorough. 

 

☐ Do You Have All the Legal Documents and Contracts?

This is another critical step in purchasing a business. You are going to need to have every last piece of paperwork that pertains to that business. This includes business licenses, copyright agreementspatentstrademarks, import and export permits, mining rights, real estate documents, etc. Basically, if something relates to the business in any way, you should have documentation of it. If the current owner has not kept good records, there is your first sign that you might want to think twice about moving forward with the acquisition. 

 

☐ What is the Condition of the Business's Equipment?

You should assess the condition of all office equipment, furniture, machinery, and vehicles used for the business. What is owned and what is leased? What are the items' lease or purchase details, and are there maintenance agreements in place? You should assess the condition of all equipment to determine if anything will need to be replaced because this will be a factor in the purchase price of the business.

 

☐ Are You Familiar With the Business's Suppliers?

This is important because suppliers can have a significant impact on how reliable your business is able to run. You want to ensure that they are established and committed to providing superior quality and service. Find out if they fill orders on time and meet their obligations. Look into any contracts that are in place, so you understand the relationship. You also will want to ask if there are any expected price increases or factors that may impact the existing arrangement.

 

☐ Contact Benchmark International 

If you are looking to buy a business, we represent highly motivated sellers in the lower-middle and middle market that may be the perfect fit for you. Contact one of our experts to discuss how we can help with target company searches. 

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Do you want to be Featured at the AVCJ Private Equity & Venture Forum in Hong Kong?

On the 12th November 2019 Benchmark International will be attending the AVCJ Private Equity & Venture Forum at the Four Seasons Hotel in Hong Kong.

The AVCJ Forum is widely recognised as the private equity industry’s ‘must attend’ event in Asia, and one of the industry’s leading events globally. It is both the world’s largest Asia-focused private equity conference, and the largest gathering of institutional investors/private equity LPs in Asia. It involves insightful presentations, thought-provoking discussions and networking opportunities with over 1,150 senior professionals.

Benchmark International is the only corporate financier to exhibit at the event, helping to promote its exclusive opportunities on a worldwide level.

Do you want to be featured and showcased in front of leading dealmakers? Naturally, we present only a select number of companies for each event, so we would encourage you to contact us now to ensure your business is included.

Schedule A Call

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Global Media Industry and M&A

Global media and entertainment conglomerates and their subsidiaries distribute mass media to the public such as television, gaming, radio, amusement parks, Internet, and publications. It’s in the nature of these types of companies—of all sizes—to continually pursue avenues for growth.

Over the years, we have seen just how much reinvention occurs in the global media industry. Consider how drastically the landscape has changed. In 1983, the media industry was dominated by 50 major companies. By 1987, that number was down to 29. In the early 1990s, the figure reduced to 23. By the end of the 1990s, there were only ten major conglomerates. In the 21stcentury, mega-deals starting taking place, causing the largest media groups to decrease in number but grow in size.

Key transaction areas for pursuing mergers and acquisitions in this global industry include:

  • Horizontal-scale deals: Companies consolidate within their own sector to increasing earnings and improve operations.
  • Cross-sector deals: Companies look outside their core sector to add products and services and integrate vertically across the supply chain.
  • Cross-border deals: Companies target growth into different global markets that offer favorable long-term fundamentals.
  • Portfolio optimizers: Companies use divestitures to streamline diversified asset bases and allocate capital to the most favorable opportunities.

 

Ready to explore your exit and growth options?

 

Competition to Innovate

It is common in this sector for the attractive opportunities to draw a great deal of competition for acquisition. The landscape is rapidly and constantly evolving as new technologies emerge and key players are always seeking ways to be the one to introduce the next big thing. Streaming service and cord cutting have been the most recent significant drivers of change. Big tech firms such as Apple, Amazon and Netflix continue to ramp up the pressure on the conventional stand-alone media model, bringing content consumption to the forefront and making the need for differentiation and integration more critical to strategies for media companies.

Unique Due Diligence

In an industry where content is king, there are very specific due diligence challenges for M&A that require meticulous attention if the goals of the transaction are to be fully achieved.

  • Copyright and Intellectual Property: Entertainment assets are subject to intellectual property protections that vary on regional, national and global levels, such as copyright, trademark and naming rights. Due diligence needs to dive deep into these rights, their usage and how they impact all parties involved, which can be extraordinarily complicated. The results of such a careful examination can directly affect valuation, so it must be conducted as thoroughly as possible.
  • Large Volumes of Content:M&A transactions in the media and entertainment industry involve massive amounts of content that can be owned by a target company. There can be millions of individual items of content that could have been created decades ago and are now owned as a result of prior acquisitions. There should be prioritization of the most valuable content, especially if there are competing acquirers and a deal must be made quickly.
  • Contractual Agreements:The production and distribution of entertainment content involves many different agreements and contractual arrangements. Careful due diligence will uncover key information regarding financial obligations, royalties, residuals and other contingent payments. How are royalty amounts determined and recouped? How do they compare with revenue and expenses in other financial documents? Does the transaction include agreements that expect the acquisition of more content in the future? Are there any unusual provisions or clauses regarding talent? These kinds of issues require solid understanding of how this industry operates.

 

Feel like it's time to slow down?

 

Integration Challenges

Integration has been proven to pose a unique challenge for M&A in the media industry. One cannot simply plug and play a typical M&A process that works for other sectors. To win out, leadership needs to carefully evaluate the possibilities for value creation through integration, as well as any risks. This requires fastidious due diligence and effective communication. There must be a set of clearly defined goals. Cost and revenue synergies need to be properly valued. And retention of management is often critical to a successful integration strategy. When there is awareness of the potential integration pitfalls in media M&A deals, a plan can be formulated to help guard against them.

Contact Us

Are you planning on selling your company? Give us a call at Benchmark International to start the process. Our M&A experts can provide you with a comprehensive market analysis for your specific industry and arm you with exclusive information that will help you get your maximum value for your business.

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Benchmark International's Three Key Philosophies for Getting Deals Done

As we work exclusively in the mid and lower-mid markets, we see many deals succeed, and some wither. In an effort to have more of the former and less of the latter, we would like to share our core philosophies with the belief that helping you understand them will make working with us a more rewarding experience.


1. Time kills all deals.

Prudent and deliberate action are certainly also key aspects of getting deals closed but, in our experience, neither buyers nor sellers are inclined to be under-prudent or lacking deliberateness. Rather, unexplained and avoidable delays tend to stack up between the first meeting and the closing. Each delay shaves off a small percentage from the probability of closing. There are enough legitimate delays in the M&A process. When we see one that can be avoided, we will step in and attempt to get the ball rolling once again.

 

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2. Transparency is the best antiseptic.

We’ve seen too many deals die because one side or the other has hidden something until it is too late. Long before you meet our clients, we will have already guided them on the value of releasing the troubling issues they might have at the earliest opportunity. Hopefully, you will already have seen some of this in our Confidential Information Memorandums. We lean forward into these issues because we believe that the sooner they are addressed, the more solutions there are, and the less likely anyone is to feel hoodwinked. We hope you’ll feel the same way with your own challenges (for example, lining up debt financing) as well as any you may see with our clients.


3. The emotional must be covered as well as the financial.

This may be somewhat unique to our clients as our process appeals to a certain owner type. As you probably know, we specialize in closely-held and owner-operated businesses. Nowhere is it more true that “every business is a family business.” Our clients have typically had 20- to 30-year relationships with their businesses and often equate the sale process to sending their son or daughter off to college. When we work with acquirers that understand the effects of this fact pattern, we see a much higher level of success. In fact, we have built our teams, our process, and our engagements around it. We will be more than happy to help you deal with this interesting aspect of our clients. Please just ask.

 

Author
Clinton Johnston
Managing Partner
Benchmark International

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

 

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Benchmark International Facilitated the Transaction of RoseMill Packaging Resources, LLC to Conner Industries, Inc.

Benchmark International has successfully facilitated the transaction of RoseMill Packaging Resources, LLC to Conner Industries, Inc.

RoseMill Packaging Resources, LLC (“RoseMill”) is a custom packaging company located in Lewisburg, TN.  Established in 2006, RoseMill specializes in the manufacturing and assembly of packaging materials for finished goods. They offer corrugate pallets, corrugate assembly, foam assembly, and additional packaging and warehousing resources.

Now former owners Mike Rose, VP of Sales, and Spencer Miller, VP of Operations, will continue in their roles as they help transition and integrate RoseMill into the Conner family.

In reference to the transaction, Mike Rose commented, “From the onset of discussions with Benchmark, we expressed our desire to find a good fit for the acquisition of RoseMill. We wanted to ensure job security for our employees as well as a continued high level of service, quality, and innovation for our customers. The Benchmark Nashville office was able to find the perfect company, Conner Industries, that had the same desires as us for the long-term success of the RoseMill facility.  We are happy to be a part of the Conner Industries family and thank Benchmark Nashville for their efforts in helping us close this transaction.” 

 

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Conner Industries, Inc (“Conner”), is headquartered in Ft. Worth, TX, and is a leading provider of industrial wood and packaging solutions in the United States. Conner specializes in supplying cut lumber (softwoods, hardwoods, and panel products) needed for pallets, crates, and skid parts, as well as fully assembled custom pallets, crates, and industrial containers. 

Conner has 10+ locations across the Midwestern and Southeastern US and serves customers nationwide.

CEO of Conner Industries, David Dixon stated, “As a buyer, I enjoyed working with Robert at Benchmark who helped keep the deal on track despite some of the matters that we were faced with. He worked diligently to help explain the matters to both sides and worked with both the buyer and the seller on viable solutions.”

Director from Benchmark International, Robert West, added, “Working with Mike and Spencer was very rewarding around.  Our entire team was very heavily invested in a successful outcome for RoseMill from the time we were engaged.  What we found in Conner is not only a great deal economically for our client, but a great cultural fit to ensure the legacy of RoseMill continues on.  We’re excited for Mike, Spencer, and Conner Industries, and look forward to hearing of their future successes.”

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A Trip Back in Time: M&A 20 Years Ago

The year was 1999. The world was transforming thanks to new technologies, and society was bracing for what Y2K and the millennium bug might bring. The popularity of the Internet was skyrocketing, and home computers were becoming a necessity rather than a luxury. Napster, Blackberry, Tivo, and Bluetooth were introduced. The "Melissa" E-mail Virus infected millions of computers and caused more than $80 million in damage globally. The Euro currency was established in 11 countries. The cost of a gallon of gas was $1.22. Bill Gates became the wealthiest man on earth, and Jeff Bezos was named Time Person of the Year. But what about the world of mergers and acquisitions twenty years ago?

