A fascinating report has been published by Intralinks who, in conjunction with Cass Business School in London examined 23 years of data from almost 34,000 companies worldwide to identify the factors that make companies attractive M&A targets.

Whilst worth reading the full report, it concludes with a summary of six vital signs business owners should be aware of to make their company attractive to buyers.

The study found that in any year approximately 12% of all companies become the subject of an acquisition approach every year and whilst our own observations of the results achieved when companies are bought, as opposed to sold, are a topic for a different article, the parameters to assess when considering the saleability of a business are relevant in both circumstances.

The report clearly highlights that the measurements used to predict likely targets for acquisition differ distinctly when considering the attributes deemed desirable by private equity, and those by trade buyers. The metrics also draw a clear distinction between these factors when targets are differentiated between public and privately-owned companies.

The 5 factors that rank a privately-owned company’s propensity to be approached were reported to be:

Sales Growth – companies with positive sales growth in the three years prior to approach reflect as desirable targets. Target companies demonstrated a sales growth rate 2.4% higher than non-target companies.

Profitability – EBITDA to Sales ratios measured 1.2% higher in target as opposed to non-target companies.

Leverage – In the Intralinks/Cass report this factor was deemed to be the #1 predictor of whether a company would become a target. Interestingly corporate acquirers (trade buyers) favoured low debt/EBITDA ratios. Private Equity acquirers, on the other hand, sought a demonstrable ability to support debt and targeted companies that had leverage as high as 3 times that of the non-target companies.

Size – This was deemed the second most important predictor of whether a company might become the target of an acquisition – private company targets were 40% larger than their non-targets peers.

Liquidity – Liquidity of target companies, as measured by their ratio of current assets/current liabilities, is 4% lower than that of non-targets. Companies in the bottom two deciles for liquidity are on average 35% more likely to become acquisition targets in any given year than companies overall.

M&A forms an integral part of corporate company growth strategies and is the purpose for the very existence of Private Equity – The Intralinks/Crass study, therefore provides valuable insights for owners of private companies seeking to groom their business for an eventual exit.

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In spite of the uncertainty surrounding the meat processing sector in Ireland, M&A activity involving participants within the sector has continued apace in 2017, with the conclusion of some notable deals.

Now, whilst there is a whole host of reasons underpinning this M&A activity, a number of common themes are evident, with the continued push for scale being the first. In an industry where operating margins are traditionally tight, top-line growth is vital for meat processing businesses to grow and prosper.

In a developed economy such as Ireland, growth by acquisition will usually outstrip organic growth in this sector in terms of pace, and hence businesses are attracted to purchasing other players in the sector as a means to achieving scale.

Scale also facilitates additional cost efficiencies, which is another key motivating factor behind many M&A deals.

Recent deals in the domestic meat sector in Ireland include: the purchase of Wilbay Ltd, a leading meat wholesaler, by Monaghan-based sausage producer Arthur Mallon Foods in 2016; and the acquisition by O’Brien Fine Foods of Faughan Foods, from Hogans Turkeys in 2017.

However, with the size of the Irish market and competition regulation acting as a constraint on growth by domestic acquisition for some players, businesses have sought to acquire international operators as a means to satisfy their growth aspirations.

A recent Irish success story in France was the acquisition by Liffey Meats of a majority shareholding in the French meat processor Chiron Viandes, which specialises in producing frozen hamburgers for supermarkets.

We have seen foreign meat-processing companies seeking the knowledge and expertise of established Irish operators, in order to improve their businesses.

Groupe Terrena, the co-operative group and owner of French processor Elivia, saw the benefits of bringing in Irish-headquartered Dawn Meats as a partner to its beef processing business.

This is a true reflection of Dawn’s excellence in the global industry, as well as the international recognition of Ireland’s expertise in grass-based meat processing.

The recently announced strategic partnership between Dawn and Northern Irish meat giant Dunbia, will provide Dawn with a Brexit buffer via Dunbia’s considerable UK presence, as well as cementing its UK supply chain.

The emerging markets (India, Indonesia, China, Malaysia) will increasingly drive global growth in the meat processing sector, with the focus predicted to shift more and more to these markets in order to be close to an ever-growing customer base.

Access to the Asian market could make Southern Hemisphere processors attractive to Irish companies.

While China’s meat imports have exploded in volume terms over the past couple of years, as well as the market being opened to Irish exporters, the vast majority of this demand has been satisfied to date by both Brazilian and Australian processors.

New Zealand, with its similarities to Ireland in terms of both climate and abundance of grass, is a region which could be explored by Irish deal-makers.

The high availability of capital, both debt and equity, is another major factor driving M&A activity in both agricultural and non-agricultural sectors.

With banks supportive of well-presented and credible growth plans, would-be acquirers are being given the opportunity to pursue value-adding targets. Additionally, the uplift in valuations being generated by this availability of capital is proving attractive to any potential sellers.

With the low-yield environment likely to persist and an abundance of private equity funds yet to be deployed, there is no indication that M&A activity within the meat processing sector will slow-down anytime soon.

M&A ACTIVITY- MEAT PROCESSING SECTOR

Of all the obstacles inherent in the M&A process, something that’s often overlooked is ‘the people factor’ – that’s to say, understanding, planning and correctly valuing the HR and employment side of a business, as well as company culture – an aspect that’s crucial when two companies come together.

