Following President Donald Trump’s inauguration in January, he appointed the then-Commissioner of the Federal Communications Commission (FCC) Ajit Pai as the Commission’s Chairman. Pai has served as Commissioner since his appointment by President Obama in 2012, however industry experts predict that Pai’s new role as Chairman spells a positive outlook for M&A in the telecoms sector.

A number of these industry commentators have characterised the Obama administration as being a blocker to telecoms mega-mergers, however Pai’s appointment signals a shift in the attitude of the FCC. According to Variety, Pai has said that the FCC is now studying restrictions on media ownership and easing these restrictions is on the new administration’s agenda. In the same interview, Pai labelled a number of the current rules as antiquated. Currently, companies are not limited to how many TV stations they own, however they are restricted from reaching no more than 39 percent of US TV households.

This attitude has understandably inspired a deal of market optimism, particularly surrounding politically charged mergers such as AT&T and Time Warner. Over the last couple of weeks, the probability of the $108.7bn deal closing has dramatically risen to 70 percent. Pai has already stated that the FCC won’t be reviewing the deal. The transaction will still, however, face consideration from the US Department of Justice (DOJ).

Market positivity across the telecoms sector remains strong. This has certainly in part been inspired by the new Presidency and the newly-relaxed approach of the FCC, but in general, analysts have predicted a wave of consolidation to sweep over the telecoms industry as competition intensifies through the continued advancement of digital and technology.

This is particularly true in the case of Verizon and Yahoo. Despite significant setbacks due to Yahoo’s data breaches, the transaction has now reached a new agreement with a heavy $350m discount. The persistence to get the deal done is indicative of Verizon’s eagerness to break into digital media. Recently the company has also been linked to cable company Charter.

With rumours circulating around Sprint and T-Mobile’s appetite for deal making, 2017 looks set to be a positive year for telecoms M&A. We will wait with interest to see the impact of Pai’s and the FCC’s regulatory changes that could shape a great deal of transactions within the sector.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

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It’s no secret that Walmart has grand plans to muscle in on some of Amazon’s online retail market share and it seems the US retail giant has edged closer with the acquisition of ModCloth.

The purchase of the vintage-style clothing retailer was made by Walmart’s ecommerce business Jet for an undisclosed sum, although industry sources believe ModCloth would have been lucky to get around the $80 million it had previously raised from investors.

ModCloth was founded in 2002 by husband and wife team Susan Gregg Koger and Eric Koger and has since grown rapidly to become a $150 million empire. During this time the business has evolved with a relocation to San Francisco and the raising of the afore mentioned $80 million in venture capital, allowing the business to hire Urban Outfitters executive Matt Kaness and experiment with physical stores in the US.

Despite ModCloth’s success, profits remained tight meaning investors were reluctant to put in any further cash, leading to Jet stepping in with an acquisition that allows ModCloth to stock a wider range of products in the future.

Jet is on something of a roll when it comes to acquisitions, with ModCloth its fourth in the last 12 months. In a move to establish itself as a major competitor to Amazon, Jet has used these acquisitions to add an even wider range of products to its online megastore. The company acquired online furniture seller Hayneedle for $90 million before it was acquired by Walmart for $3 billion. Since then, Jet has bought Zappos competitor ShoeBuy as well as outdoor apparel retailer Moosejaw. What makes the acquisition of ShoeBuy, Moosejaw and ModCloth especially interesting is the fact that all three companies are at least 15 years old and had trouble striking the balance between consistent revenue growth and profitability in the modern internet age.

With Jet’s typical customer young and affluent, these acquisitions have opened Walmart up to a brand new set of shoppers and resulted in a 29 per cent increase in domestic online sales during the last quarter.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

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Pinterest, the photo sharing site, has announced this week its acquisition of Jelly, the Q&A app founded by Biz Stone, cofounder of Twitter, in 2013.

Jelly officially launched in 2014 and received a disappointing reception. Stone and fellow Jelly cofounder Ben Finkel subsequently changed directions by launching photo app Super before relaunching Jelly again in 2016. The latest iteration of the app repurposed the Q&A format as a search engine, but like the first version of Jelly last year’s launch was met with lacklustre results.