1999 M&A in Review

The year 1999 was known as the year of the hostile deal. Strategic refocusing of companies was at an all-time high. Companies were motivated to act quickly to fend off larger rivals. The philosophy was that the bigger a company became, the more dominant it would be in the market.

  • Total worldwide mergers and acquisitions grew from $286.9 billion in 1991 to $3.2 trillion in 1999, with a total of 24,436 transactions that year.
  • Also in 1999, worldwide hostile deals reached more than $473 billion in dollar volume representing more than 14% of all announced worldwide deal value.
  • There were 9,192 M&A transactions valued at $1.4 trillion in the U.S alone, including 15 hostile deals valued at $112.7 billion.
  • Deals valued at over a billion dollars increased from 13 in 1991 to 194 in 1999.
  • There were 47 transactions valued at more than $10 billion worldwide in 1999.

 

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Making M&A History

Several of the biggest M&A deals in history took place in the years 1999 and 2000.

  • Vodafone AirTouch of Britain negotiated the hostile $183 billion merger of Mannesmann of Germany. This all-stock transaction set a record for a corporate takeover.
  • Also in 1999, Exxon and Mobil merged to become an energy industry superpower.
  • In January of 2000, America Online's announced the $165 billion purchase of Time Warner.
  • The same year, Pfizer acquired Warner-Lambert for $90 million, creating the second-largest drug company in the world.

These four deals are among the world's largest mergers of all time. 

Tech & Communications Revolution

The years of the mid to late 1990s were an economic game-changer. The tech and communications revolution certainly had a major impact on M&A activity. It stimulated the globalization of markets by improving cross-border communications and transactions, and it enhanced capabilities in modeling cash flows and structuring transaction scenarios. It also resulted in a boom in new business launches and the reimagining of established businesses.

1999 was the height of the Information Age, and the dot-com tech bubble was fatter than ever. Markets were booming. Dot-com startups were going public. Online shopping was becoming an actual thing. People were quitting their jobs to engage in full-time day trading and personal investing. We saw the rising popularity of online companies such as eBay, Amazon, Yahoo!, AOL, Match.com, and WebMD.

Of course, the bubble burst, leading to the early 2000s recession. Many online companies went under, and other major corporations lost a large portion of their market cap. Pets.com lost a whopping $1.75 trillion in value only nine months after its IPO.

Unfortunately, the dot-com crash also led to the telecoms market crash of 2001. Telecom providers over-invested in their networks, and mobile phone companies overspent on 3G licenses. The high levels of infrastructure investments were out of proportion to cash flow, and increased competition led many telecoms providers to slash prices for services, especially in the European market. Within one year, 100,000 jobs were lost in telecoms support and development across Europe.

Now vs. Then

The recession in the early 2000s cooled M&A activity for obvious reasons. The good news is that 2019 has actually been the most dynamic year for M&A activity since the year 2000, driven by a surge in North American deals. CEO confidence is on the rise, and investors are showing a willingness to take risks.

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Benchmark International has Successfully Facilitated the Transaction Between Flipfile Limited and BDS Office Limited

Benchmark International is pleased to announce the transaction between Exeter-based school stationery supplier, Flipfile, and Wick-based stationery supplier, BDS Office.

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How & When To Explain To Your Employees That You Are Selling Your Business

You’ve decided to sell your company, but when is the right time to tell your employees? And what is the right way to tell them? The conversation may not be easy, but if you follow a few simple guidelines, you can ensure that you handle it to the best of your ability.

Have a Plan

You should already have an exit strategy in place when you are selling your business, but that is your own personal exit plan. You should also think about how the process will affect employees. Develop a clear timeline of how you expect the deal to progress and when you will meet with your staff about it. You do not want to come across as confused and unsure about the process. The more confident you are in explaining it, the more confident they will be about it being a good plan for them as well. You may also want to consider when to introduce the new owner. By having the staff meet the new boss, you can dispel a great deal of anxiety. The best time to do this is AFTER the deal is done, in the event that the deal falls through. Otherwise, you are introducing them to someone irrelevant, adding confusion and instability. 

Wait Until the Deal is Done

It can be tempting to share your plans with employees early in the process. But if you disclose your plans too soon, you are opening yourself up to risks that can tank a deal. Employees can get scared into finding another job. Vendors and clients can get nervous and jump ship. These are all scenarios that are not in your best interest, as the health of your business is an essential aspect of a sale. By waiting until a deal is in place, you can avoid telling your employees false information when things are still subject to change.

 

Ready to explore your exit and growth options?

Tell Management First

Depending on the size of your business, you will likely want to inform key management before telling anyone else in the organization. They are going to need to fully understand the transition because you are going to need their support. They can help you maintain clarity when employees go to them with questions. If management is clear on what is going to happen, they can keep employees calm and properly informed.

Be Accessible

Once you’ve made the announcement, you must remain proactive in answering employees’ questions. It can also be important that they hear any news directly from you versus rumors around the water cooler.

Provide Written Communication

By creating a document that outlines pertinent points about the deal and the transition, employees can reference it following the announcement if they do not recall something. It also provides them with something concrete so that you are not leaving details up to their imagination.

Do Not Overpromise

Once you sell the company, you will no longer have control over what happens in the day-to-day business operations. It is important to express to your employees that you care about their futures and that you took the proper steps of protecting them when brokering the deal with the new owner. However, you want to avoid making promises that you will not be around to honor.

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Benchmark International Has Facilitated The Transaction Of Lovett & Tharpe To LTI International

 

Benchmark International has facilitated the sale of Lovett & Tharpe, Inc. to LTI International, LLC.

Lovett & Tharpe has been in business for more than 85 years, serving the needs of over 500 farm equipment dealers in the Southeast. Lovett & Tharpe distributes the product lines of more than 30 different manufacturers worldwide. Lovett & Tharpe operates from a 72,000 square foot warehouse in Dublin, GA.

Eddie Herrin, President of Lovett & Tharpe, stated, “The Benchmark International team facilitated the sale of my business from the earliest stages of marketing through the final agreement and completion of the deal. They acted in a courteous and professional manner and provided the insights and assistance I needed as a first-time seller. I would highly recommend Benchmark International to anyone considering the sale of their business!”

LTI companies offer procurement and distribution of specialized agricultural, industrial, hotel, construction and truck equipment, and spare parts. With over three decades of experience in procurement services and a team of seasoned industry veterans, LTI is a premier supplier to the US, Caribbean, and Latin-American marketplaces. LTI is a Georgia limited liability company with operations in Orlando, FL.

Benchmark International Director Leo Vanderschuur stated, “It was a pleasure to represent Eddie and Lovett & Tharpe in this transaction. Throughout the process, Eddie was exceptionally responsive, diligent, and professional. This acquisition represents a tremendous opportunity for both businesses and their teams to strategically accelerate the rate of profitable growth. On behalf of the numerous Benchmark International personnel that worked on this opportunity, we congratulate both teams on reaching this goal.”

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Wind Power and M&A

Renewable energy transactions are on the rise as the demand for clean, sustainable energy grows around the world. Europe in particular has seen a surge in investments into wind power as big oil and gas companies try to shift to renewables. And there is significant competition in North America for high-priority assets. Both offshore and onshore wind investments are relatively safe as far as mergers and acquisitions because demand continues to rise in emerging markets as the worldwide weaning off of fossil fuels is certainly not going to happen overnight.

The wind energy industry is still relatively young to the world. There remains plenty of opportunity for technological and design advancements, as well as how they relate to financial possibilities. 

Offshore wind in particular has inherent benefits. Because it is located out at sea, the visual impacts are minimized. Also, wind tends to be stronger and more consistent at sea then it is on land. It is highly sustainable and highly predictable. Floating turbine foundations for deep-water locations are emerging and have already been successfully implemented in countries such as Norway, Japan and Portugal. 

 

 

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Wind and Large-Scale M&A

Wind power transactions dominate large-scale renewable mergers and acquisitions because of the sector’s economy of scale. The larger a windmill is, the more efficient it is. So, one big windmill is more efficient than two smaller windmills. This translates into large construction projects—an attribute that the industry likes to see. Large corporations with bold goals for renewable energy are buying an abundance of wind power.

Innovations in wind energy make it more affordable, setting the stage for demand and growth, especially for large corporations that need a great deal of power and are looking to save money. (Think about Amazon’s huge wind farm in Texas that has 100 turbines and can power 90,000 U.S. homes). This corporate need calls for large projects and contributes to why wind power dominates large-scale M&A.

The Role of Tax Equity Investments

The wind energy industry is also subject to tax equity investing—a very important part of financing in the sector and popular in the United States. Tax equity deals for renewable energy projects are common with private energy developers seeking to extend capital, and financial institutions wanting credits to ease their tax liability.This can make the environment more competitive.

How it works:

  • A tax equity investor and a developer create a holding company that owns the project's assets. The financial institution provides capital and in return gets tax benefits and cash distributions within the first 10 years of the project’s operation.
  • This allows the investor to recoup and earn on their investment.
  • Once the investment is recovered and tax credits captured, the ownership structure is reversed.
  • The developer is now the majority owner and can have the right to buy out the investor's remaining stake.
  • Therefore, the developer built a wind project for a small part of the installed cost in exchange for relinquishing the tax credits and cash distributions to the investor.

 

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Clean 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 with painstaking due diligence
  • 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

Contact Us

Ready to make a move? Schedule a consultation with one of our M&A geniuses to see how we can help you sell a company, buy a company, create growth, or conduct exit planning.

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Benchmark International has Successfully Facilitated the Transaction Between Elastomer Engineering Limited and Dexine Leyland Rubber Technology Limited

Benchmark International is pleased to announce the transaction between bespoke rubber products engineer, Elastomer Engineering, and Lancashire-based manufacturer of niche rubber products for engineering and industrial applications, Dexine Leyland Rubber Technology (DLRT).

Family-owned business Elastomer Engineering has extensive expertise in polymer science and manufacturing technology, including a range of proprietary products sold into the oil & gas and defence sectors.