A 2016 survey by KPMG showed that a staggering 54% of executives said that HR and corporate culture issues were the most significant issues they faced when integrating companies.

But why is the people factor such a challenge?

Firstly, whatever the apparent synergies and ‘fit’ of two organizations, they’re bound to have in-house cultures that differ, because just as with people, no two companies have exactly the same personality. Those differences could be slight, or they could be vast. People’s understandings (plural!) of the company’s goals to date may not match up, or the more fluid ‘company ethos’ could be quite different from the businesses you’re going to be dealing with. All of these can present issues for even very experienced business leaders when there’s a ‘marriage’ of workforces.

Secondly, business owners often feel they have a good grip on their company – but much of that is rooted in understanding the business, the products or services offered, the competitors, the market, the figures – and the staff ‘as seen from’ the CEO or MD point of view. In fact, staff members very often don’t behave or think in the way the business owner perceives them to, and this needs to be understood up-front before going into any M&A process.

So how does your staff really feel about your organization? How well do staff members understand its goals? And importantly, how well do staff actually perform in their given roles?

Very many companies just don’t have this type of information in data formats that are valuable to potential buyers or partners. There are often skills gaps and development requirements, staff-wise, that the business owners just have no idea about – but which might be glaringly obvious to an outside eye. And in the M&A process, you’re going to be under the unflinching gaze of an outside eye.

So how can you make sure you understand your people before selling or merging your company?

Investing in a good diagnostic tool makes sense as a first step. Here, you can get an idea of likely behaviours, as well as better insights into each individual’s specific role. What’s more, the results here will give you real people-centred data that will prove invaluable during the M&A process, because it demonstrates competences as well as highlighting areas that need work.

Don’t be afraid to do what’s necessary to gain a clearer understanding of your own staff before someone else goes over it with a fine tooth-comb. Give yourself the luxury of time to do this, and you’ll be able to tweak what needs changing well before the very serious task of selling or merging your company.

People Centred Data- A Crucial Tool in M&A (1)

In a much-talked-about piece in the New York Times recently, Hernan Cristerna, Co-Head of Global M&A at JP Morgan Chase, diagnosed the global mergers and acquisitions market as alive and very much kicking – in spite of ongoing Brexit anxieties and considerable political uncertainty around the Trump administration.

Cross-border European-US transactions have already increased by over 80% this year, with some truly blockbuster deals counting among them such as Johnson & Johnson’s acquisition of Actelion Pharmaceuticals. Globally, mergers had already hit record levels in 2015 and 2016.

Factors influencing the ongoing good health of M&A worldwide have included a marked absence of organic growth per se, combined with easy access to cheap money, both of which are really helping drive the market.

However, we’ve also seen the rise of interventionist policy among governments across Europe, including here in the UK which traditionally has been one of the most open markets, The UK has seen, in common with many other European states, a marked increase in political talk of intervening to help protect ‘critical sectors’.

In the US, rigid protectionism has long been firmly ensconced; the all-powerful Committee of Foreign Investment is, after all, famously able to veto any deal that might be considered not in the nation’s interests. The European Union, tellingly, is now considering whether to bring in similar legislation to monitor cross-border deals in Europe. On the ground, this would mean the M&A equivalent of a lengthy ‘pre-nup’ period, where buyers will take longer to get their hands-on companies.

Off-setting the protectionist trend in Europe, though, China and its huge raft of state-owned companies are looking more flexible than ever in its transition from the ‘world manufactory’ to the ‘ultimate consumer’, with an obvious ongoing hunger for deal-making. Greater overseas investment in Chinese assets is surely on the cards.

Cristerna’s principal prediction is that because of the growing tendency towards state protectionism in Europe, chief executives will shy away from drawn-out juggernaut mega-deals in favour of smaller and much less fraught transactions.

Could it be that this year’s M&A volumes match those of 2016, but with much more emphasis on smaller deals?

Watch this space!

The 'Urge to Merge' is Alive and Kicking Globally

Benchmark International has successfully facilitated the sale of Rochester Electro-Medical, Inc to Advantage Medical Cables, a portfolio company of HealthEdge Investment Partners. The complementary nature of the acquisition is expected to enable both companies to build on their strengths and solid proprietary businesses, uniting the AMC, LifeSync and Rochester brands, to provide one of the most robust and diverse product lines in ECG, SpO2, NIPB, IBP, EMG, EEG, IOM, PSG, EP and Cath Labs.

The combined companies are expected to become one of the largest players in the US market.

Rochester Electro-Medical, Inc, is a manufacturer and distributor of a variety of Class I and Class II medical devices for use in hospitals and clinics. The primary products sold are reusable and disposable supplies used in neurodiagnostic and neuromonitoring procedures. The company has been family owned and operated by the Berkins family since 1960, spanning three generations of family members at the executive level. The acquirer, Advantage Medical Cables (AMC), is an active portfolio company of HealthEdge Investment Partners (HealthEdge). AMC is based on Coral Springs, FL and is a manufacturer and distributor of accessories for the patient monitoring market. HealthEdge is based in Tampa, FL and is the control investor of AMC as part of their Fund II.