With this in mind, it is interesting that Pinterest sought out to purchase the failing app. The deal figure has yet to be disclosed, however it has been confirmed that both Stone and Finkel will be joining the new setup, although it has not yet been decided whether Jelly will remain its own separate entity or merge with Pinterest. Stone, however, already has connections with Pinterest and is an angel investor in the company, which perhaps further explains the decision to acquire Jelly.

While it is not expected that Jelly will be selling for an astonishingly high figure, considering that Pinterest, valued at $11bn, has raised $1.32bn in equity funding from investors, the visual discovery and planning tool certainly has plenty of funds at its disposal to continue to make similar acquisitions. Jelly itself has never disclosed the amount of money it has raised from investing rounds, but it is safe to say that it is unlikely to have raised as much as Pinterest. It has, however, attracted investments from prominent figures including politician Al Gore and cofounder and CEO of Twitter Jack Dorsey

Speaking of the acquisition on his blog, Stone offers his advice to entrepreneurs looking for funding, suggesting that business owners may be better placed to consider acquisition offers instead. Stone continues to say that one of the main driving forces behind deciding to sell rather than raise more funding, is that it allows businesses to get their product out to a huge market almost instantly. Engaging investors through rounds of funding could take time, and in some cases it is in the best interests of the business to partner with a company that already has an established and successful platform.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

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Central Emergency Medical Services Founder and CEO, Gary Coker, stated, “I am extremely pleased with the partnership that we have developed with Priority under the guidance of Benchmark International. I believe that the Central EMS and Priority Ambulance combined management teams will be able to deliver powerful results within the industry. I would like to thank all the members of the Benchmark International transaction team that worked diligently to produce this result and feel strongly we could not have achieved this without them by my side every step of the way.”

Based in Atlanta, Central EMS provides advanced life support, basic life support, critical care and nonemergency transport options from 13 stations throughout the state. Eight stations are located in the Atlanta metro area and its surrounding counties. Central EMS also serves Northeast Georgia from an Athens location; Central Georgia from Macon, Dublin and Newnan stations; and Southeast Georgia from a station in Savannah.

Central EMS transports approximately 50,000 patients annually with 77 ambulances. The company specializes in ambulance transport service between hospitals and other health care facilities, assisted living facilities, skilled nursing facilities and long distance transports, as well as contracts for special event medical coverage. Central EMS currently employs more than 340 EMTs, paramedics, communication and billing specialists.

Dara Shareef, Director at Benchmark International, stated, “It was a pleasure to represent Central Emergency Medical Services in this transaction. Combining management teams with hundreds of years of experience, backed by a strong private equity investor we believe the partnership with Priority Ambulance will be extremely successful within the EMS industry. We wish both parties the best of luck moving forward.”

Graham Woodard, Senior Associate at Benchmark International, stated, “Benchmark’s ability to create a competitive bid process for our client was instrumental in this transaction. At the end of the day, we believe our client found the perfect fit to continue and grow in the EMS industry and preserve a merited legacy.”

 

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.com/
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Call Benchmark International today if you are interested in an exit or growth strategy or if you are interested in acquiring.
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Back in 2013 the EU blocked UPS’s $5.5bn takeover of Dutch-based TNT over concerns that the deal would affect consumers with drastically reduced choice and expected price increases for small parcel delivery in Europe. However, in an interesting turn of events, this week an EU court ruled in agreement with UPS that the EU’s probe, led by the Competition Commissioner at the time Joaquín Almunia, was wrong in its decision to block the deal.

In the four years since the breakdown of the deal, TNT was bought by FedEx for 4.4bn euros and UPS acquired i-parcel and Coyote Logistics. It isn’t unusual for regulatory authorities to collapse a deal, particularly when it involves such a large transaction. But the fact that FedEx, arguably its largest competitor, had its bid for TNT unconditionally approved must have been difficult for UPS to hear.