DLRT is a leading manufacturer of elastomeric products and components for industrial and engineering uses. The company specialises in the design and manufacture of complex products and offers a range of rubber compounds with properties such as oil and fire resistance and vibration damping.

Working in the same sectors as Elastomer Engineering, the acquisition allows for the two companies to sell an extensive product range into these sectors.

Do you have an exit or growth strategy in place?

The acquisition also provides DLRT the opportunity to acquire a portfolio of significant intellectual property, along with a wide range of specialist equipment designed for high value precision moulding. With DLRT’s assets, this constitutes greatly enhanced product development and manufacturing capabilities for both businesses.

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5 Things Sellers Wish They Had Known Before Selling Their Business

You’ve decided to sell your business. Congratulations! Whether you are retiring, looking to embark on a new business adventure, or wanting to hand off the reins and take a different role in the company, the process of selling a business can be a trying one without the correct preparation and support. Fortunately for you, you can learn from other entrepreneurs who have been in your shoes and have shared the five things that they wish they had known before selling their business.

1) Neglecting to perform pre-transaction wealth planning can result in you potentially leaving a lot of money on the table. Before you sell, consider your family members’ wishes and concerns. Communicating with family members before the sale can help ensure smooth sailing through the deal negotiations. Effective tax-planning to support family members’ needs, philanthropic plans, or creating family trusts can help increase the value gained from the transaction.

2) Don’t underestimate the importance of a good cultural fit with a buyer. While the price is always at the forefront of a sellers’ mind, cultural fit can mistakenly be pushed to the back burner. One of the many things that you have worked hard to create in your business is the employee culture. Most likely, you want to see the close-knit “family” that you have built continue when you are no longer working there. Benchmark International understands that and will help you find that partner. We remain committed along with you to your goal of finding a buyer who will carry on your legacy.

 

Ready to explore your exit and growth options?

3) Skimping on your marketing materials does not pay off in the long run. With confidentiality being of the utmost importance, how can you engage buyers without them knowing who you are? Preparing a high-quality, 1-2 page teaser that provides an anonymous profile of your business is the tool used to locate a buyer confidentially. This is followed by the Information Memorandum, with an NDA that is put in place for your protection. Benchmark International will prepare these high-quality documents and put your mind at ease.

4) Sellers wish they had known how detail-oriented the process would be, how many documents would be needed, and how labor-intensive each phase would be. One of the most crucial pieces of advice that the majority of sellers wish they had known is that you need to have a team. Sellers need to continue running their business as they were before, or operations can really start to slow. The last thing you want is for the value of your company to take a nosedive because you are investing all of your time into a transaction. With the team at Benchmark International as your partner dedicated to the M&A process, you will be free to continue to focus on the growth and operations of your business. We will handle the details for you.

5) Finding a like-minded partner can give a seller a false sense of security that the transition from two companies to one will be easy. You need a trusted advisor that will help you navigate the complexities of integration, giving you insight on some of the other intangibles that need to be negotiated. Those intangibles include the details of your role after the sale, employment contracts, earnouts, etc. With Benchmark International’s vast knowledge and experience in M&A deals, we know what is usual and customary to request throughout the negotiation process and will bring more value to your transaction.

Congratulations again, this is an exciting time for you! With the right partner, it can be a smooth and profitable process as well. Benchmark International has a team of specialists that arrange these types of deals every day. We can answer your questions and help you determine what is best for you, your business, and your exit plan. A simple phone call or email to us can start the process today and move you one step closer to accomplishing your goals.

 

Author
Amy Alonso 
Associate
Benchmark International

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

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South Africa's Private Equity Scales New Heights

Benchmark International’s South African office was proud to attend the unveiling of this year’s private equity survey conducted by the South African Venture Capital Association (SAVCA).

Once again, private equity in South Africa has demonstrated the robust nature of the local market by posting a significant increase in investment activity in 2018.

The survey reports the value of new and follow-on investments has reached R35.4 billion, more than double the annual average of R15.2 billion posted over the past decade.

The research has further revealed that Southern Africa’s private equity industry (comprising both government and private funds) boasted R171 billion in funds under management (FUM) as of 31 December 2018.

More pointedly, the facts allude to a significant spike in trade sales, which were the most popular transaction, equating to a value of R5.6 billion in the past calendar year.

This further solidifies the dynamic reputation of the local mid-market sector of the economy and bodes well for the near and mid-term investment cycle for South African business owners looking to grow, transform, or exit their businesses.

Additional key takeaways from the survey include:

  • R171 billion in funds under management (FUM)
  •  R12.8 billion was raised in 2018
  • 55. 5% of the funds have been earmarked for South African investments
  • Real estate comprised 15% of the value of all unrealized investments at 31 December 2018, with manufacturing and retail accounting for 11.6% and 10.8%, respectively
  •  Average investment deal size increased to R43.3 million during 2018, from R41.5 million during 2017

To obtain the survey results, SAVCA, along with its research partner Deloitte, surveyed 47 managers, representing 82 funds, with a mandate to invest in South Africa and in other African markets.

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Where Will Lower-middle Market M&A Be In A Year From Now?

The Current Market

The lower-middle market has remained positive for sellers in 2019, thanks to an abundance of buyers that are giving sellers the leverage to demand favorable terms. Most business sectors are seeing strong profits, and the bullish optimism of large-cap investors has spilled over into lower and middle markets. This has resulted in heightened interest and aggressive valuation and buying from private equity firms.

There are several patterns have carried over into 2019 from a very active year in 2018.

• M&A activity has been especially strong in the healthcare and technology industries.

• Acquisitions remain a popular strategy for companies needing talent to keep up with growth.

Buy-and-build strategies are proven to be working.

• Emerging markets are being attractively valued, especially in the Asia Pacific region.

• Competition for high-quality targets is intense, particularly for businesses that are owned by the rapidly growing retiring population.

• Small business confidence is strong, resulting in increased investment by owners.

What Lies Ahead

The world faces potential changes in the political landscape as the United States 2020 presidential election nears, Britain is under new leadership through the Brexit transition, and the global economy navigates significant political unknowns in the wake of trade deals and tariffs. However, the United States election takes place near the end of 2020, which could possibly stave off any significant effects on the economy until the year 2021.

 

Ready to explore your exit and growth options?

While no one can ever be certain what the future holds, we still see the benefits of a strong year midway through 2019, yet the lower-middle market has the potential to become more complicated in 2020. The current bullish market is strong but is expected to lose momentum based on the average amount of time that historical highs have been proven that they can be sustained. Many experts warn of a downturn in the economy next year, predicting that a recession is looming. In contrast, some experts expect M&A activity to remain robust regardless of the economy.

Obviously, uncertainty in the marketplace can impede M&A activity. But a recession does not necessarily mean that selling will be impossible. The variables that drive lower-middle market M&A include:

• Lending capacity: The less money a buyer can borrow, the less money they may want to spend.

• Cost of capital: The cheaper a buyer can borrow, the more money they may want to spend.

• Buyer access to equity capital: Strong profits and surplus cash motivate activity.

• Supply and demand for deals: Aging populations entering retirement and business succession plans, strategic buyers focusing on growth, etc.

In the lower-middle market, buyers and lenders both tend to stay much more disciplined regarding their willingness to lend, cost at which they lend, and returns they target. Buyers will be seeking targets with stability, limited cyclical exposure, a business model with recurring revenue, and a history of performing well through a recession.

Should You Sell Now?

The good news is that there is still time before a possible slump in activity and optimism. If you are looking to sell your business, you may have another 12 to 18 months to benefit from the premiums today’s sellers are getting. Keep in mind; it does not mean that after this time is over, you will not be able to sell. Companies are always looking to grow through acquisitions, and the market is always changing. You do not need to feel completely discouraged by any economic slowdown.

Consider how long you are willing to wait to sell your business if the market were to drop. If you do not plan to sell within around five years or more, you can wait patiently for the next market rebound. But if you are determined to sell in the next couple of years, it may be wise to get serious about your exit strategy while conditions are still favorable. Think about what is right for you, your business, and your family when deciding when to make a move.

Contact Us

Our business acquisition experts at Benchmark International can offer exit planning advice and help you plan a solid transition for your company. We will use all the tools at our disposal to get you the maximum selling price while preserving your vision for the future. We can also help if you are looking to buy a business. Contact us today.

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15 Smart Tips On Exit Planning

15. Decide the Company's Future

Before planning your exit strategy, you must decide the future course for your business. Do you plan to sell outright? Would you prefer that the company stay within family ownership? Do you want to retain a percentage stake in the company? Is there an employee that you would want to take over? Could a merger or an acquisition be the best move? This is a key decision to consider before embarking on your exit plan.

14. Set a Date

It's never too early to think about when you plan to retire. This need not be an exact date on the calendar, but you should establish a ballpark timeframe that you would like to put the wheels in motion for your exit. Having an idea of the timing will help you get the process started at the right time, whether it's two years from now or 20 years down the road, especially because most transactions take time.

13. Plan for Continuity

If your business will be changing hands when you retire, you should have a solid plan in place for maintaining the continuity of the company's operation. Both employees and customers alike will need to feel that the future is secure, and you should be able to reassure them through a clear strategy for the transition.

12. Use Diversity to Minimize Risk

The more diversity you have in your client and supplier bases, the more attractive and less precarious your business will be to potential buyers. They are going to need to have confidence that the business can grow, rather than falling apart if the sale results in the loss of one or two key clients.

11. Think Big Picture

It is not uncommon for a business owner to get wrapped up in the day-to-day details of running the company to the point where they lose sight of the bigger picture. It is a good idea to take a step back and consider where you want your business to be in the future, how you plan to get it there, and when your exit fits into that plan.

 

Ready to explore your exit and growth options?

 

10. Create Your Dream Team

Having a strong management team in place is crucial to any successful exit strategy. Whoever is taking the reins is going to be a significant factor whether you are selling the business to an outside party or bequeathing it to family or an employee. It will also help you rest easier about leaving the company in someone else's hands.

9. Get Your Financials in Order

Before you can broker a sale or transfer ownership or control, you will need to organize financial statements, valuation data, and other important documents about the business. If you are planning to sell, buyers will expect to see thorough documentation about the business operations, profits, losses, projections, liabilities, contracts, real estate agreements (pretty much anything and everything regarding the company).