The Rochester Electro-Medical, Inc shareholders stated, “We would like to thank the team at Benchmark International for their expertise, hard work and dedication in helping us find the perfect partner for our business with AMC and HealthEdge. Benchmark effectively marketed the growth occurring in our business in order to negotiate and procure the highest possible value, while guiding and supporting us throughout the entire process. We are very proud of our company’s history and dedication to our industry and customers, but we recognized it was time to move on to new ventures in our lives. Benchmark brought the same level of passion, innovation and energy to facilitating our exit that we brought every day as owners.”

Graham Woodard, Senior Associate at Benchmark International, added, “Being able to support a client in such a positive acquisition is rewarding for our entire team. We truly enjoyed working for our client at Rochester Electro-Medical and the group at HealthEdge and AMC were equally pleasurable to work alongside. On behalf of Benchmark International we would like to wish both sides the very best in future endeavors.”

ABOUT BENCHMARK INTERNATIONAL

Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners achieve their personal objectives and ensure the continued growth of their businesses.

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Following on last year’s impressive 26 closings, Benchmark International’s US offices represented sellers on 14 transactions in the first six months of 2017. This was due in no small part to a 30-day span in which Benchmark International closed ten deals globally, with six of those being for US-based sellers.

Benchmark International’s US sellers were spread across a number of states with multiple deals closing in each of Texas, Florida, North Carolina, and Georgia. Nine buyers were strictly strategic (aka trade) buyers and an additional four were strategic buyers backed by private equity funds. Transactions were evenly split between stock and asset deals.

This success and year-over-year growth can be attributed to a range of notable factors including:

  • Benchmark International’s global reach. Though the transactions were heavily weighted toward domestic buyers over this period, the Benchmark team handling the sale of a US-based manufacturer of network connectivity equipment reached all the way to Sri Lanka to identify and procure Orel Corporation as the buyer of this Miami-based client. “Getting the right buyer with the right deal requires looking under every rock, without limitations. That’s what we did here. Buyers from other countries can pose unique challenges but the right buyer is the right buyer regardless. You just have to make sure they get an invitation to the party,” commented Tyrus O’Neill, the director who led the deal.
  • Benchmark International’s understanding of deal urgency. “Time kills all deals” goes the adage. Benchmark facilitated the closing of a fairly sophisticated transaction within 60 days of the signing of the letter of intent. “That may not sound extraordinary but when you are dealing with a multi-jurisdiction, vertically-integrated target company and complex family dynamics; this is no small accomplishment. There a thousand reasons a deal can die and I’m not going to let time be one of them,” said Dara Shareef, the director who pushed hard to make this timely closing a reality.
  • The team’s unconventional extra effort from top to bottom. When no customary buyers could meet the needs of Benchmark’s client Bold Staffing Solutions LLC, Luis Vinals, the associate handling buyer outreach on the engagement, dug a bit deeper and found a non-for-profit buyer that proved to be the perfect fit. After the closing, he said, “When I came up with the idea, I couldn’t find any record of Benchmark facilitating a sale to a not-for-profit but we ran a legal check and my director then gave me the go ahead to make the introduction and deliver the pitch. Knowing that my unusual idea led to the client’s success was a truly rewarding feeling and I believe that shows how vested the whole team is providing a satisfying result to the client.”
  • Capitalizing on trends. At the firm’s annual global conference in 2016, Benchmark’s directors and management team noted both the increasing presence and the high certainty of close offered by an emerging form of buyer, the private equity backed strategic buyer. The firm’s outreach efforts then placed greater emphasis on identifying and building relationships with these acquirers. As a result, a third of US buyers over last six months resided in this category. As Graham Woodard, the senior associate on two deals involving hybrid acquirers, summarized, “These buyers represent the best of both worlds. As strategics, they can quickly and often painlessly get a grasp on the seller’s business, greatly reducing stress and time to close. As a financial buyer, they have both the funding and the sophistication to act efficiently. Overall, they take a great deal of strain and risk out of the process for the seller.”

Benchmark International has successfully facilitated the sale of Cade & Associates Advertising, Inc. to Eyeworks Advertising, Inc.

Cade & Associates Advertising, Inc. is a full service advertising agency that focuses on creative design, production and account management of digital media, social media, and in-house video production services. Cade also offers a full slate of traditional agency services like graphic design, brand development and media planning and placement. Cade & Associates Advertising, Inc. has been operating in the Tallahassee, Florida for close to a quarter of a century and has over 100 clients across a number of different industries.

The acquirer, Eyeworks Advertising, Inc. is led by entrepreneur Robert Marshke. Robert has extensive experience in video production and advertising. Rob is looking forward to the addition of Cade & Associates Advertising to the Eyeworks Advertising brand and plans on building the companies footprint into the Midwest.

Rick Shapley and Linda Frandsen, owners of Cade & Associates Advertising, Inc., stated “Our experience with Benchmark has been first class since day one. Their attention to detail, professionalism and availability at a moment’s notice made us feel as if we were their only client. We would like to thank the team for helping us through the process and look forward to seeing the company grow under new ownership.”

ABOUT BENCHMARK INTERNATIONAL

Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners achieve their personal objectives and ensure the continued growth of their businesses.

 

Cade advertising merger broker deal

Due diligence by potential buyers takes up a serious amount of time in any M&A process. Essentially, it’s designed to make sure the buyer knows exactly what it is that they’re buying – and in other cases, ‘reverse diligence’ helps the target company understand whether a potential buyer or merger partner is right for them.