Following the EU’s block of the deal, UPS challenged the decision at the Luxembourg-based General Court, who ruled that the Commission has wrongly infringed the company’s rights of defence. This is because in the Commission’s analysis of the deal, it used a different econometric model than had previously been used in the exchange of views and arguments. The court argued that UPS would have been able to better defend the deal if it had access to the final version of the econometric model which was used by the commission.

While it is obviously too late to reconcile the deal now, the decision to annul the block could potentially allow UPS to sue the European regulators for damage claims. In addition, TNT shareholders who lost out on the deal could file their own damages claims.

The decision, however, remains a hollow victory for UPS, and there is speculation that Brussels may appeal the court’s ruling. The ruling could also trigger similar investigations or affect other contentious deals. According to antitrust lawyer Nicholas Levy of Cleary Gottlieb, the annulment marks the first time in over a decade that the regulator has been found to wrongly block a deal, the last time being in 2002 when the blocked deals involving Airtours and First Choice, Schenider and Legrand, and Tetra Laval and Sidel were all annulled throughout the year.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

 

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Online education platform Udacity has completed its first ever acquisition with its purchase of CloudLab for an undisclosed figure. With its specialism in tech-related nanodegrees – vocational qualifications that can be achieved faster and cost less than traditional degrees – Udacity plans to use CloudLab’s platform to allow users to code interactively and collaboratively from within their browsers.

Udacity also has grand plans to implement CloudLab’s live developer environments into its courses so that instructors can quickly and easily inspect student’s code and highlight specific issues in real time. As part of the deal, Udacity will gain CloudLab’s CEO, Dr. Varun Ganapathi, and his five person team who will go on to play a key role in the company’s machine learning projects.

As well as this, Udacity plans to leverage the experience of the CloudLab team to help automate more of its grading and reporting processes. Speaking on this, CEO of Udacity Vish Makhijani said: “We believe that human feedback is going to be super important, but we can make graders more efficient and drive down the final cost for students.”

Founded in 2011 by Sebastian Thrun, David Stavens and Mike Sokolsky, Udacity has gone on to be one of the largest online education providers with 11,000 students enrolled across the world. A number of its affordable and easy-to-access nanodegrees have been developed in partnership with tech giants including AT&T, Google, Facebook, Amazon, GitHub and MongoDB in order to bridge the current gap between education and jobs.

It is rumoured that Udacity will look to complete further acquisitions in the future as it continues to expand its course offering, particularly in the field of VR development and engineering for self-driving cars.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

Udacity Acquires CloudLab #BenchmarkIntl

 

Phillip Hammond of the British Conservative Party has delivered his first budget, outlining the governments plans for both the economy and public finances. We at Benchmark International have put together a summary of all this, highlighting the most important points and explaining just what kind of impact they will have on the average taxpayer.

As of April 2017 – new announcements:

Package of measures to give some relief to small businesses who were badly affected by business rates revaluation.

The threshold for simplified cash basis accounting for self-employed businesses raised from VAT registration threshold to £150,000 for 2017/18, extending to landlords.

As of April 2017 – previously announced:

Income Tax rates and allowances confirmed as announced at the 2016 Budget – tax free personal allowance will be £11,500, with the threshold for 40% tax being £45,000.

National Insurance thresholds for employers and employees made consistent at £157 per week.

Tax and National Insurance advantages of ‘salary sacrifice’ schemes withdrawn, apart from arrangements involving pensions, childcare, Cycle to Work and ultra-low emission cars.

New £1,000 tax-free allowances for trading and property income will apply for the 2017/18 tax year.

New tax-free childcare arrangements to be introduced on a trial basis and rolled out to all taxpayers over the coming year.

Tax advantages of foreign domiciled status will be lost for those resident in the UK for 15 of the last 20 years, and UK property held by a foreign domiciled individual through offshore structures becomes chargeable to Inheritance Tax.

ISA investment limit rises from £15,240 up to £20,000 per year, of which £4,000 can be in the new ‘lifetime ISA’.

Public sector employers become responsible for tax due from individuals working for them through personal service companies and similar arrangements where there is an underlying employment relationship.