8. Know Your Target

If you plan to sell your company, you are obviously going to want a buyer who has the financial capacity to take on your business. But money is not the only thing that you should be seeking. You want a buyer who shares your values and your vision for the company. They also should possess the right skill set to maintain the company's success and even grow that success. You should not waste your time with a prospective buyer that doesn't have the chops to take the business in the right direction.

7. Always Listen

Even if you feel it is too soon to sell and someone is reaching out to you, it is always wise to hear him or her out. It could result in a meaningful relationship that can be beneficial in the future. They could also reveal some things about your company that you have not yet considered, sparking new ideas and opportunities in the realm of business acquisitions.

6. Devise Practical Earn-outs

If you plan on getting additional payment as part of the sale of your business based on the achievement of certain performance metrics, be realistic about setting these goals. Falling short of these targets can result in less money for you and enhanced leverage for the buyer.

5. Get Your Tech in Order

Today nearly everything is powered by technology. You use it to help you get organized, but you also run the risk of letting things fall through the cracks. Think about all the logins and passwords that give you access to things that run the business. Establish a plan to streamline your tech while keeping it secure for a transition in management. There are enterprise cyber-security management solutions that can assist with these matters.

4. Know Your Number

Have you asked yourself, "What is my business worth?" When you understand the precise valuation of your business, you will be able to ascertain the difference between a fair sale and a bad deal, and get the money you deserve. This includes a company analysis married with a market analysis. You should enlist the help of an M&A expert to determine the valuation of your business accurately. It is worth it to ensure that you get your maximum value.

Feeling unfulfilled? Explore your options...

 

3. Put it on Paper

Having the proper paperwork drawn up for legal purposes is important in the event that something were to happen to you so that you can convey your plans and wishes for the business. The task of creating this safety net will also help you plan more clearly for the future. Sometimes there are details you may overlook until you go to put it all on paper. You should outline your plan and make sure any necessary signatures are on file.

2. Assess the Market

Markets fluctuate and can change at any given time. But if you carefully evaluate your industry's outlook and growth projections, you can time your exit strategy for when you can get the most value for your company. If the outlook is not trending toward optimism, you can take the time to consider how you can bolster the value of your business and make it more desirable in the future.

1. Partner With an Advisor

Valuating and selling a company is not easy. Neither is planning an exit strategy. Seeking the help of experts such as an M&A advisory firm can take an enormous weight off of your shoulders. It can also ensure that the exit process goes smoothly, stays on track, and achieves your specific objectives for both you and the company.

Benchmark International can help you establish your exit strategy and broker the sale of your company so that you get every last penny that you are worth. Call us to get the process started. Even if you are not 100% sure that you are ready to plan your exit, we can help you devise strategies to grow your business in the meantime.

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Selling Your Business: Expectations vs. Reality

When business owners begin the process of selling their business, they may have expectations about the sale process. These expectations can be based on what they have read, what their friends have told them, and what their own needs are. However, the reality of selling a business can be very different from the expectations.

Timing

Sellers tend to think that a buyer will appear at their doorstep ready to transact a deal when, in reality, that is not the case. The sale of a business is a very time-consuming process. M&A transactions can take anywhere from 6 months to a few years to complete, pulling a seller away from the company, which can affect the financial performance and valuation of the business. Hiring an M&A advisor can help take some of the time burdens off of the seller.

Buyers

In our experience, it never surprises us who the buyer is at the end of the day. However, many sellers believe that their perfect buyer is international or a larger company. Again, this is not the reality of it. The ideal buyer may be right down the street or even a member of the seller's management team. When considering selling a business, a business owner needs to seek an advisor or sale process which will provide them with options when it comes to buyers. Not only does this drive up valuations, but it also allows the seller to choose the buyer that is the best fit for their company.

 

Ready to explore your exit and growth options?

Business Condition

Sellers often assume that their business needs to be in the perfect shape to sell it. Sellers will typically share that they want their business to show year over year growth or a more diversified customer base. While these changes might make the business more attractive to the market, buyers buy companies for different reasons. For example, if a buyer is seeking to acquire a company to gain a relationship with a particular company, then that buyer will see a concentrated customer base as a good thing. Also, sellers will work hard to groom their business and miss out on opportunities within the open market. They work for years to grow their business, only to have the market shift and have their business not gain any additional value. The best tie to sell a business is now. We understand what's going on in the market, both from a micro and macro level, and we are not trying to predict the future.


Answer to Questions

The sale process can be very nerve-racking for sellers because of the unknowns. Sellers often expect their advisors and or buyer will be able to answer all of their questions. However, this is not the case. The sale process is just that, a process. Business owners need to go through the process to discover all the answers to their questions. Buyers are eager to get sellers comfortable with deals, integrations, and any other areas of concern for sellers. An M&A Advisor will be able to guide sellers on when they should have answers to their questions. If the answers are unknown, the M&A advisor can help guide the seller to provide comfort based on the advisor's experience.


Deal Structure

A lot of sellers assume that the majority of deals are structured as all cash transactions. All cash transactions mean when the sale closes, the seller will receive his or her money, and the buyer gets the key to the operations, allowing the seller to leave immediately. However, this scenario is a rare occurrence. Typically, a seller is required to remain with the company for 3-5 years to help with transitioning the business. Sellers in lower middle market deals tend to be critical to their company because processes are rarely formalized, and the relationships that sellers hold are key. Given the time frame for a transaction, the buyer will want to incentivize the seller to remain motivated post-closing. To achieve this goal, the buyer will want to structure the deal so that the seller has an interest in the smooth transfer and future success of the business.

 

Author
Kendall Stafford  
Managing Partner
Benchmark International

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

 

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Should You Hire An M&A Advisor To Sell Your Business?

That’s an easy answer. YES! You absolutely should hire an M&A advisor to sell your business. Here’s why.

It’s Not Easy

The process of selling a company is guaranteed to be complicated. While an accomplished attorney or accountant can help, you are going to need a true expert intermediary to handle the entire venture if you are serious about selling and getting the best possible deal.

Consider the seemingly endless amount of work that needs to be done.

• Data and documentation must be produced and organized, stretching back several years to a decade. This is going to include financials, vendors, contracts, and so much more. Do not underestimate how overwhelming the paperwork will be.

• Potential buyers will need to be identified and vetted. A good M&A advisor has access to connections and a knowledge base that you would otherwise never have, opening up an entirely new realm of potential buyers. This process will include a fair share of phone calls, emails, and face-to-face meetings, all of which add up to be very time-consuming.

• You are going to need an experienced negotiator that knows how to maximize your business value and lay the groundwork for getting you what you want. This means knowing how to push a deal forward while providing you with peace of mind that things are on the right track. This also means creating a competitive bidding landscape.

Get Peace of Mind

Selling your business is not a process that should be taken lightly. Countless decisions will need to be made. Consider the reality of what is going to be required and embrace the fact that you cannot shoulder the burden and run your company. Make sure you can sleep at night. Find an M&A advisor that will find you the right buyer, deal with the minutiae, and get the job done—all while sharing your vision for the company, as well as your exit strategy.

They Can Get You More Money

It is also important to note that an M&A advisor is more likely to get you more money. Research shows that private sellers receive significantly higher acquisition premiums when they retain advisors, in the range of six to 25%. Additional research shows that 84% of mid-market business owners who hired an M&A advisor reported that the final sale price for their business was equal to or higher than the initial sale price estimate provided. After all, they know how to value a company properly.

Another benefit of having an M&A advisor is that it shows buyers that you are a serious seller. As a result, hiring an M&A advisor can help drive up your company valuation and get you more favorable terms.

Ready to explore your exit and growth options?

What to Look for in an M&A Advisor

Enlisting the guidance of the wrong advisor can be disastrous. The last thing you want is to end up in negotiations with someone who does not have your wants and needs in mind at all times. Even worse, they can slow down the process and cost you a fortune. When making this decision, know what to look for:

• You want an advisor that understands you, your company, and what you expect to achieve from the sale.

• Consider their experience in your sector, as well as their geographic connections, and how that can work for your business. Global connections are especially helpful. And do they usually work with businesses that are around the same size as yours?

• They will adequately prepare you and manage your expectations.

• They will work diligently to find the RIGHT buyer, not just the easiest or the richest.

• They should be honest, and you should trust them because they have demonstrated that they are worthy of it.

• Their track record will speak for itself. A quality business acquisition advisor is going to have a proven reputation, client testimonials, credentials, and accolades.

• Also, ask if they use any proprietary technologies or databases and how it helps them gain insight into specific industries.

Take your time in evaluating potential advisors. A good firm will patiently accommodate your process. You are going to be working closely with them through a grueling journey, so you will want to feel comfortable with their team and confident that they will work around the clock to get you the most favorable results possible.

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6 Books About Growing A Business That You Should Read

Growing a Business

By Paul Hawken

In this book, Paul Hawken explains how a successful business is an expression of the individual behind it, along with practical advice, common sense, and down-to-earth ideas. Even though it was written 30 years ago, it remains an excellent and very relevant read, backed by the fact that the author’s own companies are still successful after all these years.

 

Organizational Physics - The Science of Growing a Business 

By Lex Sisney

The author of this book spent more than a decade leading and coaching high-growth technology companies. In his work, he discovered that companies that thrive do so in accordance with six universal principles. The book covers a blend of important business and entrepreneurial topics in a manner that stands out from other business books.

 

Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine

By Mike Michalowicz

In this book, the author offers principles to simplify accounting and easily manage a business through analysis of bank account balances. The theory is that a small, profitable business can be more valuable than a large business surviving on its top line, and those that achieve early and sustained profitability have a better chance of maintaining long-term growth.

 

Ready to explore your exit and growth options?

 

Explosive Growth: A Few Things I Learned While Growing To 100 Million Users - And Losing $78 Million

By Cliff Lerner

This best seller provides step-by-step instructions, case studies and proven tactics on how to explode business growth. It reveals the detailed growth frameworks that propelled the author’s small online dating startup to grow to 100 million users while coupling humorous storytelling with concrete examples.

 

Traction: How Any Startup Can Achieve Explosive Customer Growth

By Gabriel Weinberg

Traction is based on interviews with more than 40 successful business founders about their real-life successes. It covers 19 channels that can be used to gain traction for a business, and how to select the best ones for your company. The book discusses topics such as targeted media coverage, effective email marketing strategy, and online search optimization.  