But what does due diligence cover, in a nutshell? Here are the top five areas of interest in the due diligence process, regardless of sector or size of business.

  1. Strategic ‘Fit’

How well would the target company fit into the wider strategic plan of the buyer? The buyer and their team will also want to check exactly what any pre-existing perception of ‘fit’ is based on.

  1. Finances

The buyer needs to be aware of the company’s historical financial statements and metrics, as well as checking that any predictions for future performance are reasonable. This is a detailed process par excellence, but one that your company can be ready for if your financial house is all in order beforehand.

  1. I.P. and Technology

The extent and quality of the company’s I.P. and technologies need to be determined here, covering areas such as patents, I.P. protection measures, trademarks and service marks, trade secrets and their safety, copyrighted products or materials, I.P.-related disputes, licenses granted to third-party companies, any open-source software issues and so on.

  1. Sales and Customers

The company’s customer base and the sales pipeline need to be fully understood by the buyer, as well as customer satisfaction, the concentration of customers, sales terms and policies, the motivation of the sales team and any seasonality issues amongst other criteria.

  1. Material Contracts

This is one of the most time-consuming aspects of the due diligence process, but it’s absolutely critical to the success or otherwise of the deal. Here, the buyer will want to review and understand contracts around credit arrangements, loans, customers and suppliers, settlement agreements, equipment leases, employment, exclusivity, physical property, unions and much more besides.

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There are many more areas that are looked at during due diligence, but preparing well for these top five categories of interest will help equip your company for a smoother, more successful deal. Due diligence can take a long time, and you’ll be able to hold your nerves a lot better if you feel you’ve prepared well and that all the necessary information is in place for potential buyers and their teams to examine.

If you’re considering selling your company, take a long hard look at these five areas and reality-check as to whether you need to do a lot more work before making yourself open to this very high level of scrutiny.

Great preparation makes for easier due diligence – and better deals!

POST BREXIT BENEFITS FOR MERGERS AND ACQUISITIONS

In July 2016, Benchmark International’s client, Command Partners (a digital Marketing Firm) merged with Enventys (a Product Development Firm). These companies cater to helping entrepreneurs and startups locally and globally. Command Partners focuses on digital marketing for burgeoning companies using crowd funding and Enventys; expertise is in product design, engineering, manufacturing and fulfillment. The joint company will provide the following services, among others: marketing research, industrial design, engineering, prototyping, commercialization strategy, software and app development, branding, video production, digital marketing, public relations, search engine marketing, web development, lead generation and more.

 

Command Partners engaged benchmark International as their broker in January, 2016.

 

For more information visit: https://enventyspartners.com/blog/new-company

Benchmark International is pleased to announce that after an exciting year of growth, we are expanding our international reach to Ireland.

The news comes after our recent announcement that Benchmark International will have a presence in South Africa, with the opening of our new Cape Town offices.

Ireland has witnessed a staggering economic turnaround as of late, with unemployment being dramatically slashed and the Bank of Ireland forecasting GDP growth of 4.8% this year, resulting in the country being named as Europe’s fastest-growing economy – for the fourth year in a row.

The office will be headed up by Pieter Joubert, who brings with him a wealth of experience within the corporate finance industry as well as international experience too, thanks to his time spent in South Africa, New Zealand and Ireland.

Joubert, Ireland Managing Director said “this is a wonderful time to be part of a company that shows no signs of slowing down, with Benchmark International having offices throughout the world, the opening of the Ireland office is just another example of the ambition and drive that this company has.”

James Thornton, Benchmark International’s Chief Operating Officer, added “the expansion into Ireland is yet another integral part of our growth plan. Ireland’s economy is in a strong position and is proving to be an attractive destination for a number of companies, with a number moving their European headquarters here.

“We are very pleased to be able to further our company by opening an office in Ireland and are excited by the opportunities that it will present.”

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Benchmark International is pleased to announce the sale of Furlong Business Solutions to Volaris Group.

Furlong is a unique Management Information System provider in the UK, working with schools across the world. Whether you’re looking to improve access to data, consolidate many disparate systems or improve parental engagement, they can help. More than 285 schools worldwide trust Furlong software products, they provide comprehensive management information solutions. Furlong aim to be a valued partner with their schools and have organised their services accordingly, their support teams are highly responsive and their customers say that the help they receive is more like that of colleagues on the same team than of a service provider.

“Becoming part of Volaris means we can continue growing our business and innovating our products, helping our customers continue to provide the very best education to their students,” said Howard Langley, Furlong’s Managing Director. “This is an exciting opportunity to leverage Volaris’ resources and capabilities particularly in regards to best practice sharing, mentoring and coaching for better business performance focused on customer needs.”

Volaris Group are a company that acquire, strengthen, and grow vertical market software companies so that they are leaders in their industry. Our buy and hold mentality means that when we acquire a business, we hold onto it for life. We have expertise working in various geographical markets and can help business grow into these different areas. Not only do they understand the software industry and its nuances, but they know how to operate business around the globe.

On behalf of everyone at Benchmark International, we would like to wish both parties every success for the future.

ABOUT BENCHMARK INTERNATIONAL

Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.