Limit on pension contributions for those who have already made a flexible income drawdown form a money purchase pension scheme will be slashed from £10,000 per year down to £4,000. Limit for those who have not made such a drawdown remains at £40,000.

Main rate of Corporate Tax falls to 19% as of the 1st April 2017.

Benefit of VAT Flat Rate Scheme almost completely withdrawn for businesses spending less than 2% of their turnover of less than £1,000 per year on goods, excluding capital goods, food, vehicles and fuel.

Reforms to restrict interest relief and amend the rules for brought forward losses for corporation tax.

As of 1st June 2017, Insurance Premium Tax rises from 10% to 12%.

As of April 2018 – new announcements:

‘Making Tax Digital’ reforms require businesses and landlords with a turnover above the VAT registration threshold (£85,000 for 2017/18) to make quarterly online reports updating their tax position. However, those businesses below the threshold will not be affected until April 2019, when the threshold will be £10,000.

Class 4 National Insurance Contributions rate on profits between lower threshold and upper limit (for 2017/18: £8,164 to £45,000) rises from 9% to 10% (and from 10% to 11% in April 2019).

Nil rate band for dividend income, introduced at £5,000 for tax year 2016/17, reduced to £2,000 for 2018/19.

As of April 2018 – previously announced:

Class 2 National Insurance Contributions for the self-employed abolished.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

 

The announcement in December of last year that Rupert Murdoch’s 21st Century Fox was positioned for a full takeover of Sky was hardly one of the most popular deal announcements of 2016, and most certainly the least surprising. The £11.7bn bid has proved to be a contentious one, and Murdoch and co. have now reached one of their first major hurdles in the deal process in the form of competition authorities.

Fox must now formally notify the European competition regulator of the bid, after which the UK government and culture secretary Karen Bradley must decide whether to issue a public interest intervention notice (PIIN) and refer the deal to media regulator Ofcom. If a PIIN is issued, this surely won’t come as a surprise to team Murdoch considering its history and failed 2011 bid under News Corporation to take over Sky. The deal was squashed when Ofcom raised its concerns and Murdoch faced public outcry after his newspaper The News of the World became embroiled in phone hacking scandals.

While supporters of the bid argue that the competitive digital media landscape has reduced the Murdoch empire’s influence over UK media (their empire is no match for the reach of social media heavyweights, they argue), the deal has had a less than favourable response from the majority of the industry and several politicians. Politician Ed Miliband, for example, has demanded that UK regulators investigate whether Fox CEO James Murdoch meets a test to hold a UK broadcasting license.

Considering that the Murdochs have already tried and failed once before to acquire Sky, the fact that they are trying yet again to purchase the 61 per cent stake that it doesn’t already own in the broadcasting company suggests that team Murdoch is not likely to back down easily. While the bid this time around comes from Fox rather than the defunct and defamed News Corporation, the deal is so intrinsically linked to the Murdoch family that it was never going to be plain sailing.

Given the Murdoch’s history with Sky, and the fact that the Murdoch-owned company News Corp already controls a large chunk of the UK media including the Times, the Sunday Times, the Sun and TalkSport, it is widely expected by industry experts that culture secretary Karen Bradley will refer the deal to Ofcom. It’s safe to say that this transaction will be a politically charged process, and the industry waits with interest to see whether competition regulators will try and put a stop to the deal.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

The appetite for M&A in the fast food industry shows no sign of waning following news that Popeyes Louisiana Kitchen Inc. has been acquired by the owner of Burger King and Tim Hortons.

Restaurant Brands International Inc. paid a lip smacking $1.8 billion to acquire the New Orleans-based quick-service chicken concept chain, which was originally established in Louisiana in 1972 and specialises in regional cuisine. It operates primarily in the southern states of the USA, with 2,600 outlets, but it also has over 400 international franchises in 25 countries around the world.

Restaurant Brands was formed in 2014 after the merger of Burger King and Canadian coffee and donut outlet Tim Hortons, and the Popeyes deal is the first that the company has made since.

