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

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

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

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

Environmental Consulting

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

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

Waste and Recycling M&A

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

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

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

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

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

When to Sell

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

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

Procure M&A Experts

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

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

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

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

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

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

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

M&A Optimism

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

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

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

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

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

Nuclear Energy M&A Expertise

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

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

Contact Us

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

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

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

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

Specialty Pharmacy

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

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

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

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

Institutional Pharmacy

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

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

Keys to Successful M&A in the Pharmacy Sector

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

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

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

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

Over the years, we’ve collected the questions acquirers most often ask about our relationships with our clients. We hope you will find working with us to be a beneficial experience and invite you to learn a bit more about our relationship with our clients by looking over these most frequently asked questions.

Do you ever represent acquirers? No, we are and always have been a 100% sell-side shop. Many of our team members have significant buy-side experience but we prefer to have a very narrow specialty and we take all our fees from the seller. We have, from time to time, been asked by serial acquirers to search for targets with specific criteria. We are happy to do this and when we do, we do not seek engagement by or fees from the acquirer. Instead, we work to sign up the seller as a client and then bring them to the inquiring potential buyer for a pre-market first look. 

Is the relationship with your client exclusive? Yes, all of our contracts are executed on a sole and exclusive basis. The financial investment we make in each of our clients is far greater than the typical broker in the mid and lower-mid market. The process only works if we work on this basis. For the same reason, we do not co-broker with other sell-side brokers.

How are you compensated? We require a one-time retainer from all clients upon engagement and we have a success fee due upon (and at) closing. The one-time retainer is significant enough to ensure that our client is serious about undertaking the process but not large enough to muddy the waters as to our incentive. For us, the profit is in the success fee. Our success fee is a percentage of the total benefit our client will receive from you as a result of the transaction, subject to a smaller fixed minimum amount. Our contract states that it is to be paid at closing by the acquirer out of the purchase price (on behalf of the seller) on the funds flow memo.

What authority do you have? We never have authority to bind our clients in any manner. We have authority to release the teaser, which they will have previously approved of in writing, as we see fit. Following the execution of a NDA by an acquirer and our client’s written sign off on that NDA and acquirer, we are authorized to release the Confidential Information Memorandum and have wide latitude to discuss anything relevant to a potential transaction.

Are your clients tied to you for a fixed term? No. If one of our clients no longer desires to sell, they can terminate our contract by written notice. Termination is not valid if delivered while engaged in negotiations with an acquirer. In exchange for this right to come off market at any time and to defend the exclusive nature of our engagement, we have tails that we feel are industry standard.

What visibility do your clients have into the exact size of your fee? We will provide a pro forma invoice to our clients at any time. All they need to do is ask. This may be upon presentment of proposed letter of intent (LOI), upon execution of an LOI, upon review of the first draft of the definitive agreements, or even the day before closing. Our contract obligates us to do this and we believe it is the most productive way to handle the issue of fees. We encourage our clients to ask early and often. Our accounts department can typically prepare these within 24 hours of the request and they are, of course, subject to modification if and as the deal develops or changes.

What notification and information rights do you have? Our clients are obligated to keep us informed of their negotiations and provide copies of agreements relevant to the calculation of our success fee for any transaction for which we may be due such a fee.

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

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

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

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

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

Office Administration Outsourcing

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

Recruitment Outsourcing

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

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

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

BPO M&A Activity

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

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

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

RPO M&A Activity

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

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

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

M&A Due Diligence

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

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

Benchmark International facilitated the transaction of Gene Larew Lures, LLC in Tulsa, Oklahoma to PRADCO Outdoor Brands.

Gene Larew Lures, an Oklahoma-based company, was purchased by owner Chris Lindenberg in 2006.  The company became a market leader with the Gene Larew brand synonymous with bass baits, the Bobby Garland brand, and the Crappie Pro brand.

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

Owner Chris Lindenberg commented, “I retained the services of Benchmark to help market my company to the public and had very positive results with the right fit with the buyer and a satisfied client.”

Deal Associate, Amy Alonso commented, “Benchmark International added value by negotiating this deal.  We saw throughout the entire process that the buyer, PRADCO Outdoor Brands, was a perfect fit who stood to benefit greatly from the manufacturing experience, industry knowledge, and fishing expertise that they would gain from the existing owner. With this knowledge, the team was able to negotiate a deal that would allow for the existing owner to successfully transition the business to a capable buyer in a swift and expedited manner.  We wish Gene Larew Lures and PRADCO Outdoor Brands the best of luck in their future endeavors.”