 

Growing Influence: A Story of How to Lead with Character, Expertise, and Impact

By Ron Price and Stacy Ennis

Growing Influence is packed with relatable human experiences and practical advice on developing the right leadership skills. It chronicles two main characters’ growth as they applied the principles in the book, mixing solid business advice with a novel that is fresh, timely and inspiring.

 

Ready to Grow Your Business?

Contact us for help with unique growth strategies for your company and how we can partner for your successful future.

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Benchmark International Advises on the Transaction Between Forza Projects Limited and Lenhart Partners

Benchmark International is pleased to announce the transaction between London-based furniture and kitchen studio, Forza Projects, and private equity firm, Lenhart Partners.

Ready to explore your exit and growth options?

Forza Projects, operating from a prestigious showroom in London W1 and a warehouse and distribution centre in London W3, resells high-end kitchens and furniture to commercial, office and residential clients.

Lenhart Partners acquires small to mid-sized companies with good profitability in a niche growth market.

Benchmark International would like to thank all parties involved and we wish them all the very best of luck for the future.

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Global Oil & Gas Industry Outlook

The global oil and gas industry is expected to remain relatively stable in 2019, even amid oversupply risks and volatile pricing, as oil demand continues to increase. Oil usage is expected to grow by more than 3.5 million barrels per day.

 Key Industry Trends for 2019

  • Natural gas remains a major player as a generator of lower-carbon power, especially in North America. Over the next decade, it is expected to surpass coal to become the second-largest source of fuel worldwide.
  • China and India are leading the way in overall energy demand growth. India is projected to have the largest additional oil demand and fastest growth through 2040.
  • U.S. sanctions on top exporters such as Iran and Venezuela continue to affect the global oil industry, as a retraction in the oil supply leads to inflated global oil prices.
  • Improvements in infrastructure are becoming more critical because production and the physical ability to move products directly impacts pricing.
  • The oil and gas pipeline market is predicted to grow at more than 6% by 2024.
  • Sustainability is becoming a more central issue as renewable energy draws more investment from oil companies, and both consumers and companies wish to mitigate methane emissions.
  • The industry is focusing on how digital technologies can improve capital productivity. Robotics, artificial intelligence, blockchain, and data analytics are being implemented to enhance efficiency and production.
  • The oilfield services sector will see a 10 to 15 percent increase in earnings, with a positive outlook for offshore oilfield services. There are more than 100 new projects planned for 2019 approvals and $210 billion earmarked for offshore oilfield services worldwide.
  • After years of limitations, deepwater exploration and production activity is likely to resurge this year with a spike in investments in deepwater projects.

Ready to explore your exit and growth options?

Increased Drilling Activity

2019 is experiencing increased activity in global oil and gas drilling, led by the United States due to shale production. Outside the United States, global drilling activity is expected to rise by 2.5 percent. Across the world’s eight major oil and gas producing regions, each is predicted to see a higher number of wells drilled.

2019 Forecasted Percentage Increase in Drilling Activity by Region

Africa: 8.7 percent

Saudi Arabia: 5.4 percent

North America: 5.1 percent

Western Europe: 3.9 percent

South Pacific: 3 percent

United Arab Emirates: 2.5 percent

Far East/South Asia: 2.6 percent

South America: 1.7 percent

Eastern Europe/Former Soviet Union: 1.4 percent

Iraq: 1 percent

The most growth in the overall global drilling market will be in offshore oil and gas drilling, with expected growth at around 6 percent. The most active offshore drilling regions are Brazil, Canada, Norway, Angola, Nigeria, Saudi Arabia, Abu Dhabi, China, and India.

Rystad Energy has reported that global deepwater liquid production is set to reach a record high of 10.3 million barrels per day in 2019. This is a result of new fields in Brazil and the Gulf of Mexico. Other leading deepwater producers include Angola, Norway, and Nigeria.

Ready to Move Forward?

Contact us at Benchmark International if you are interested in exploring your options and embarking on the next chapter of your business.  

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The Importance of Environmental Due Diligence

We often say here at Benchmark that signing an LOI is the 10% mark of a transaction.  While it’s difficult to support that quantitatively, it’s certainly anecdotally true. Due diligence is an arduous part of the closing process that will either substantiate the terms outlined in the LOI, call for different terms, or reveal such material differences that the deal craters altogether.  Financial, operational, and sales diligence are all givens, but one component that isn’t always conducted is environmental due diligence. While the former three, as examples, are customary and a part of every transaction, environmental is not always a necessity.  If the business is purely a service business, it is increasingly unlikely that a purchaser will seek to conduct environmental due diligence.

However, there are many reasons a purchaser may decide to conduct environmental due diligence. Perhaps, real estate is included in the deal, or maybe the target entity is a manufacturing business that uses various chemicals in the production of a product. Ultimately, the purchaser is seeking to become aware of any pre-close conditions and limit any post close liability. This is a necessary step in the process as finding and assessing potential issues affecting the facilities is imperative to the facility’s overall health and safety for its future employees and customers.  The environmental due diligence audit ensures future regulatory compliance and reduces potential issues as well as future energy and waste costs associated with the property. 

Ready to explore your exit and growth options?

Traditionally, purchasers have sought to go straight to a Phase 1 ESA (Environmental Site Assessment) which we will discuss further below in this article. However, environmental due diligence can be very costly and time intensive. Many environmental consulting firms now offer an Environmental Desktop Report.  This is the most cost-effective tool for evaluating the risk of future property, as it is done without a visit from the environmental consultant on-site to the property.  This assessment is limited and is used as an initial screen of the property to understand the potential environmental liabilities better.  Different types of environmental desktop reports consist of Historical Records and Database Review, Records Search with Risk Assessment, Environmental Historical Reports, and Environmental Database Reviews.  If any documented contamination has been identified from the past and the purchaser feels more comfortable with further inspection of the property’s existing state, the process expands to the previously referenced on-site Phase I ESA. Many times, the Desktop Report is packaged with the Phase I process to streamline.  The Phase I ESA includes a site visit by the Environmental Professional to document the potentially hazardous materials that could exist. Phase I ESA uses historical resources such as local, state, and federal records to identify any past uses and occupants of the property.  Additionally, the purchasing party will conduct interviews with tenants, government officials, as well as nearby businesses. Once all research is complete, the group will prepare a records review to determine if the next steps may be applicable.

If contamination is detected, the viable next step is a Phase II ESA. Phase II ESA is essentially a field investigation that evaluates the impact the hazardous waste had on the property.  Phase II ESA includes Soil Sampling, Groundwater/Surface Water Sampling, Geophysical Testing for Tanks, Drums & Waste Materials, among other tests.  The most frequent substances tested are petroleum hydrocarbons, heavy metals, pesticides, solvents, mold, and asbestos.  After proper testing and concise reporting, a Phase III ESA may be completed to remediate any contamination based on recommendations made during Phase II.  Phase III ESA includes identifying the extent of contamination, determining the amount of material that was impacted by said contaminants, and assessing options available for all parties involved.    

Regardless of the findings, it is very rare that a buyer walks away after conducting and concluding environmental due diligence.  If it makes it past the Phase II ESA, evidently there will be some remediation.  In the very off chance that the contamination is beyond safe and capable remediation, Phase IV ESA will be conducted. Phase IV ESA is quarantine and closure of the site. Think of Chernobyl. It’s not an often occurrence, and one we haven’t seen here at Benchmark.  All in all, it’s helpful to understand this part of diligence, its importance, and level of detail associated with it. Buyers and sellers alike should be as informed as possible, heading into the due diligence.

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How Should your MBO be Funded?

If you’ve decided to embark on an MBO, you might have asked yourself, how is this funded? Generally, members of the buyout team are required to invest a sum of personal money into Newco but it would be unusual for them to fund the whole transaction. The equity provided by the management is necessary to demonstrate their commitment to the transaction, therefore it needs to be meaningful, yet it does not have to be too vast – typically representing 6-12 months salary. So, how is the remainder of the MBO funded?

Do you have an exit or growth strategy in place?

Seller Financing

A common option to fund an MBO, seller financing is where the management team asks the seller to help fund the MBO. This is also known as deferred consideration, as the seller is deferring a proportion of their payment of the purchase price until after completion. While the seller would more than likely prefer the consideration paid in full on completion, often lenders may request that a portion of the sale is financed by the seller, as it demonstrates that the seller has confidence in the management team and the company going forward.

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M&A Trends in the Technology Sector – Why has it Reached New Highs?

A newly released report from Mergermarket concerning M&A trends in the first half of 2019 has shown that M&A in the technology sector has reached new highs. So far, 1,307 deals have been recorded in the technology sector this year, equating to 15.9% of deal activity by volume in 1H 2019, its highest half-yearly share on Mergermarket record.

Feel like it's a good time to sell?

In fact, in recent years tech M&A has reached record levels but what are the reasons for the industry’s popularity?

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Why Buy-and-build Strategies Work

What Is Buy and Build?

When private equity acquires a well-positioned platform company to acquire additional smaller companies, using the developed expertise in a specialized area to grow and increase returns, it is considered a buy-and-build strategy. This strategy is common with private equity firms with shorter holding periods of about three to five years.

Why It Is An Effective Growth Strategy

If a buy-and-build strategy is executed correctly, a great deal of value can be created when smaller companies are combined under the control of a new company.

  • This type of acquisition saves time regarding the development of specialized skills or knowledge, allowing for growth and expansion to other markets more quickly and successfully with lower production costs.
  • Creating a larger, more attractive company offers a path to exploit the market’s inclination to assign larger companies higher valuations than smaller ones.
  • It provides a clear plan when deal multiples are at record levels and there is a need for less traditional strategies.
  • Buy-and-build deals generate an average internal rate of return of 31.6% from entry to exit, versus 23.1% for standalone deals.

Ready to explore your exit and growth options?

Getting It Right

The buy-and-build acquisition is not simple to execute. The process demands meticulous planning and due diligence for the strategy to work. The best deals usually employ multiple paths to create value.