Benchmark International Advises on the Sale of Furlong Business Solutions )

Irrespective of the outcome and the eventual deal Britain strikes with the EU, there will be greater uncertainty for businesses in the near-term.

So what and how will this affect the M&A sector?

History shows us that turbulent times economically, politically and socially produce a short term drop in investment and a period of re-appraisal, followed not so remarkably by a resumption in activity.

With interest rates low – and set to remain so for the foreseeable future – investment capital will continue to seek a good return based on a careful rebalancing of risk and reward in equity markets.

Those companies that can demonstrate a history of resilient profitability and a vision that will deliver sustainable growth irrespective of market trends will always attract investment capital. And there is no shortage of investment capital.

The challenge for businesses seeking an exit will be to look even more carefully to define the value drivers in their operations, and the reduced risk that can be liberated from a more comprehensive and verifiable history of financial and strategic performance.

Those companies whose brand propositions are more resistant to price competition will continue to realise good deal values.

The ability for acquirers to identify new synergistic opportunities from deals, particularly on a pan-European basis, will be a key determinant of M&A activity in the coming years.

As change always tends to liberate opportunities, and as risk will continue to deliver rewards, greater strategic clarity will separate the acquisitive winners from the inert losers.

So for companies with a good business model who can demonstrate the value growth and scalability that a suitable acquirer can build on, now is a good time to consider your business exit.

Talk to us today about how Benchmark International can guide you through the business sale process and help you avoid common pitfalls, as well as ensuring your goals and objectives for sale or growth are met.

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‘To err is human’, it’s said … but for sellers and buyers alike, the M&A process is surely not a good time to make mistakes.

Here are the top five errors made by sellers in M&A deals according to Forbes magazine, and our take on each.

1.Not Anticipating the Time and Effort Involved

The number one spot goes to failure to anticipate the sheer amount of time and effort that’s involved in the seller’s exiting via the M&A process.

Due diligence from the buyer’s side alone takes up a lot of time, and patience is required here – something that’s not easy for business people used to fast-paced environments and eager to move on.

It’s not unusual for an acquisition to take between six and 12 months – a short amount of time in the grand scheme of things, but one that can feel painfully slow to the seller living through the process.

2. Not Creating a Competitive Sale Situation

It’s common sense that lining up multiple potential buyers and therefore having a more competitive sale situation is likely to result in a much better deal for the seller, in the shape of both a higher price and better deal terms – and yet sellers very often negotiate with only one potential buyer, effectively boxing themselves in to a less ambitious deal.

Added to this, the seller and buyer are also often personally known to each other, which further jeopardizes the seller’s chances of getting the best exit deal.

In an ideal seller’s world, an auction situation or some other type of competitive bidding process is best. Here, multiple bidders – whether actual or perceptional – can be played against each other to achieve the best deal for the seller.

3. Not Having a Decent NDA

The M&A process requires extensive disclosure, so a well-drafted non-disclosure agreement (NDA) is crucial to protect the seller’s propriety company information – and ‘well-drafted’ here means that it includes specific M&A-related protections for the seller.

The need for a thorough NDA becomes even more important when the potential buyers are strategic competitors, making the situation even more sensitive and important clauses being needed around potential buyers not being able to contact the seller’s customers, suppliers and employees.

Incredibly, good NDAs, as essential as they are, are often sacrificed in the ‘rush to sell’.

4. Not Having an Online Data Room

Although it’s very time-consuming to put together, an online data room that’s set up early on in the M&A process really helps the ultimate success of a deal.

Containing all of the essential information to which potential buyers would need access, the online data room lets buyers complete their due diligence more quickly and much more easily, as well as making the preparation of the all-important disclosure schedule much easier for the seller.

This said, under-estimating the importance of the online data room remains one of the top five mistakes made by sellers during the M&A process.

5. Hiring the Wrong Legal Team

There is, of course, a place in this world for the generalist corporate lawyer – but the complex M&A arena isn’t it!

Sellers need to have an expert lawyer or legal team on board whose primary specialism is mergers and acquisitions, and they shouldn’t settle for anything less.

The legal team needs to be experienced in the field, au fait with structuring M&A deals and all the accompanying documents and agreements, as well as being suitably responsive to the seller’s needs and prepared to hand-hold the seller through the whole process.

For more information about selling your business, contact our expert team at Benchmark International.

THE FIVE MOST COMMON SELLER MISTAKES IN M&A DEALS (2)

It seems as though every other day, the headlines announce a new acquisition among major retailers. The giants in the industry are diversifying their products, sucking up more stock, and building mighty kingdoms that boutique and small business owners can’t even throw stones at. How can these smaller businesses possibly compete? First, take a look at what’s happening…

It was recently announced that Michael Kors would acquire the Jimmy Choo brand for $1.17 billion. The luxury brand also said it has plans to close at least 100 of its full-price stores throughout the next two years. “Michael Kors and many other upscale luxury brands such have faced plummeting sales and minimal profits as consumers spurn these retailers for less expensive, more accessible options,” says Glenn Taylor, a journalist for Retail Touch Points.

Jimmy Choo shoes and accessories certainly aren’t in the off-price realm, nor would they be considered as a brand which is a ‘more accessible option.’ Taylor suspects that even Michael Kors is feeling the pressure to expand during this turbulent time in retail, especially with Coach acquiring Kate Spade earlier in the year.