Benchmark International facilitated the transaction of Hair Are Us, LLC, a Los Angeles based hair extension brand. They ship worldwide and are well-known in the industry as one of the leading hair experts of human hair extension. They specialize in various extensions, including Indian Wavy, Brazilian Curly, and Kinky Straight.

In addition to a quality product and superior brand, the company has a strong social media following with over 347,000 followers on Instagram and over 5,500 followers on both Twitter and Facebook.

Hair Are Us is a Los Angeles limited liability company established in 2011 by Ashley Williams and Khat Abdur-Rabbani. They started as a mobile business but quickly found success and grew rapidly into an online store and three locations with a fully operating warehouse. Given this success, the company engaged Benchmark International’s help in finding a partner to help take the company to the next level. With the assistance of Benchmark International, Hair Are Us found the right collaborator and agreed to bring on an equity partner in August 2019.

Transaction Director at Benchmark International, Luis Vinals commented, “We are excited to have facilitated the sale of Hair Are Us, LLC a company that designs and retails custom hair extensions and wigs through an online portal and storefront to a private investor. The company serves both individual clients and hair salons, has a national presence within the hair care industry, and serves a number of celebrities. Understanding the intangible assets of the business, such as its social media following of over 300,000 followers was a key aspect that our team heavily focused on. This is a testament to our team’s ability to adapt and apply new innovative skillsets to the successful sale of our clients’ businesses.”

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

 IPOs

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

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

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

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

Asset Management

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

Strategic M&A

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

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

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

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

Benchmark International is pleased to announce the transaction between Counterpoint Trading 439 (Pty) Ltd (Counterpoint) and Shave and Gibson Packaging (Pty) Ltd (S&G).

Counterpoint is a leading manufacturer of food paper packaging products and industrial wipes, founded 14 years ago in Hammarsdale, Kwa-Zulu Natal. The company leverages long-standing and vital relationships with several leading retailers, wholesalers, and distributors and boasts a strong reputation for quality products and reliable service.

S&G, founded in 1981 by brothers-in-law Alan Gibson and Neville Shave, is recognized as one of South Africa’s largest privately-owned packaging and printing businesses, employing over in 500 staff. The business operates through its national infrastructure with its headquarters and manufacturing facilities strategically located in Mobeni, Durban. Further auxiliary sales and warehousing facilities are operated in both Cape Town and Johannesburg.

“We believe that Counterpoint will add significant value to S&G through the addition of further products which are required by our own customers. As people, we share similar values and corporate beliefs and we are confident that this partnership will be a major success in the years to come. Counterpoint will continue to manufacture their products from their existing factory and trade independently under their own name. We are confident that this will be a fruitful partnership, and we welcome Wim and Ruben and their team into the S&G Group of companies,” said Simon Downes, S&G Group Chairman.

On working with Benchmark International, Ruben Van Wambeke, shareholder and director of Counterpoint said “Having Benchmark International walking us step by step through this process was ultimately the key to success. Benchmarks’ ability to realign our perspective is what brought this JV to fruition.”

“The anti-plastic revolution has generated a rise in demand for environmentally friendly packaging alternatives. Strengthened by joining forces with S&G, the innovative paper packaging manufacturer, is well-positioned to capture this market. Having worked closely with the shareholders, we’re pleased with the incredibly strategic match and successful conclusion.” Says Benchmark International’s Transaction Associate Director, Raquel Naicker.

Energized by what the deal portends for the South African M&A industry, Andre Bresler the Managing Director at Benchmark International, added Shave and Gibson’s motivation for this transaction to extend product lines and partner with strong entrepreneurs is a recurring theme emerging in our industry, we are delighted for both parties as the agreed synergies will enable Counterpoint to capitalize on the growth opportunities that motivated them to explore a transaction in the first place.

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

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

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

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

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

Solar Power M&A

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

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

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

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

Hydroelectric Power M&A

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

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

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

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

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

At Benchmark International, we work exclusively on the sell-side, so we would love to say, “The way to do a re-trade is to never do a re-trade.” However, when you have completed countless deals, there are times when we are tied so closely into those deals that we know the terms of the original offer do not stand up to the target company’s actual position following due diligence. In other words, we will admit when there is a legitimate reason to re-trade a deal term, including the price.