  • Synergy between the acquirer and the acquired is important to the outcome of the deal. Companies should target existing firms that will be a good fit as a team both tactically and culturally. The human element should always be considered.
  • The management team must be an appropriate fit and have experience with these types of transitions.
  • There should be a vision in place for where the company will be five years down the road.
  • The platform company must be stable enough to endure the process regarding operations, cash flow, and infrastructure (IT integration in particular).
  • Sector dynamics should also be considered. Avoid sectors that are dominated by low-cost rivals or mature, stable players. Focus on sectors with many active smaller suppliers and service providers. Consolidation should result in cost savings and improved service.
  • While no two deals are the same, there are patterns for getting it right. Those experienced with buy-and-build strategies are more likely to lead to a successful deal.
  • It can be difficult to identify private equity firms because of the nature of the way they do business. It helps to have an experienced M&A firm with extensive connections and a proven track record of negotiating successfully with buy-and-build-focused private equity firms.

These reasons are among several as to why it is a sensible decision to enlist the help of an experienced M&A firm such as Benchmark International for your vision for growth. Count on us to help you get your buy-and-build strategy done right.

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9 Ted Talks Every Business Owner Should Watch

1. Globalization Isn't Declining—It's Transforming
Arindam Bhattacharya

https://www.ted.com/talks/arindam_bhattacharya_globalization_isn_t_declining_it_s_transforming

Mr. Bhattacharya is a Boston Consulting Group Fellow, Senior Partner in their New Delhi office, and worldwide co-leader of the BCG Henderson Institute in Asia. Hear his interesting argument as to why globalization is not going extinct but instead is evolving due to cross-border data flow.

2. How to Build a Company Where the Best Ideas Win
Ray Dalio

https://www.ted.com/talks/ray_dalio_how_to_build_a_company_where_the_best_ideas_win

Mr. Dalio is the founder, chair, and chief investment officer of Bridgewater Associates, the largest hedge fund in the world. Learn how his strategies helped him create such a successful hedge fund and how you can use data-driven group decision making to your advantage.

3. Why the Secret to Success is Setting the Right Goals
John Doerr

https://www.ted.com/talks/john_doerr_why_the_secret_to_success_is_setting_the_right_goals

In this talk, engineer and venture capitalist Mr. John Doerr discusses the established goal-setting system "Objectives and Key Results," or "OKR," which is currently being used by companies such as Google and Intel.

4. The Global Business Next Door
Scott Szwast

https://www.ted.com/talks/scott_szwast_the_global_business_next_door

Mr. Szwast is the marketing director for UPS, and he has spent 25 years supporting the international transportation industry. In this talk, he explains how the image of global business is misunderstood and why businesses should stop hesitating to consider crossing borders.

Do you have an exit or growth strategy in place?


5. How to Break Bad Management Habits Before They Reach the Next Generation of Leaders
Elizabeth Lyle

https://www.ted.com/talks/elizabeth_lyle_how_to_break_bad_management_habits_before_they_reach_the_next_generation_of_leaders

Tune in as esteemed leadership development expert Elizabeth Lyle offers a new approach to cultivating middle management in fresh, creative ways.

6. Business Model Innovation: Beating Yourself at Your Own Game
Stefan Gross-Selbeck

https://www.ted.com/talks/stefan_gross_selbeck_business_model_innovation_beating_yourself_at_your_own_game

Mr. Gross-Selbeck is Partner at BCG Digital Ventures, and he has 20 years of experience as an operator and a consultant in the digital industry. In this talk, he discusses the unique aspects of today's most successful start-ups. Also, he shares strategies for duplicating their philosophies of disruption and innovation that can be applied for any business.

7. How the Blockchain is Changing Money and Business
Don Tapscott

https://www.ted.com/talks/don_tapscott_how_the_blockchain_is_changing_money_and_business

Mr. Tapscott is the executive chairman of the Blockchain Research Institute. In this talk, he explains Blockchain technology and why it is crucial that we understand its potential to redefine business and society completely.

8. What it Takes to Be a Great Leader
Rosalinde Torres

https://www.ted.com/talks/roselinde_torres_what_it_takes_to_be_a_great_leader?referrer=playlist-talks_for_when_you_want_to_sta

In this talk, leadership expert Rosalinde Torres describes simple strategies to becoming a great leader, based on her 25 years of experience closely studying the behavior and habits of proven leaders.

9. How Conscious Investors Can Turn Up the Heat and Make Companies Change
Vinay Shandal

https://www.ted.com/talks/vinay_shandal_how_conscious_investors_can_turn_up_the_heat_and_make_companies_change

Mr. Shandal is a partner in the Boston Consulting Group's Toronto office, leading their principal investors and private equity practice. Hear his chronicles of top activist investors and how you can persuade companies to drive positive change.

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How Seller Due Diligence Maximizes Business Value

Selling a company is a momentous life event for any business owner. You have worked hard to build it and want to achieve the highest acquisition value possible when you are ready to sell. To do this, you should be fully prepared for any prospective buyer to conduct rigorous due diligence, which means you should be prepared to do your own.

What is due diligence? A comprehensive appraisal of your business to establish its assets and liabilities and evaluate its commercial potential. 

If you carry out thorough due diligence before putting your company on the market, it will be primed and ready for the buyer to conduct their due diligence process. By being sufficiently prepared, your business is going to appear more attractive to buyers.

Planning Ahead is Crucial

First things first: plan ahead and plan early. Give yourself enough time to optimize the company’s value before putting it on the market. A carefully planned sales strategy is sure to garner better value than what appears to be a hasty fire sale. It is best to wait to sell until you have done everything that you can to maximize your company valuation. When you take the time to position your business attractively for the marketplace, it reduces the odds of a negative outcome.

Start by identifying the key value drivers for your business and how they can be improved. This will help you find obstacles to a sale before a buyer does, and give you time to address any issues. These drivers include:
• Skilled, motivated workforce
• Talented management team
• Strong financials and profitability
• Access to capital
• Loyal and growing customer base
• Economy of scale
• Favorable market share
• Strong products/services and mix of offerings
• Solid vendor relationships and supplier options
• Sound marketing strategy
• Product differentiation and innovation
• Up-to-date technology and workflow systems
• Strong company culture
• Research and development
• Protected intellectual property
• Long-term vision

It is common for buyers to be especially concerned with company culture and existing customer relationships. Make sure your employees and your customers know what to expect and share your vision. If there is misalignment in these areas, it can unfavorably impact the post-sale performance of the company.

Ready to explore your exit and growth options?
Why Documentation Matters

Having all your documentation in order, ensuring its accuracy, and putting it all on the table is going to make you a more trusted seller and increase the value of the business. It will also help you avoid constant back-and-forth requests from a buyer, which can be a distraction for you while you’re trying to run a business.

Creating a secure and efficient virtual data room (VDR) for storage and review of documents offers major advantages. A VDR is a secure online document repository that enables efficient collaboration between parties in any location so they may share information at any time during the pre-deal phase. A VDR also makes it easier to compile and verify every document internally and avoid duplicating efforts. Plus, it offers exceptional security to safeguard against confidential information ending up in the wrong hands. Once you have your VDR completed and vetted internally, you can open the files up to outside partners. Overall, the VDR is your secret weapon in making sure all of your documentation is centralized and that you are presenting your company in the very best light.

You can learn more about the documentation you will need to compile here.

Timing is Everything

You want to sell at the right time based on the market, which is always changing. Being adequately prepared to sell means being ready to act when the time is right. And selling at the right time means getting more value for your business.

Something else you must consider is if you are truly ready to sell. This is not the time to be emotional. Once you’ve initiated the sales process, the last thing you want to do is change your mind when buyers are already involved in the conversation. This will give you a reputation of being disingenuous and not being a serious seller, scaring off potential buyers in the future and devaluing your company.

Professional Help is Key

If it sounds like preparing for the sale of your company is an exhaustive undertaking, that’s because it is. But you do not have to do it alone. If you enlist the expertise of a reputable mergers and acquisitions firm, they can lead the way and help you get the most value for your company. A good M&A Advisor will know better than anyone how to steer you through the due diligence process.

They will also know when the market is in the right place for a sale, and give you access to quality buyers that you can trust. It is also important to note that buyers are going to take you much more seriously when you have partnered with a highly regarded M&A firm.

At Benchmark International, we’re here for you. Our experts are ready to partner with you to exceed your expectations and make great things happen.

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The 12 Best M&A Twitter Accounts To Follow

PitchBook Data| @PitchBook

PitchBook is a financial data, research, and technology provider that covers global venture capital, private equity, and M&A transactions. Here you will find comprehensive news and analysis, as well as deep-dive info on individual business sectors.

Mergers&Acquisitions| @TheMiddleMarket 

See what is happening in private equity and get a healthy dose of all things related to M&A, including in-depth analysis, articles, and commentary in the middle market from an array of sources.

Benchmark International | @benchmarkgroup

As one of the most powerful M&A firms in the world, this list would not be complete without including our very own Benchmark International Twitter account. Get the latest news and industry insights, and see how our Benchmark team stays dynamic on the world stage.

The M&A Advisor| @themaadvisor

The M&A Advisor is the premier network of M&A, turnaround, and finance professionals. Read great industry articles, and get access to information regarding conferences, awards, and meetings.

The Deal@TheDealNewsroom

The Deal has served investors, advisors, and dealmakers with high-level analysis of “the deal economy.” Their Twitter account is an excellent extension of a news source that started as a print newspaper in the 1990s and has grown into a sophisticated M&A information tool.

WSJ Private Equity| @WSJPE

The official Twitter account for the Wall Street Journal PRO's is where you will hear from their global team of editors and reporters covering all topics related to private equity worldwide.

 

Ready to explore your exit and growth options?

 

Flipidea| @Flipidea_AI

Flipidea uses machine learning to discover insights from failed businesses and predict failure from startups. While the account does not have many followers, the account’s timeline of tweets reveals an interesting compilation of information that can be of value to entrepreneurs, including an array of interesting retweets. 

Buyouts| @Buyouts

Buyouts Insider offers industry intelligence and is a handy source of news, data, and analysis of trends in the leveraged buyout and private equity industries.

Mergermarket| @Mergermarket

Mergermarket provides M&A intelligence, data, and research designed to give subscribers an edge. It is a robust Twitter account for anyone interested in M&A, and can sometimes be a source for finding out about unannounced deals.

M&A Critique| @mnacritique

The social media arm of this India-based magazine gives insight regarding deals related to M&A, restructuring, insolvency, takeovers, and joint ventures.

Smart Business | @Smart_Business

The Twitter account of Smart Business Magazine offers a U.S.-based perspective on business insights, advice, and strategies for growth. Here you will also find individual profiles on dealmakers and interesting viewpoints from American business leaders.