Part of the attraction of Popeyes was that it is run on a franchise basis, similar to both Tim Hortons and Burger King – a business model which Restaurant Brands finds both successful and profitable due to its generation of robust cash flow and high margins. Daniel Schwartz, CEO of Restaurant Brands, said the acquisition paved the way for further expansion and that it was, “an opportunity to massively accelerate the growth [of the brand].” Future potential targets are rumoured to be Subway, Pollo Loco and Dairy Queen which also operate on a franchise basis.

The tasty deal was financed by Brazilian private equity firm 3G Capital, which owns over 42 per cent of Restaurant Brands, and Warren Buffet’s Berkshire Hathaway, who previously combined to structure the Kraft/Heinz merger. 3G Capital have a reputation for growing revenue through driving down capital expenditure, and is renowned for its ambitious expansion plans.

The announcement has been good news for shareholders in both Popeyes and Restaurant Brands, with share prices rising 19 and 7 per cent respectively. Popeyes, amid heavy competition in the ‘quick-service restaurant’ sector from household name brands such as KFC, Wingstop, Bojangles and Chick-fil-A, saw sales rise by 1.7 per cent during 2016. Mr Schwartz said the company had achieved its long-term success through its high levels of guest satisfaction and franchise profitability which its new owners intended to continue. He would not comment on whether any locations would be closed or jobs cut, but given Restaurant Brands’ owners’ penchant for a growth strategy based on aggressive cost cutting, this cannot be ruled out.

Dining deals seem to be flavour of the month at the moment, with Restaurant Brands’ acquisition of Popeyes continuing a trend which has seen a $4.71 billion spend in this sector so far this year. Last year’s record-breaking Yum China spin-off, worth $9.5 billion, headed up the third-biggest year for dining M&A worth a total of $29.7 billion.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

When it comes to M&A security breaches can be costly in more ways than one. Yahoo!’s expectations of a smooth transition in the Verizon takeover have been scuppered with the news that the acquiring company was not prepared to offer the full asking price.

The timeline of the Yahoo! and Verizon takeover has certainly been colourful. The headlines began in 2014 with what was the biggest data breach in history where the details of 1.5 billion Yahoo! users was targeted by cyber-criminals. This was further compounded by revelations emerging of a further cyber-attack a year earlier where 500 million accounts were compromised.  The sequence of events which followed – Yahoo!’s stock price falling and Verizon’s hesitation to proceed with the deal – have been well documented and resulted in the telecommunications company seeking to pay a reduced price for Yahoo! of reportedly at least $350 million less than was originally agreed.

There is little doubt that Yahoo! has suffered in terms of its reputation, its brand and even its customer base as a result of the cyber-attacks. However, it now seems that the California-based tech company will also undergo a significant financial hit. Verizon is apparently still willing to proceed with the Yahoo! acquisition but at a much-reduced price of around $4.48 billion for Yahoo!, which is substantially less than Microsoft’s 2008 bid of $44 billion.

It confirms Verizon’s willingness to absorb the data breach risks in order to expand into the lucrative digital market. The company bought AOL in 2015 for $4.4 billion in a bid to capitalise on its technology within the sphere of digital advertising, and Verizon now hopes to benefit from Yahoo!’s news, finance, entertainment and sports coverage, as well as the photo sharing site Flickr and micro blogging site Tumblr.

Under the terms of the new offer, Verizon and Yahoo! will be jointly responsible for any financial liabilities which can be linked to the data breaches and which may arise from both third-party litigation and government investigations. However, Yahoo! alone will be responsible for any liabilities which result from lawsuits from shareholders and any Securities and Exchange Commission (SEC) investigations into whether Yahoo! should have fully disclosed information it had on the hacking. There are around 23 class action lawsuits currently filed against Yahoo! for breach of privacy and non-disclosure of material facts to federal investigators.

The deal is expected to close in Q2 2017 and following this, Yahoo!’s remaining interests will be renamed Altaba Inc. This company will have a stake in the Alibaba Group – a Chinese e-commerce company – and Yahoo! Japan.