Our experience also tells us that these instances are rare when sellers have been through our process, and there is a right way and wrong way to do it if you want the deal to close. We encourage you to avoid blown deal costs by following these simple steps:

Step 1: Discuss it with us first. Yes, we are going to push back. Yes, we are going to support our client. But we will also be able to keep the deal on track by doing the following:

• In a best-case scenario, clarifying a misconception on your part that moots your need to re-trade
• Giving you a read on how our client will react
• Suggesting the best means of communicating the issue so that the reaction you receive best matches the severity of the actual change
• Providing our client our open and honest view of the change and the reasons for it before he or she has had a day or two to lock themselves into a position that may be based on less than the clearest picture possible
• Delving into our resources to convert what starts as a win-lose scenario to something closer to a win-not-lose-too-much scenario

Step 2: Have your data lined up. Very often we see re-trades supported by vague concepts and no numbers. These cause extra problems. If the amount of the re-trade can come over on the left side of the page with a numerical breakdown of the reasons for the re-trade on the right side of the page, and the seller can see that the two balance one another out—even if just figuratively—we are all in a much better position to get to the closing.

Step 3: Don’t wait. When you find something in diligence that looks like it is building to be the source of a re-trade, don’t save it all up and then dump it on the sell-side at the last minute. Conditioning the recipient of bad news is always the best way to get the most appropriate response to that news.

Step 4: Don’t overreach. Even in our smallest deals, we are not operating in a Turkish bazaar. There is no need to ask for $500,000 when you need $250,000. That type of negotiation works well in one-off trades but not when you are trying to build a relationship that is expected to hit additional bumps before the deal closes and likely needs some level of ongoing trust after closing.

Step 5: Be open to creative solutions. Regardless of how meaningful the problem is and how large a fix you need, your solution may not be the only acceptable one. It may not even be the best one for you.  There are many ways to change a deal to address an unforeseen risk and provide the protection you need to offset that risk. The key to getting the transaction closed is often finding the amount of offset you need using the method of offset the seller can accept.

Benchmark International works hard with its client to avoid the need for re-trades. We collect extensive data on our clients prior to going to market. We run a very process-driven data room and often pre-populate it. We encourage our clients to get in front of disclosing detracting factors to avoid any surprises. We comb through every financial statement and tax return our clients can produce. In some countries, we are able to verify returns against official tax transcripts. Unlike many other brokers, we will even put known issues into our Confidential Information Memorandums. We attempt to place our clients with experienced M&A legal advisors. We understand—and make every effort to ensure our clients understand— that hiding an issue is not going to get them a better deal, may cost them a very good deal, and will never make it through due diligence.

The Course of the Apparel Industry

Several factors have reshaped, and continue to reshape, the worldwide textile and apparel manufacturing industry. The paradigm has shifted into a digital market that demands speed and agility from industry players. These sweeping influences create drivers of increased mergers and acquisitions activity in this market.

• Online expansion, the reduction in brick-and-mortar store locations, and omni-channel shopping
• Sophisticated tech-savvy consumers and social media influencers
• Digitization of payments, points of sale, logistics and delivery
• Demand for fashion at lower prices
• A growing market for fair fashion and demand for increased sustainability as younger generations call for reduced impacts on the environment
• Cost-cutting measures and restructuring to focus on core brands
• Emerging markets of second and third-tier cities and the assertive expansion of fast-fashion retailers

The E-commerce Race                                                                                  

Becoming a go-to platform for customers in the apparel industry means that companies are forced to innovate and diversify their offerings to provide added value, relying less on retail margins. This not-easy task can be accomplished through internal research and development, or mergers and acquisitions.

Changes in Fashion Ownership

Consumers are becoming more interested in different ways to extend the lifespan of fashion items as new companies crop up that offer used clothing, refurbished apparel, and even clothing rental. As more of these new companies emerge, the existing fashion retailers must to adapt to embrace these new ownership models, which are being heavily driven by younger generations that still want new clothes but are more concerned with sustainability. Even luxury brands are embracing this model, but are buying resale or rental businesses so that they can maintain control over the marketing of their brands.