With Amazon’s major acquisition of Whole Foods Market for a whopping $13.7 billion, the steady expansion of Walmart has mainly gone under the radar. Within the last year, Walmart has consolidated companies that manage to skim at least a fraction of the major competitor’s sales away.

Walmart’s purchase of Jet.com and the following acquisitions of Shoebuy, Moosejaw and ModCloth, demonstrate a path to cater to a wider audience, yet offer a more personalised experience through unique brands.

Some have still questioned the reasoning behind Wal-mart’s mergers selections, feeling that the connotation of shopping at Walmart will hurt the brand equity of the once independent retailers.

However, Wal-Mart’s Senior Director of public relations, Ravi Jariwala believes that the deal still makes perfect business sense: “Through the acquisition by leveraging cost of goods, by leveraging some of our transportation efficiencies and our shipping rates, we can apply those toward these newly acquired businesses and help them continue to grow, and at the same time we bring in their expertise,” says Jariwala.

In early July, Liberty Interactive Corporation, owner of QVC, announced it would acquire the remaining stakes of HSN. The deal resulted in a major conglomerate and a near complete takeover of retail television as we know it.

 What to do about it

Mergers are only going to continue in the retail sector, but they won’t spell the end of small retailers. “It means it’s time to step up in a big way,” says Townsquare Interactive. “Retailers like Amazon aren’t going to wait for small business owners to decide they are ready to change with the times, rather they will force you to.”

However, changing with the times doesn’t necessarily mean buying out another retailer. If your business is experiencing a lull in sales, don’t be afraid to adjust your business strategy. As you discover what resonates best with your customers, you will then be able to implement stronger in-store experiences successfully.

If you operate a small business, you’re not going to meet or exceed the business of the majors, however you can provide an exemplary customer experience to keep you and your business a priority with consumers. A website that is easy to navigate and find in a search engine, targeted ads that drive traffic back to your website, and regular, engaging activity on social media will help you become a convenient place to shop for products/services.

For more information about selling your business, contact our expert team at Benchmark International.

Major 2

 

Disclosure schedules are an integral part of any merger or acquisition (M&A) transaction. They contain information required by the acquisition agreement—typically a listing of important contracts, intellectual property, employee information, and other materials as well as exceptions or qualifications to the detailed representations and warranties of the selling company contained in the acquisition agreement.

An incorrect or incomplete disclosure schedule could result in a breach of the acquisition agreement and possible significant liability to the selling company or its stockholders. Indeed, a well-drafted disclosure schedule will provide substantial protection against post-closing allegations that the selling company breached its representations and warranties.

Now, because poorly prepared disclosure schedules have the potential for significant liability, it is important that they are compiled in both a careful and thorough manner. Any disclosure schedule that is prepared at the last minute, is ikely to be incomplete or inadequate thus creating problems to closing a deal or bringing unnecessary risk into the transaction.

Typically, the process of producing a disclosure schedule is undertaken by employees of the selling company, together with an outside M&A legal counsel. However, the schedules can require a significant amount of time to produce, meaning that the initial drafting should be undertaken early on. It’s not unusual for disclosure schedules to go through a dozen or more drafts and negotiations with the buyer’s counsel.

Common Mistakes Made in Preparing the Disclosure Schedules

There are a number of mistakes that are frequently made by the selling company when it comes to the production and preparation of the disclosure schedules. Below is a list of the more common ones:

  • The seller fails to include the right employees who have the necessary knowledge to assist in the preparation of the schedules. Although it is understandable for many reasons why a selling company limits the number of people that are aware of a possible deal, that small group frequently doesn’t have access to all the information necessary to complete the disclosure schedules.
  • The seller fails to carefully review every sentence of each representation and warranty of the seller it makes in the acquisition agreement, to determine what is required for disclosure. The language and thresholds for disclosure are imperative and will be negotiated between buyer and seller. Ideally, thresholds will be established so that the burden of disclosure is not overwhelming.
  • The capitalisation table is incomplete (such as incorrect amounts for stock, warrants, options, etc.).
  • The schedule for subsidiaries of the company is incomplete or doesn’t list the jurisdiction of incorporation or percentage of the subsidiary owned.
  • The list of material contracts is incomplete.
  • The description of the material contracts is inadequate (such as including the wrong title of the contract, not listing all amendments to the contract etc.).
  • The schedule of leases for the company does not contain all required information (such as title of the lease, landlord, date of lease, location etc.).
  • The intellectual property disclosure is incomplete (such as missing information about patents, trademarks, service marks, domain names, etc.).
  • The list of software used in the business (including any open source software) is incomplete.
  • The schedule for employees is missing salary, bonus, or other key information.
  • The schedules are missing the listing of any employment agreements or officer, director indemnification agreements.
  • The schedules on the largest customers or suppliers are missing key data (such as dollar amounts involved or a description of the relationship).
  • The disclosure schedule listing any key contracts that have a “change in control” provision is incomplete.
  • The disclosure schedule listing all employee benefits is incomplete or not descriptive enough.
  • The disclosure schedule for insurance policies is incomplete.
  • There is an incomplete schedule of any required disclosures regarding litigation, arbitration, investigation, or other governmental proceedings.
  • The schedule of any liens on the company’s assets is incomplete (such as failure to list the secured party, what contract it relates to, the date of the contract, and other relevant information).
  • The tax disclosure schedule is incomplete (such as failing to disclose all income tax jurisdictions the company is subject to, any pending or past tax audits, any delinquent tax returns, or any unpaid tax liability).
  • The disclosure schedule for bank accounts is incomplete.
  • There are incomplete financial statements or liability disclosures, which are required by the seller’s financial representations and warranties.