Head of Product at Verizon, Marni Walden, was pleased with the deal which has been struck and said: “The amended terms of the agreement provide a fair and favourable outcome for shareholders.” The stock market seemed to agree given the rise in stocks of both companies, after the amended announcement was made.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

The UK biscuit industry is crumbling; slowing sales, intense competition and an increase in the price of sugar and wheat have hit the sector hard. Not to mention the pressure from the vast range of new and healthier products that are available. As a result, the UK sweet biscuit market, valued at £1.9bn, is experiencing a flurry of deal making.

Health kick

One move biscuit companies are making is into the health market. In 2015 the Belgian company Lotus Bakeries, renowned for its caramelised biscuits, purchased the majority stake in Natural Balance, the UK company that owns the Nakd health bars brand, as well as acquiring Urban Fresh Foods, the producer of Urban dried fruit and Bear fruit snack bars in a £70m deal.

Fox’s loses its appetite

Fox’s Biscuits, producers of Rocky, Party Rings and Ginger Crunch Creams to name but a few, has struggled to hold on to their market share of the UK biscuit industry, which has dropped more than 25 per cent over the last five years to just 4.9 per cent. The slowing sales have prompted parent company 2 Sisters Food Group to consider selling Fox’s, valued at around £350m. As the UK’s third largest biscuit company, Fox’s would be an ideal target for a fellow biscuit giant looking to expand. Possible buyers could include Burton’s who, while being smaller than Fox’s, owns popular brands including Wagon Wheels and Jammie Dodgers.

International competition

While the UK market has endured headwinds over the last couple of years, the global biscuit market remains strong. Mondalez, the Illinois-based multinational confectionery, food and beverage company, has made a firm stance in the UK market. Mondalez’s acquisitions of companies such as Cadbury have opened up new areas for the American company. In 2016 it purchased the licence to produce Cadbury’s chocolate biscuits from biscuit company Burton’s, and its vast portfolio includes popular biscuit favourites such as Oreo and Chips Ahoy! as well as healthier brands including belVita. Modalez was almost non-existent in the UK market in 2007, but last year the company held 10 per cent of the UK market share.

Biscuits will always remain a hot commodity, however the pressure from healthier snack alternatives has had a significant impact on the sector. The margins on biscuits are exceptionally good, and the industry is extremely profitable for those who can challenge the competitors and make it a success. Over 2017, we expect to see more M&A activity in the biscuit sector, which will hopefully give UK biscuit companies the pick-up they need.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

Earlier this month, the health insurance organisation Cigna Corp. announced the termination of its $54bn merger agreement with insurance company Anthem Inc. The deal has taken a further complicated turn, after Cigna announced that it had filed a lawsuit against Anthem seeking a $1.85bn termination fee, plus a staggering $13bn in damages. In an interesting twist, Anthem has launched its own lawsuit against Cigna, claiming the company has sabotaged the merger in its attempts to breach the agreement and collapse the $48bn deal.

As failed deals go, this one is certainly becoming very messy.

The dispute has arisen from a US District Court ruling blocking Anthem’s purchase of Cigna, citing that the merger would decrease competition and ultimately consumer choice. Anthem, however, is appealing the ruling and seeking an extension of the merger agreement until April. In the meantime, Anthem has requested a temporary restraining order against Cigna.

Claims by Anthem suggest that Cigna has deliberately attempted to sabotage the purchase, by delaying data production and integration plans, as well as a less than satisfactory performance when defending the merger in front of the US District Court. Coincidentally, the fallout came less than 24 hours after fellow insurance industry giants Aetna and Humana agreed to terminate their merger after another US district judge blocked their own deal.

Firing back at Cigna is a bold move for Anthem, however the animosity between both parties is palpably clear, not least because of Anthem’s request of a restraining order against Cigna. Anthem CEO Joseph Swedish suggested that “if not overturned, the consequences of this decision will hurt American consumers”, while it is rumoured that Cigna has the cash to make an acquisition of its own following the collapse of the merger, suggesting that perhaps one party feels more strongly about the failed deal than the other.