Thinking Small

More and more consumers—and investors—are being enchanted by small brands with interesting and genuine stories. Younger generations prefer small brands and authenticity. Digital marketing changes how the brand narratives are conveyed and provides a cost-effective vehicle to reach larger audiences. And retailers want the differentiation that draws customers in and boosts their margins. Small brands are also able to cater to niche shoppers and more nimbly react to market trends. These small apparel companies are seeing billions of dollars in funding. The giant fashion brands must adapt to this shift in philosophy and add small brands to their portfolios.

On-Demand Fashion

Data analytics and automation have created a new market for companies that focus on made-to-order manufacturing of apparel. Small-batch production cycles are a result of the need for a more rapid response to changing trends and consumer demands, as well as a reduction in overstock.

From a financial viewpoint, on-demand fashion production has both benefits and drawbacks. It requires lower capital investment. It leads to smaller inventories, which means more agility. And faster turnaround cycles can ease demand uncertainties and make production more sustainable. In contrast, production and transport costs are typically higher because of the smaller batches.

Digital Textile Printing

Conventional textile printing methods (rotary screen or flatbed) are being abandoned for newer digital printing methods, especially in European countries. Digital printing allows textile manufacturers to respond to an increasing demand for fast fashion through shorter production runs and customization.

This tech-driven printing sector is drawing the attention of private equity and strategic investors. M&A deals in this space create companies that combine specialty technical mastery with the market and monetary reach of large corporations.

M&A Motivation

There are several reasons to sell a company in this sector. It can be too expensive to keep up with new trends in such a quickly changing operating environment. It can be beneficial to sell within a segment that has high valuation levels (such as affordable luxury or athletic wear). Additionally, brick-and-mortar retailers can sell assets to focus on the development of their flagship and online stores.

There are also many reasons to buy a company in this sector, such as the integration of the supply chain from manufacturers to wholesalers. It can also drive geographical expansion or growth into a new segment, especially emerging markets with developing economies. Another tactic can be to leverage existing brand equity to profit from a known brand that the current owner cannot afford to maintain or grow. Plus, the ever-changing technology landscape means new opportunities within tech companies that serve the industry.

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Let’s talk about a plan to sell your business. Contact the experts at Benchmark International to start strategizing for a sale, growth, or your exit from the company. We are eager to get to work with you.

The furniture manufacturing industry includes the design, production, distribution and sale of household, institutional and office furniture and related products. Global furniture sales are expected to increase 5% each year through 2025. According to Dun & Bradstreet, the countries that are home to the most furniture manufacturing companies are Brazil (72,063), China (62,832, Poland (22,389), with these three accounting for more than half of the world’s furniture manufacturers (54.9%).

Mergers and acquisitions deals in the furniture manufacturing industry are driven by a variety of factors:

• Healthy economies and housing trends
• Major retailers looking to tap new markets
• Vendors seeking category and price-point expansion
• Foreign manufacturers looking to grow geographical production
• Increased investor confidence due to Millennials approaching their prime spending years
• Family-owned businesses with aging management and no succession plan

Consolidation Within the Industry

Furniture needs are evolving and the industry is seeing overlap between residential, hospitality and commercial projects, creating increased appetite for acquisitions.

Strong, existing industry players are known to utilize M&A to expand their global footprints, product lines and price-point offerings. Building out helps companies to gain market strength and enhance shareholder value.

In some regions, labor shortage issues present a challenge. Therefore, companies with trained and skilled labor are able to command a premium in a sale.

Vendors that design furniture but outsource it from overseas are seeking competitive advantages. And those overseas producers are looking to increase their global presence. Geopolitical factors have a good bit of influence on how prosperous these M&A transactions can be so they are contingent upon global economic situations and trade relationships.

Large furniture companies that have a cash surplus from operations, reduced taxes, and funds recouped from offshore business, have liquidity that drives them seek out strategic acquisitions.

The Role of Private Equity

Private equity investors look to the furniture industry to create value within vendors and retailers, as well as add-on acquisitions that create platform companies. In the case of furniture production, manufacturers have assets that can be leveraged in a purchase, especially for the upholstery sector.