Tips to Make the Preparation of the Disclosure Schedules Less Burdensome

Given that disclosure schedules are crucial, yet time consuming, here are a few tips:

  • The seller has to start preparing the disclosure schedules very early on in a deal, even before the acquisition agreement is finalised.
  • The seller’s management team has to be alerted to the high importance of the disclosure schedules.
  • Key knowledgeable employees within the seller must be involved in the preparation process.
  • The disclosures need to be coordinated and tied to what is contained within the seller’s online data room.
  • Over-disclosure tends to be better than under-disclosure, but this has to be tempered with an understanding of the likely reaction to a disclosure from the buyer.
  • Every new redlined draft of the acquisition agreement must be circulated to the parties involved in the preparation process, in order for the appropriate modifications to be made.
  • The seller must be aware of developments in the business that may require updates to the disclosure schedules.
  • The seller’s M&A counsel should qualify the seller’s representations and warranties as much as reasonably practical by including “materiality” and “knowledge” qualifiers, in order to make the preparation of the disclosure schedules less problematic.
  • The seller’s M&A counsel also should endeavour to limit disclosures to lists of documents or matters, rather than descriptions of the contents of documents or matters (such as requiring a list of pending litigation rather than a description of each pending lawsuit); again, this approach reduces the work involved when preparing the disclosure schedules.

For more information about selling your business, contact our expert team at Benchmark International.

Sched 2

Timing is, without doubt, one of the most critical factors in mergers and acquisitions; a recent report found that it is, in fact, the single most reliable predictor in terms of creating real shareholder value.

But why is timing so crucial?

Think Macro!

Acquiring a company is a risk that’s ultimately taken based on the health or otherwise of economies – and we’re talking about macro-economies here, looking way beyond the company in question, as opposed to the ‘micro’ environment of the business itself.

The big picture is that the right conditions for economic growth – with the accompanying revenue growth, market growth and profits – are required at the end of the day in order for the acquirer’s shareholders to reap the benefits of the deal; value creation in M&A depends on it.

No Time like the Present…For Now

Deals that were announced during the ‘economic bubble’ period of 2004 to 2006 bore out the importance of timing in the macro-economic sense, creating significantly greater shareholder value than deals that were announced at the peak of the economic cycle in 2007 or during the 2008 to 2010 ‘slide’.

The global economy is currently in a ‘recovery’ period, despite high levels of general uncertainty socially and politically, so now is a good time for deals.

Companies can – and do! – wait too long for election results, interest rate movements and so on and fail to move fast enough. Too long a wait can mean smaller returns during the window of growth, and “time is the enemy of all deals,” to quote FT contributor Richard Harroch.

This also impacts, of course, on the importance of swift and decisive execution in the deal-making process. Due diligence is crucial, but the movements of the wider economy must be considered at all times.

Other Factors

Timing isn’t the only predictor of success in M&A, however; deal size also comes into play, for example, and this will be the specific focus of an upcoming Benchmark International post. Watch this space!

For more information about selling your business, contact our expert team at Benchmark International.

Timing 2

ROC Northwest are a residential care, domiciliary care and educational care service provider for young people with Autistic Spectrum Disorders, learning, physical disabilities and complex needs with associated challenging behaviour and young people with SEBD. Community inclusion and participation enhance and enrich young people’s lives both educationally and socially. ROC offer exceptional, individual quality environments that put young people at the centre of the programmes they operate.

Speaking about the deal, Benchmark International’s Chief Marketing Officer, Michael Lawrie said: “Benchmark International were able to facilitate a successful marketing campaign, resulting in a prospective future for all involved, with the synergies of both companies there for all to see. From everyone at Benchmark International, we would like to wish ROC Northwest every success for the future.”

This is just one example of the many companies Benchmark International has helped since its inception, and proof of our commitment to continue changing the way deals are done. Whether you’re contemplating a growth or exit strategy, our team is equipped to help you navigate the process.

ABOUT BENCHMARK INTERNATIONAL

Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.

We are ready when you are.

Website: http://www.benchmarkcorporate.co.uk/
Client Testimonials on Vimeo:  https://vimeo.com/benchmarkinternational

Call Benchmark International today if you are interested in an exit or growth strategy or if you are interested in acquiring.

Entrepreneurs, by nature, are people who spend a considerable amount of time looking for the next opportunity. And for them, ‘the next opportunity’ often includes a suitable time to sell their company.

But what, practically, are the most common reasons for sale?

1. Business Value vs Liquidity

Getting hold of liquidity in your company is a valuable opportunity, because while there is always value in a business, there is no real liquidity until all or part of it is sold.

Given that business ownership is in and of itself a risky endeavour, it stands to reason that the longer you own the business, the greater ongoing chance that there’s a risk of failure. Seen this way, it can become clear that time itself is a risk and that liquidity should be a goal sooner rather than later.