M&A Navigator| @manavigator

M&A Navigator is a great tool, especially if you prefer simplified access to your headlines. There are no flashy graphics or photos, just the headlines on what is happening in the world of M&A.

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The Ultimate Cheat Sheet On How To Sell Your Business

Once you have decided that the time has come to sell your company, you will want to be as prepared as possible for the endeavor. Being adequately prepared will pave the way for a smoother process, avoid unnecessary delays in the sale, and increase the value of your business. Use this cheat sheet as a guide to get your business ready for what lies ahead.

Know Why You’re Selling

An important part of selling your company is having a clear understanding of why you are doing it.

  • Do you want to exit the business completely and retire?
  • Do you wish for it to be under control by family or an existing employee?
  • Do you hope to retain a stake in the business as part of the sale terms?
  • Do you plan to sell the business to facilitate its growth?
  • Do you aspire to sell the business to fund other ventures?

These questions should all be considered so that you have a clear answer before initiating the sale process. By knowing why you are selling, you can look for the right kind of buyer to suit those needs and establish a clear plan of action.

Compile the Proper Documentation

Any buyer is going to expect to see the facts and figures on your business. The more prepared you are to provide detailed documentation, the more likely they will be to trust you. Items you should compile and have ready for review include:

  • Current and recent profit & loss statements
  • Balance sheets, income statements, and tax returns for at least 5 years
  • Leases and real estate paperwork
  • A business plan
  • A marketing plan
  • Accounts payable and client lists
  • Inventory and pricing lists
  • Insurance policies
  • Non-disclosure/confidentiality agreements
  • An executive summary and detailed profile of the business
  • Employee, customer, vendor, and distributor contracts
  • Outstanding loan agreements and liens
  • Organization chart
  • Letter of intent and purchase agreement

Feel like it's a good time to sell?

Inventory Your Assets

Your assets are a key factor in determining the value of your company, so it is important to have a clear picture of what they are and what they are worth. Create a record of these assets, including:

Physical assets:

  • Business furnishings, fixtures, and equipment, inventory, real estate, automobiles

Intellectual property assets:

  • Trademarks, patents, licensing agreements, trade secrets, and proprietary technology

Intangible assets:

  • Brand equity, business name, and brand identity
  • Processes and strategies
  • Trained employees
  • Loyal clientele
  • Supplier and distribution networks

Enlist the Help of an Expert

Selling a business is a complicated process, and it is not as simple as just gathering the items listed above. This is why most business owners opt to partner with a mergers and acquisitions firm to organize a deal. They do all the work and tend to all the details so that you can focus on running your business and keeping it thriving in the wake of a sale. This includes finding the right buyers, creating a competitive bidding environment, and making sure you get the most value for your company.

Advisors such as our experts at Benchmark International have specialized tools at our disposal that are proven to maximize value for our clients and get desired results. Give us a call and let us put our connections to work for you.

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Which is the Best Way to Structure the Sale of my Business?

When selling your business, receiving offers is a big hurdle to overcome so, when this happens, it might seem like plain sailing from here. Unfortunately, there is still quite a way to go with the transaction, the first being to analyse the offers on the table, to make sure they suit your exit or growth strategy.

This might not seem difficult, but there are many ways to structure a transaction. Therefore, depending on what you want to get out of the sale of your business, this will influence the type of deal you take. For example, are you planning to retire and need to live off the proceeds of the sale? Or do you want to remain involved in the business?

Ready to explore your exit and growth options?

Consider the below list of ways to structure a deal to find out which is right for you:

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Benchmark International Facilitates the Transaction of In-O-Vate Technologies Inc. to Continental Materials Corporation

Benchmark International has successfully facilitated the transaction of In-O-Vate Technologies Inc. ("InOvate") to Continental Materials Corporation ("CMC").

InOvate, based in Jupiter, Florida, is a leading manufacturer of premium, metal dryer venting accessories used in residential home construction. Founded by Rick Harpenau in 1996, and led by tenured employees James Ortiz and Cliff Budnick, InOvate has grown consistently through supplying quality engineered, superior products along with delivering excellent customer service.

In response to the transaction, CEO Cliff Budnick stated, "Benchmark helped create a strong first impression for InOvate when introduced to CMC. The InOvate team is excited to continue its growth as part of the CMC portfolio. Equally, we appreciate the ability to maintain our family-oriented culture while ensuring stability for our staff, customers, and vendors alike. "

Founded in 1954, Continental Materials Corporation is a public holding company with subsidiaries in heating and cooling manufacturing, building products, commercial door distribution, and manufacturing and aggregates mining and processing. Headquartered in Chicago, IL, CMC employs approximately 450 employees across the US.

Ready to explore your exit and growth options?

Senior Deal Associate, Sunny Yang Garten, added, "It was a pleasure to represent InOvate in this transaction. Throughout the process, Rick and his team were exceptionally responsive, diligent, and professional. This acquisition represents a tremendous opportunity for both businesses and their teams to strategically accelerate the rate of profitable growth. On behalf of the numerous Benchmark International personnel that worked on this opportunity, we congratulate both teams on reaching this goal."

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Buyer Comfort

Buyers tend to assuage their discomfort with deal structure.  When negotiating with buyers, it is prudent for the seller, guided by a seasoned M&A Advisor, to consider what the underlying issue is, discomfort, instead of addressing the result of that discomfort, a specific deal structure. Huh, you say? Let me dive a bit deeper.

Buyers of businesses use deal structural devices to cure many issues or concerns. Let's take a second to illustrate the most typical elements of a structured deal. While the following encompasses the most common deal structures, it is, by no means comprehensive.

Cash at the closing table is obvious and needs no further illustration. A seller note or seller financing is also fairly simple. The seller essentially serves as a lender to the buyer. The attorneys draft a promissory note, perhaps a stock pledge agreement and incorporate them and potentially other documents in the definitive agreements. The buyer pays off the principal of the note and interest over the course of a few years.  Seller notes don't tend to be contingent upon anything other than the solvency of the entity backing the note. They are deferred. Rollover equity, often known as Seller Rollover, Rollover or simply Roll, occurs when the seller maintains a position in either the existing business or Newco. In some circumstances, a seller may sell 80% of the shares in his or her company while in another, that seller may sell 100% of the shares in her business and simultaneously reinvest what amounts to 20% of the proceeds in Newco. This is generally a cashless exercise. It is critical for the seller to engage seasoned advisors to assist in structuring the rollover in the most tax-efficient manner. The final typical structural element of a deal is an Earnout. Where the seller note isn't contingent upon performance, an earnout is. Earnouts pay out a prescribed dollar amount over time as certain agreed upon and defined metrics are achieved. While these tend to be quantitative metrics like EBITDA and Revenue, they can also be tied to qualitative measures like maintaining key customers or employees or integrating technology. In addition, earnouts can be tied to maintenance or growth.   

Ready to explore your exit and growth options?
As I hinted at earlier, buyers use these structures to cure their apprehension. What is behind that discomfort or apprehension? Many things but at the heart of most of those is the oft-cited, yet misunderstood concept, risk. Risk, in a business context, is the chance for an unanticipated outcome. Risk can be specific to a business, to an industry, to geography or more global. Risk isn't inherently bad, thus the risk/reward model, but it needs to be accounted for in decision making. Buyers, in their initial diligence, aim to understand the underlying risks and determine their tolerance for said risks. When structuring an offer, they seek to allocate and incorporate those risks.   

Some buyers seek out businesses that are very easy for them to understand, have very predictable financial performance and robust operational teams.  Those types of businesses, if proper controls are also present, will garner simple offers with a high percentage of the deal in the form of cash. This is a low-risk deal. A business with more volatile performance introduces incremental risk. A buyer may still be interested in the business but may shift cash at close to an earnout. If the business is growing rapidly, but that growth hasn't been consolidated in the buyer's eyes, that earnout may be linked to the growth of earnings or revenue. Perhaps the buyer will apply a three-year average to EBITDA to incorporate the volatility into the valuation.  If the seller wants to be paid on the recent growth, a buyer may use an earnout to bridge the valuation gap. A buyer willing to pay 5x EBITDA in an all-cash deal may pay 8x or more if allowed to incorporate structure, thereby mitigating their risk.

If the seller is adamant that he or she won't accept an earnout, it behooves an M&A advisor to dig deeper into where the actual buyer's discomfort lies.  Rather than fighting the earnout, might it be a better strategy to uncover the underlying issue and solving that? The earnout is the solution, not the problem. Why might a buyer incorporate an earnout? There are several possible reasons; 1. Earns reduce the cash required to close the deal.  2. They create alignment between buyer and seller post-close, thereby ensuring the seller continues to act like an owner even when he longer is an owner. 3. They confirm their diligence. Can these concerns be addressed in other ways? Of course, they can. If the earnout is moved to a seller note, no additional cash at close is required of the buyer to fund the deal. Both two and three can be addressed through a seller roll. If the buyer wants to ensure the seller acts like an owner, make him an owner. Rollover allocates some of the risks to the seller in both an earnout and rollover equity. Perhaps an employment contract signed by key employees would provide the buyer some comfort? Many deals incorporate an options pool, Management Incentive Program (MIP) or Profits Interest as additional ways to create alignment post-close. 

The central idea is this. Rather than focusing all of your attention on the proposed structure of a deal, attempt to think through the concerns the buyer is trying to sooth with that deal structure. Solving for the actual underlying problem rather than the buyer's proposed solution may lead to better outcomes for both parties.

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What is a Management Buyout (MBO)?

There is a vast range of different types of acquirers a seller can go to when selling their business. From trade to private equity, national to international buyers, there can be a large pool of potential acquirers to approach.

One of the many options available is selling to the current management team – otherwise known as a management buyout (MBO). This is a transaction where a company’s management team purchases a majority or all of the shares from the existing shareholder(s) to take control of the company. This requires the management team to pool resources to fund the acquisition, but there are various funding options available such as private equity financiers and seller financing.

Do you have an exit or growth strategy in place?

There are different reasons as to why a company might opt for an MBO rather than look to sell to an outside company – for example, it might particularly appeal to a shareholder who is looking to retire. If the company is run by its management team and the shareholder(s) are no longer involved in the day-to-day then an MBO can allow the shareholder(s) to fully retire.