Consolidation at the retail level also increases investment interest in the furniture industry. As more retail store locations close their doors, private equity investors see opportunities for new retail concepts to replace them. And when larger investors show interest, smaller investors take notice. Consolidation also creates synergies of shared office, logistics and warehousing costs, which can lead to higher profit margins.

Value Drivers for Furniture Manufacturing Companies

• Online sales: In today’s world, the majority of furniture sales now take place online. Businesses must have a compelling and secure e-commerce platform and a strong online advertising and digital marketing presence in order to remain competitive.
• Factory maintenance: The actual manufacturing conditions are a key component in valuations. This includes equipment service and maintenance, inventory, and overall environment. 
• Vendor relationships: Having a variety of healthy, trusted vendor relationships shows buyers that profits can be expected to remain steady due to changes in ownership.
• Skilled staff: The creation of high-caliber products and a company’s reputation hinge upon the craftsmanship and retention of the staff. Satisfied employees produce consistent quality, which translates into higher sales numbers.
• Safety measures: The furniture manufacturing industry is more prone to employee injuries than most because of its labor intensiveness, making on-the-job injuries a costly expense. Highly detailed and enforced safety plans can save businesses money, making prospects less risky and more appealing to investors.

Careful M&A Approach

A major challenge that furniture companies run into with M&A transactions is maintaining the day-to-day operations of the business throughout the course of a deal. A merger or acquisition can be a significant distraction that can put strain on financial departments and senior management, putting the everyday work on hold. For this reason, buyers typically look to target add-on companies. It is wise for business owners seeking M&A strategies in this industry to enlist the experience and guidance of a reputable M&A firm to facilitate a value-driven deal that allows for the sustained success of the company and takes advantage of proper market timing.

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If you are a business owner and would like to consider ways to grow or sell your company, our M&A experts at Benchmark International are waiting for your call. We can even assist you with exit planning for your retirement. We look forward to hearing from you.  

Benchmark International facilitated the sale of Vintage Park VIP Lounge One, LLC d/b/a Barcelona Restaurant & Lounge in Houston, Texas. It has been acquired by private investor Holssam El-Assal.

Vintage Park VIP Lounge One, LLC d/b/a Barcelona Restaurant & Lounge, was founded by Mark Evans in 2014, at Vintage Park, one of Houston’s premier destinations for shopping and dining.

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

Owner Mark Evans commented, “Benchmark International’s team was able to accurately represent my business to the market and find a buyer that could continue providing the level of service our clients desire. Most importantly, they valued the confidentiality of the transaction deeply to not disturb any on-going operations. They were involved every step of the way and were able to deliver on their promise of bringing in a buyer that would take care of our team post-close.”

Deal Associate, Amy Alonso commented, “Benchmark International added value by negotiating this deal. We saw throughout the entire process that the buyer, Holssam, wanted to become involved with the restaurant and be a hands-on operator. With this knowledge, the team was able to negotiate a deal that would allow for the existing owner to successfully transition the business to a capable buyer in a swift and expedited manner. We wish Holssam and Mark the best of luck in their future endeavors.”

Mergers and acquisitions in global government contracting (specifically the technology, aerospace, defense, and government services industries) is a market that tends to remain stable and ripe with opportunity. This sector offers many positive qualities such as revenue transparency and predictability. Strategic buyers seek products, services, sales channels, and geographical presences that broaden capabilities and make them more competitive. Companies with advanced technologies are in an especially advantageous position for acquisition.

Yet, even in an environment that consistently sees a strong flow of defense M&A deals, there is a heightened level of risk with plenty of opportunity for errors and setbacks. The business of government contracting is highly regulated and can be extremely complex, with a great deal of challenges. It is also subject to the effects of government spending budgets—and budget cuts.

Governments enforce intricate legal and regulatory requirements. Failure to adhere to these requirements can result in government actions that include contract termination, suspension, debarment, damages and penalties. Suspension and debarment, which means that a company can no longer conduct business with the government, can be a result of unfair trade practices, fraud, commission of crimes, and even a lack of business integrity or honesty. There is also a great deal of emphasis placed on conflicts of interest.

With so many possible risks, careful planning is imperative when considering a transaction in this space. It is recommended that sellers engage M&A experts with a strong reputation, transaction experience in their sector, and strong connections within the global buyer community.

It is also recommended that sellers prepare for a sale from the perspective of the buyer.  