Commenting on the collapsed deal, antitrust attorney Matthew Cantor hinted that the deal breakdown may be down to Anthem and Cigna expending energy disagreeing with each other, rather than uniting and making their joint case to the authorities to push the deal through.

If the merger agreement is extended until April, both parties now have more time to carefully consider their next move. At this stage it seems unlikely that the deal will go ahead, however, with the similar collapse of the Aetna and Humana deal there is ample opportunity for M&A activity in the health insurance sector, and both Anthem and Cigna will be well positioned to approach new targets.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

As we all know, EBITDA is not defined under either accounting’s Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). What’s worse is that there is no other evenly mildly authoritative source that delves into the specifics of the definition beyond much more than a one-word description of each letter’s meaning.

Despite its murky definition, EBITDA remains the lengua franca between buyers and sellers when discussing valuation of privately held companies. Regardless of the true manner in which the seller sets the minimum price for which she will part with her business and whichever of the likely more academic methods the buyer has used to determine its maximum purchase price, the parties tend to lob multiples of EBITDA back and forth across the negotiating table.

While the exact meaning of each letter in the acronym is worthy of its own discussion, there is perhaps no more frustrating issue than how to deal with state income tax in the “T” portion of the term. The frustration arises because some parties refuse to acknowledge that what is so eminently clear – that state income taxes should be treated in an identical manner to the treatment of federal income taxes.

The very purpose of using EBITDA in this discussion is to place the concerned enterprise in neutral position with regard to capital structure, accounting decisions, and tax environments. This is why, and all parties do agree on this point, federal income taxes would always be added back to earnings when making this calculations. The proponents of not adding back state income tax are never able to explain why differing treatments would result in better serving the objective of using EBITDA.

State income taxes, like federal income taxes, are only due when a business is profitable. A business’s profitability is effected by, among other things, its capital structure (because more debt means more interest and interest reduces income and is therefore a tax shield whereas dividends do not and are not) and its depreciation (because, again, depreciation reduces earnings and serves as a tax shield). These factors have the same effect on state income taxes as they do federal income taxes. Thus, the amount of federal and state income tax a business paid in a given year will vary depending on the quantity and rate of loans outstanding that year and the method and amount of depreciation employed (i.e., the entity’s capital structure and accounting decisions). The amount of state income tax paid in a given measurement period is no more a function of the business’s operations than is its federal tax paid over that same period.

Further, while also not defined under GAAP, “profit before tax” (PBT) is a term more commonly used by accountants than EBITDA, appearing on a fair number, if not the majority, of companies’ routine income statements. As accountants will always take this measurement before including the expense of both federal and state income taxes, why should the same logic not apply to EBITDA? EBITDA is of course, simply PBT minus interest, depreciation and amortization charges.

Proponents of disparate treatment suggest that the state income tax is an unavoidable cost of doing business. But this argument fails for two reasons. First of all, it is not unavoidable. As discussed above, high debt levels and aggressive depreciation can allow the minimization or avoidance of state income tax (just as they can for federal income tax). But more significantly, it is not the job of EBITDA to take out only the “avoidable cost of doing business.” Eliminating 401k matching, reducing salaries, renegotiating a better lease, or relocating to smaller premises may also be ways to reduce the cost of doing business. Yet no one proposes adding benefits, salaries, and rent to EBITDA because they are wholly or partially “avoidable”.

Continuing with this logic, state income taxes are avoidable by changing domicile just as federal income taxes are avoidable by changing domicile. Ask Tyco, Fruit of the Loom, Sara Lee, Seagate or any of the other 43 formerly US companies that the Congressional Research Service has identified as redomiciled for this purpose in the decade leading up to the 2014 election. Would the EBITDA of any of these companies not have included an addback for federal income tax because it was an “avoidable cost of doing business”?