2. Life Journeys

Entrepreneurs are only human, and being human involves a ‘life journey’. For business people, that’s typically a progression from being an ambitious young gun looking to ‘make it’, through to a successful business owner looking to ‘grow it’, to a veteran looking to ‘exit’.

In some cases, life-journey exiting may be due to a wish to retire or slow down, but it can also be a case of looking for new pastures, greater excitement or even greater challenges!

3. Risk Fatigue

When a business is young, entrepreneurs take risks more confidently; the company doesn’t hold much value yet, so there’s less to lose.

But as the company grows, do does its value, and entrepreneurs naturally become more conservative and more risk-averse.

In addition, as business owners age they tend to become more reluctant to devote time and energy to fixing problems within the business, and with risk comes change and a greater potential for problems need to be fixed.

4. Opportunity Knocks!

Opportunity can sometimes present itself in such a way that the circumstance itself becomes the reason for the business sale.

Examples include meeting an individual or team whose experience, reputation and/or chemistry are so obviously right for your company that it makes total sense to hand over the reins, or coming across a different venture that appeals overwhelmingly, to the extent that an existing business needs to be sold to make way. Sometimes, opportunity really does come knocking.

For more information about selling your business, contact our expert team at Benchmark International.

to sell 2

Benchmark International has recently opened a new office in Cape Town, South Africa (see 3rd July blog post), headed up by Andre Bresler and Dustin Graham. This is an exciting development for Benchmark International, in a dynamic evolving market.

South Africa is a core strategic market for any global M&A team, as the country is the conduit for more than half of M&A activity across the African continent. In South Africa itself, the M&A market is expected to grow by some 66% over the next two years, making it one of the top 10 domestic markets predicted to witness the greatest M&A expansion worldwide.

Rises in local commodity prices, as well as more gradual economic and wider reforms, are set to help stimulate growth in the sector, especially among domestic investors. South Africa is becoming more and more integrated into the global economy, and it’s very much showing in the M&A market. Also, with the country’s in-bound foreign investment expected to increase significantly – so is the demand for specialist legal skills across borders.

M&A deals involving African markets were worth US$39bn in 2016 – an value increase of 49.1% compared with 2015. Top deals in the region in 2016 included Bidvest Group selling food service company Bid Corp to Bidvest shareholders (€5.7bn); Rockcastle Global Real Estate Co Ltd selling to New Europe Property Investments Plc (€3.5bn); and Coca-Cola Beverages’ re acquisition of a controlling interest in their African division from Anheuser-Busch InBev (€3.1bn).

Featuring strongly amid other African markets, Nigeria has a predicted M&A transaction growth rate of 62% over the next two years (the only other African market in the top ten countries worldwide aside from South Africa), having reported over $1.9bn of M&A deals in 2016.

For more information about M&A activities in southern Africa, contact our team at Benchmark International.

Brian L. Davis recently joined Benchmark International as a Director on the Deal Origination Team, with a primary focus on Major Transactions across the United States. Mr. Davis will concentrate his efforts working with business owners and entrepreneurs to bring the breadth and experience of Benchmark International’s years of experience and unique ability to maximize value for our clients as they seek to pursue a potential sale of their businesses.

Mr. Davis joins Benchmark International after over fifteen years of experience in senior level roles focused on sourcing and originating new clients for leading investment banks and Private Equity firms throughout the U.S. Prior to Benchmark, Mr. Davis was a Managing Director at one of the leading middle-market lending and credit firms in the US, Golub Capital. Mr. Davis previously held the position of Managing Director and Head of Business Development at one of the premier middle-market Private Equity firms in the US based in New York, Sentinel Capital Partners and also was the President of TPG Sourcing Advisors, where he led the origination efforts for one of the largest Private Equity firms in the world, TPG Capital’s middle-market fund, TPG Growth. Mr. Davis was also a Partner and the head of the Private Equity Coverage Group at Charlotte, NC-based McColl Partners, which was subsequently acquired by Deloitte Corporate Finance. His experience across the credit markets, his extensive access to private equity firms globally, as well as middle-market investment banking experience will provide tremendous value and insight to the core focus of Benchmark International—the privately held business seeking to maximize value in the complex world of global Capital Markets.

Mr. Davis stated, “I could not be more excited to join a world-class organization like Benchmark International and be able to leverage the extensive experience and unwavering work-ethic of our firm to achieve superior outcomes for our clients.”

Greg Jackson, CEO of Benchmark International stated, “We are delighted Brian has joined the immensely talented team of professionals here at Benchmark International. Brian brings a wealth of expertise and experience within the global M&A markets that I am sure will be value adding at all levels. He stands out most notably for his proven track record in investment banking, cross border deals, clear strategic acumen and a strong record of delivering value to shareholders. We are excited to see how his refreshing approach and entrepreneurial flare will assist our clients with their growth or exit strategies. Brian’s proven approach to origination excellence and delivering superior customer experiences is invaluable. I am confident that his leadership and long history of monumental success within M&A will be key in helping Benchmark International extend authentic, trusted solutions for our clients and be influential in advancing the global strategic vision of Benchmark International.”

ABOUT BENCHMARK INTERNATIONAL

Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners achieve their personal objectives and ensure the continued growth of their businesses.

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