• Determine areas of exposure. Due diligence is always important in determining an accurate valuation of a company, and this is even more so in the case of government contractors. It demands a meticulous level of scrutiny. The company’s level of compliance can directly impact the valuation. Often, many contracting companies also run commercial businesses and have less strict compliance programs versus pure government contractors, yet carry the same risks.
• Assess risk and successor liability. Serious risk mitigation strategies are necessary when it comes to proper recordkeeping regarding compliance, including cyber-security and socio-economic topics, as well as a lack of negative factors such as prior suspensions or debarments, tax violations, investigations, and claims. Additionally, what is the exit strategy that is in place, and how can it improve the quality of buyer conversations and increase valuation?
• File regulatory notices and approvals. Be prepared for the filing of government notices, regulatory approval prerequisites, and post-M&A integration. These filings should be identified in the agreement, and the parties should preemptively agree to a process for securing government approvals.

Other important considerations regarding government contracts mergers and acquisitions that any seller should anticipate include:

• Analysis of existing and prospective government contracts held by the entity to be acquired and assignment of contracts to the buyer
• Any potential socio-economic impacts as a result of the transaction
• The transfer of facility and top-secret clearances, as well as intellectual property rights
• Assessment of conflicts of interest that could exclude the buyer from future contracts
• Whether the target company is compliant with specific government regulations
• Any existing subcontracts and teaming agreements
• Past performance of the target company and its impact on the buyer’s ability to win other government contracts

Foreign transactions may face additional challenges in completing M&A transactions in the government-contracting sector. These include more stringent due diligence processes, export law compliance, security clearances, cultural differences, and foreign investment scrutiny. This applies even further regarding higher risk regions, such as Africa.

In the case of cross-border deals, there are key concerns as to:

• Whether the seller is considered an inverted domestic corporation and no longer eligible for future government contracts
• If there should be inclusion of a board of directors as part of a mitigation plan to allow continuation of the seller’s facility clearance

Proper due diligence can identify risks in a transaction, create accurate representation and certifications, confirm that the adequate disclosures and indemnifications are obtained, and secure necessary government approvals, resulting in a successful and profitable acquisition.

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If you are interested in making a move in this sector, please consult with our international M&A specialists, as we have the desired experience in transactions involving government contractors and companies that support them.

The inverted yield curve is a situation that occurs when the interest rates on short-term bonds are higher than the interest rates paid by long-term bonds. It basically means that there is enough concern about the near-future markets that people move their money into less risky long-term investments. Any time this scenario arises, investors get nervous because it typically warns of a recession.

Short-term vs. Long-term Bonds

In thriving economies, bondholders demand a higher yield (profit) for longer-term bonds versus short-term bonds.

• Short-term bonds mature in less than five years and carry a lower interest rate risk. These funds do not yield large returns. They give investors a safe way to earn higher yields than they would with extremely low-risk investments and do not require money to be tied up for a long period of time.
• With long-term bonds, there is a much longer maturity period and people are required to invest their money for greater lengths of time. While these types of bonds yield higher returns, there is also an increased risk that higher inflation could reduce the value of payments, and that higher interest rates could cause the bond's price to drop. A longer-term bond also carries a higher risk of default.Basically, the longer it takes to be repaid, the greater the risk that inflation will swallow your investment.
• Most investors choose to have a mix of both short- and long-term bonds.

Treasury Bonds

Government debt securities are known as Treasury bonds or T-bonds. These types of bonds are considered to be virtually risk-free. They earn fixed interest until they mature (a period of 10-30 years). Once they mature, the owner is also paid the face value of the bond. Treasury bonds make interest payments semiannually and the income earned is only taxed federally.

The Inverted Yield Curve

Treasury bonds help to form the yield curve, which includes the full range of investments offered by the United States government and diagrams yields by maturity. It usually curves upward, with longer-term bonds having a higher yield. The yield curve becomes inverted when long-term bonds are in high demand and the rates are shown to be lower than those of shorter-term bonds.Essentially, in this scenario, investors expect that they will make more money by holding onto a longer-term bond than a short-term one.

The yield curve inversion can also point toward expectations by investors that the Federal Reserve will cut short-term interest rates in an effort to boost the economy.