While an MBO may appeal more to a shareholder looking to retire, it can be an attractive succession plan for any company. One of the reasons being is that there is no need to disclose confidential information to outside parties such as competitors. Another reason is it ensures a smooth transition as the management team has the skills and experience to take the company forward and continuity is ensured for customers, suppliers and employees.

Nevertheless, there can be pitfalls to an MBO which must be treated with caution. If both the management team and the shareholder(s) are spending a lot of time working on the MBO, then this could be detrimental to business performance and, as MBOs require a lot of specialist knowledge in structuring and financing the deal, a lot of attention is required.

However, these pitfalls can be avoided – a good corporate finance team can assist in executing a successful MBO, without compromising business performance.

READ MORE >>

How to Strike a Work-Life Balance to Improve Your Health

What were the reasons you started your own business? Most likely you wanted to pursue a passion but there are a multitude of other benefits that would tempt anyone to start their own business – from flexible working times to calling the shots. But, have these benefits actually become a reality?

If not, then it might be time to look at your work-life balance. Do you find yourself having no time to spend with your family and doing the things you love? Even worse, do you find that it’s having a detrimental effect on your health? For example, if you are stressed, being overworked can lead to a number of health problems such as stress induced insomnia and heart disease – something that needs to be remedied straight away.

Feel like it's time to slow down?

Here is what you should do to make sure you are balancing work and life without being detrimental to your health:

 

Visit the Doctor

If you are feeling stressed and this is making you feel unwell then it is time to visit the doctor. Nobody likes visiting the doctor and it might be difficult to fit an appointment in around your schedule, but it is best done sooner rather than later – a doctor can tell you if you need to slow down and what will happen if you don’t.

 

Factor in Time for a Healthy Lifestyle

Make sure you schedule time for eating well, exercising regularly and getting plenty of sleep. Admittedly, it’s easier said than done, but fitting these activities into your day can help you work better and, often, working longer hours doesn’t actually lead to increased productivity, in fact – studies have shown that work performance can improve with a shorter work week.

 

Schedule Some Non-Business Time

Aside from scheduling in time for a healthy lifestyle, you should have some time for leisure activities you enjoy. You can’t work 24 hours a day so try and find time in the evening or weekend to switch off and enjoy other passions in your life to help reduce stress.

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Five Things I Wish Business Owners Knew Before Engaging Us

1. No one can control the market.

You can know it. You can be smart about what it will do, how it will react. But you cannot control it. The nearer into the future you look, the more of a feeling of control you can have. But the longer a business owner wants us to look into the future, the less valuable the insights. Things change. Interest rates move. Sectors fall in and out of favor. If you want me to try to control the market, please act quickly so that we are dealing with the current market, not some future version of the market.

2. There is no perfect buyer (or seller).

Everything in life involves tradeoffs. Your business, like the ones we will bring to you, has imperfections. I’m here to convince buyers to take a favorable view on your business – to trade off its defects against its outstanding features in a way favorable to you – AND to help you uncover and evaluate the buyer’s defects and favorable features. So … please don’t expect your business to be perfect and don’t expect us to bring you perfect buyers. One of the main reasons our business exists is because buyers – and sellers – are imperfect. If that were the case, you’d not need us.

3. Your priorities will change over the course of the company sale process.

This is not a bad thing. It’s a marvelous occurrence that is very satisfying to observe. It is an unintended consequence that will be of great benefit to you. What makes it problematic is when you don’t realize its happening AND when you don’t tell us its happening. As your broker, we are out there trying to achieve your objectives – as you’ve explained them to us. If we don’t know what you’re after, we’ll be after the wrong thing.

 

Ready to explore your exit and growth options?

 

4. We’ll give you plenty of feedback but we need feedback also.

We will start by proving you some feedback from our internal knowledge base and experience. We will then give you feedback from specific buyers and the market in general. In order to get the best result for you, we need that feedback loop to be a two-way street. We want to know what you think of each buyer, of our service, of your own business, of the market in general, and of the process. Both our process and the market are highly flexible and changes can be made to meet your needs and expectations, but only if we know they need to be made.

5. It’s a marathon, not a sprint.

Too many clients come out of the blocks at full speed. Many also tend to think the signing of a letter of intent is the beginning of the end but it is just the end of the beginning. Running out of gas is a big problem when it comes to getting deals closed. Some parts of the process require significant time and energy from you and others do not. In order to hit your goals, we’ll need you well-prepared for those stages where your input is crucial. The deficiency we most often see emerging during the process is not one related to energy or time but rather emotions. This is understandably a stressful process. It should be and we build our service model around that fact. And that emotional aspect of the process is the hardest one to deal with over the course of the lengthy process.  

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I’ve Had an Offer for my Business – What do I do?

If you’ve received an offer for your business, you have three options – the first being take the offer and sell your business. This is possibly something you have been considering, or it seems too good an offer to refuse; however, you should be cautious in such an event and, if you do want to pursue the offer, make sure you do the following:

Keep the Business Sale Confidential

Confidentiality is very important when it comes to the sale of your business. If it gets out that you are selling your business then this could potentially lose you staff, customers, and suppliers as they could get nervous about an impending sale and the changes that could be in store for them. Therefore, do not discuss anything until a non-disclosure agreement (NDA) has been signed, including whether you are prepared to sell the business.

Make Sure you Stay Focused on Your Business

One of the dangers of the sales process is that it is very time-consuming at the point where you really need to focus on maintaining a good business performance – if business performance dips, then this can give a buyer an excuse to lower their offer.

Need help with a business offer?

In fact, this is not the only situation where a buyer might decide to lower their initial offer. The buyer is under no obligation to actually pay this price for your company until you both sign the Sales and Purchase Agreement (SPA) and there are several reasons a buyer might try and chip away at the offer to try and get your business for a bargain price.

For example, when you have accepted the offer and signed the subsequent Letter of Intent (LOI), the buyer can commence the due diligence process, providing them with access to confidential information such as financial documents and contracts for a specified period of time, typically 30-60 days. There are two related problems with this. Number one is the fact that the due diligence process is time-consuming and a resource drain, which could lead you to take your eye off the business. Number two is the buyer can now look at re-negotiating now they have had a thorough look at the ins and outs of your business.

Therefore, after this huge resource drain, you now have an offer on the table that does not meet your expectations as the buyer has chipped away at the price. Either you still take this less than favourable offer, or you turn away from the deal. While it is your prerogative to do so, you have lost time and valuable resources, you have given information about your company to another party, and you have not had your full focus on the business.

So – what are the alternatives to accepting an unsolicited offer?

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How Do I Know If I’m Ready To Retire?

Retirement is a significant decision that you have waited your entire life to make. Most people retire between the ages of 60 and 70, but everybody faces a different set of circumstances that dictate when they can retire. So how do you know if you are ready?

The most important factor in retirement is whether your financial situation will allow you to do so with security and peace of mind.

Do you have enough money saved? You want to live comfortably and maintain the standard of living to which you are accustomed. The last thing you want to do is retire and then realize you don’t have the means to live the way you are used to and end up having to downsize your dreams.

Are the markets in the right place so that you maximize your investment returns? Maybe your portfolio took a little bit of hit recently. Giving it a little time to recover can be a wise strategy. Consider where the markets are and where they are forecasted to be in the upcoming months. If you time it right, you can make the most of your decision.

Are you debt free? It may not be the smartest move to retire if you still carry debt you must pay, especially if it is significant. Retiring when you are debt free means retiring when you are worry free.

Do you need a plan to cut down on potential expenses? If you have a strong desire to retire but feel that you are not as financially confident as you would like to be, you can devise a plan to reduce your monthly expenses and ease some of the burdens.

Of course, there is more to the decision than just financial factors. You must consider whether you are mentally and emotionally prepared for retirement.

Are you no longer interested in pursuing career opportunities? If you are still hungry to attain work-related goals or you feel that you haven’t achieved everything you set out to achieve, then maybe retirement is not for you just yet. You do not want to retire and then feel that you are missing out or that you didn’t reach your full potential.

Do you find yourself thinking about recreational and social activities more than you are thinking about work? If you find yourself standing on the golf course, wishing you could spend more time there, then it may be a good time to consider retirement. Sometimes getting out before you are completely checked out is in the best interest of you and your business.

Do you have a plan for how you want to spend your time? It is not unheard of for people to retire only to become overwhelmed with boredom and a lack of purpose. Having a plan in place can help you stay busy and feel that you are achieving a new set of goals in life.

If you are retiring with your spouse, are you equally ready and on the same page when it comes to how you will spend your time? If you are in this together, make sure your plan is truly in sync. If one of you wants to travel the globe and the other one just wants to spend time with the grandchildren, there could be a conflict that you didn’t even realize you would have to address. Plan your vision for retirement together.

These are all critical questions to ask yourself when deciding if you are ready for retirement. But there is one more crucial question that you must address.

Do you have an exit strategy for retiring from your business? An exit plan is essential because it ensures that your business will make a successful transition into its next phase of ownership. Also, an exit plan will help you boost the value of your business so that you are prepared to sell at the ideal time.

Ready to explore your exit and growth options?
A proven strategy for success regarding exit planning is to partner with a trusted advisor, such as Benchmark International. We can help you find the right buyer, maximize value, and craft a dream exit that leads to a happy and satisfying retirement.

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Benchmark International Facilitated the Transaction of Master Printing Group to JAL Equity

Benchmark International has successfully facilitated the sale of Master Printing Group to JAL Equity. Master Printing is one of the Mid-South's leading marketing solutions providers. The company provides complete services from design and concept through the production of complicated collateral pieces. Additionally, the company operates a full-service graphic design, marketing, and advertising division as well as comprehensive direct mail services.

JAL Equity is a boutique private equity firm based out of Sarasota Florida and focuses on acquiring small businesses and operating them profitably over the long term. The company targets printing services, data services, direct marketing, and lead generation entities.

Ready to explore your exit and growth options?

Senior Deal Associate, JP Santos, added, "The Benchmark International team is incredibly excited about the future of Master Printing Group under the ownership of JAL Equity. The previous owners did an outstanding job of building a company with an impeccable reputation in the market, and a brand that was built over generations. Jon and Susan were a pleasure to work for, and we're excited about what the future holds for them both. JAL Equity has proven to be successful in this industry, and the corporate and cultural fit amongst the JAL Equity and Master Printing Group was apparent from the first conversation."

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