A Predictor of Recessions

Although it can happen months or years before a recession begins (usually an average of 18-22 months), the inversion of the yield curve has been a consistent predictor of every recession since the 1960s. For that reason, any time it happens, there is heightened anxiety and anticipation of slowed economic growth.

The last time the yield curve inverted was in 2007, prior to the financial crisis and recession of 2008, which was the worst recession since the Great Depression. The yield curve also inverted prior to the recessions of 2001, 1991, and 1981.

In this latest case, the yield curve first inverted in December of 2018, and inverted even further in March of 2019. Then, the 10-year yield hit a three-year low of 1.65% on August 12, 2019.On August 15, the yield on the 30-year bond closed below 2% for the very first time in history. Fears of the ongoing economic effects of the trade war between the United States and China are fueling the market concerns around the world. 

The science of forecasting financial futures is never a 100% certainty, and while the inverted yield curve has proven to be a reliable indicator of things to come, it does not necessarily guarantee that a recession will happen. As of August 2019, the Federal Reserve has said that there is only around a 35% chance of a recession.

What It Means for M&A

An inverted yield curve can have implications for mergers and acquisitions, especially if you are aiming to grow your company.

For example, let’s say that part of your growth strategy requires funding for building expansion or new equipment. Under an inverted yield curve, short-term interest rates become higher than long-term interest rates. Some businesses may find this to be good news because they can lock in a good rate for the long term.

It may be impossible to predict financial futures, but enlisting the help of experience M&A advisors can help you formulate growth and risk management strategies for your company that make the most of available capital for expansion and lower your risk in all yield-curve situations.

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Are you ready to make a move? Call our M&A experts at Benchmark International to start the conversation about your growth strategies and future opportunities.

The trillion-dollar technology industry is inherently subject to massive growth, disruptive mega-trends, and voracious corporate and investor appetite. Companies such as Internet software and services, e-commerce, telecom, financial tech, cybersecurity, data analytics, social, travel tech, and auto tech are the world’s major players.

The main drivers for M&A in this sector are the creation of revenue growth, improved efficiencies, acquiring key talent, and staying ahead of competitors. It can be more efficient for a big tech firm to buy a smaller technology company in order to gain new functionality or services without creating them itself. It also serves as a pathway to ease into newer areas, as non-technology companies look to acquire technology companies to avoid disruption.

Mergers and acquisitions are commonly used as exit strategies for businesses in the technology industry. Company owners tend to prefer to cash in through M&A versus IPOs because IPOs can take longer and involve more regulatory authorities. 

The Software Sector

Enterprise software and software as a service (SaaS) companies comprise a major segment of the technology industry. IT, data and cloud-based services have permeated every field of business in the world. Traditional and legacy software providers are using M&A in order to remain relevant. Healthcare, financial, and customer relationship management services software are continually in high demand. And digital marketing deals play a key part in the software M&A landscape.

Tech Company Valuations

Technology businesses that garner the highest company valuations for M&A typically share the same set of qualities:

• Reliable growth metric performance
• Good product/market fit
• Above-average margins
• Strong and predictable cash flows
• Positive key performance indicators
• Low owner involvement
• Streamlined operations
• A formulated exit plan

Additionally, investors are usually willing to pay more for businesses that have well-built brands because they are able to focus on long-term growth strategies without worrying about being eclipsed by intense competition while changes are being made.

Due Diligence

In the technology sector, careful due diligence is especially important to coordinating a successful deal. In an industry where lifecycles can be short and technologies can change quickly, there is great risk. Understanding the future relevance of the product or service is key. If a company is profitable today, it does not mean it will be tomorrow, making growth potential a larger motivating factor for M&A than current profitability. Therefore, in addition to financial due diligence, there needs to be a high level of technical and commercial due diligence. There are intellectual property issues, and due diligence must fully assess patents, copyrights, trademarks, domain names, trade secrets, and mask works

Cross-border M&A

Technology has completely blurred global borders, which greatly increases opportunities in M&A. While acquirers can expand their worldwide reach, this can also make the processes more complicated and time consuming for several reasons.

• Countries have varying and evolving regulations regarding technology and privacy, as well as tax and labor-related factors.
• Integration becomes more complex because of cultural differences, language barriers, and variances in corporate philosophies.
• The geographical distance between the companies can also make coordination difficult when trying to communicate in opposing time zones.
• Geopolitical factors can cause uncertainty and influence the feasibility of deals.

All of these circumstances change the implications for M&A strategies and calls for heightened expertise in dealing with cross-border transactions.

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If you are considering a merger or an acquisition, you will love the way we do things at Benchmark International. We are motivated to achieve all of your aspirations and will never present you with a deal that we think will fall even the slightest bit short of your wants and needs. Count on our industry experts to use their global connections to deliver the right options for you.

The financial industry is an ever-evolving industry dealing with constant regulatory adjustments, scrutiny, competition, etc. The financial industry is also one of the first industries to look toward for a current health report on an economy as well. Numerous factors impact the financial sector, such as changing customer behaviors, macroeconomic cycles, data protection legislation, political climate, etc. 

M&A activity in the banking and finance industry has been on the rise in the last few years. This trend looks to continue as we head towards the end of 2019, and begin to take a peek around the corner in 2020.

Key Industry Trends

Look for M&A activity in the finance industry to continue to place a major focus on improving technology, product offerings, and overall customer satisfaction. 

• At the base of much of the M&A activity, we currently see a technology arms race in the finance industry. Banks and financial institutions have identified a strong need to enhance their technological features, and this has become a focal point for M&A activity in this industry.

• One interesting factor to watch for as we move forward is the continued entrance of non-traditional players into the finance industry, commonly referred to as fintech. The fintech group is an emerging group that heavily utilizes technology to deliver financial services, unlike their more-traditional counterparts. Fintech disruptors are the technologically innovated companies that are competing head to head with the traditional financial methods we have grown accustomed to for years. As this relates to M&A activity in the finance industry, one might assume a combination of financial services and technology would make for an attractive acquisition or merger opportunity.
   
• Customer service remains a high priority for all banks and financial institutions. However, customer service can theoretically split into two parts: The first part involves people and relationships, which smaller banks tend to tout as an advantage over larger banks. The second part is more strategic, involving product offerings that will better keep customers satisfied. Larger banks tend to win out with more product offerings over their smaller counterparts based on economies of scale, and access to significantly more resources. M&A opportunities allowing a bank to enhance its product offerings is an attractive feature as well as acquiring talent and relationships through acquisition.  For smaller banks and financial institutions that find it harder to keep up, being acquired by a larger bank may be an attractive strategy to explore as we look toward the future. 

Debt Financing and Interest Rates

Lastly, M&A transactions typically involve some form of debt financing, which a lot of times will make up the majority of the cash at close. Interest, which is the cost to borrow money, can severely impact an M&A transaction from a funding perspective, and certainly an economy for that matter.  Though they are trending higher, interest rates remain reasonable for the time being, and not far above historical standards.

It appears a significant portion of private equity firms are financing a large percentage of their M&A transactions with nonbank debt. In comparison, other groups are using cash reserves, which end up lowering the dependency on debt financing.  A movement in valuations, rates, and funding could cause a shift either way in M&A activity, though for now, the environment appears stable.  Should interest rates continue to rise, eventually causing equity market volatility, one would assume this would force buyers to focus on consolidating their strategic positions more than pursuing opportunistic acquisitions.

Author
Neal Wilkerson
Senior Analyst
Benchmark International

T: +1 615 924 8607
E: DWilkerson@benchmarkcorporate.com

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.  

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.  

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.

• 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.

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. 

☐ 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 agreements, patents, trademarks, 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. 

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 21^stcentury, 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.

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.

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.

The global print market is shrinking in volume but growing in value. Output measured in billions of A4 prints was 49,973 back in 2014 but is forecast to decline very slightly to 49,654 by 2024. In value terms, print output is expected to grow from a total of $767.4 billion in 2014 to $862.7 billion in 2024 – a CAGR of 1.18%.

The role and dynamics of the print industry are changing, with the main factor being the impact of the internet and mobile connectivity on the way both businesses and individuals communicate and access information. This affects every segment of the traditional printing business, changing expectations of what is acceptable to speed, relevance, and degree of interactivity of data, irrespective of the medium used.

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.

2. Transparency is the best antiseptic.

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

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.

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.

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.

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.

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. 

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.

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.

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.

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

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.

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.

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.

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.

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.

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.

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

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.

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.

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.

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.

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.

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.  

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. 

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.

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.

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.

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.

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.

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.

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.