Ah, state income tax, the poor runt of the litter in the world of finance. Too small to be taken seriously, too complicated to be understood, and too varied to warrant the time. Five states have no such tax on corporate entities. Most of the other 45 do not impose it on entities making federal S-elections. Those who do impose it do so in so many different ways. And the names are so confusing, often being called by another name that allows the state’s development board to claim they do not have a state corporate income tax. Capped at 6% or less in most states, it pales in comparison to the 35% federal rate. (Though Iowa hits double digits at 12%, it is the only state to do so and there exists no documented record of anyone ever buying a business in Iowa.) How unfortunate that this scrawny beast seems to raise its head so uncannily when a deal is on the line, in those final days when the parties are so close yet so far away on valuation and the closing hinges on the fate of this oft-misunderstood adjustment to earnings.

Benchmark International is proud to announce that it has placed top of the North West Financial Adviser table for the second consecutive year in Experian’s annual North West and Manchester Corporate Finance Review.

Having advised on 34 transactions during 2016, Benchmark International dominated the table for the most active individuals in the North West, with the top three spots being filled by Peter Kelly, Nick Hulme and James Robinson.

“I would like to say how proud I am of everyone here at Benchmark International for the dedication and hard-work they put in each day. To receive this recognition under Experian’s annual review for the second year in a row is no coincidence; each and every member of our team works tirelessly to ensure we set the standards within the M&A and corporate finance industries, whilst continually seeking out new ways to improve our offering to clients”, said Michael Lawrie, Chief Marketing Officer at Benchmark International.

2016 2015 Financial Adviser Vol.
1 1 Benchmark International 34
2 2 BDO LLP 29
3 RSM 28
4 4 Grant Thornton 23
5 3 KPMG 17
6 Dow Schofield Watts 16
7 6 Zeus Capital 15
8 UHY Hacker Young 15
9 Mazars 15
10 KBS Corporate 15

In the wider North West market, 2016 proved to be another exceptional year for deals, with a 30% increase in deal values to £13.6bn compared to the previous year. Small and mid-market deals in the North West showed significant growth in 2016, with the number of deals valued at £100m – £1bn more than doubling in volume and value in comparison to 2015.

So, whether you are seeking a full or partial exit, a strategic growth partner or an acquisition opportunity, Benchmark International looks forward to helping you realise your business objectives in the coming year and beyond.

Please visit our website to find out more: http://www.benchmarkcorporate.co.uk/

 

The mega-merger between chemicals and seeds producer DuPont and chemical corporation Dow is now expected to close later than anticipated. The $130bn deal has encountered a roadblock as the companies face further regulatory approvals, which means that this is now the second occasion the deal’s completion date has been pushed back.

The deal will now be subject to an investigation from EU competition regulators amid antitrust concerns. The investigation into the mega-deal will be the first of three agrichemical deals that EU competition commissioner Margrethe Vestager will look into this year, which also includes ChemChina’s $44bn purchase of Syngenta and Bayer’s $66bn acquisition of Monsanto. If all three of these mergers are approved, the resulting companies will control 62 per cent of the world’s patented seeds and 62 per cent of all pesticides.

The EU commission’s issue with the Dow and DuPont mega-deal lies within the merger’s risk to innovation in the crop protection market, which is estimated to have an annual worth of €60bn. In response to the investigation, Dow and DuPont have offered to divest business units in order to appease the EU regulators and push the deal through.

Assets included in the divestment are DuPont’s crop protection business and research and development, as well as Dow’s acid copbolymers and ionomers business. DuPont’s crop protection business makes up one third of the $9.5bn its agricultural unit produced in sales in 2016; while this would be a significant loss for DuPont, Dow’s own crop protection unit will strengthen the merged companies.

The divest offer means that the merger’s review deadline has now been extended until April. Deal making isn’t necessarily a speedy process, and the delay in the Dow and DuPont merger is a poignant example of how M&A can drag out if the deal causes concern with the regulating authorities. Since the deal was announced in August of last year Dow and DuPoint have gained $10bn in market value, signalling just how significant this megamerger will be for the sector. With that in mind, Dow and DuPont’s move to divest assets in order to expedite the deal is clearly a smart decision.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

They say that you either love it or hate it, but Marmite has been at the centre of a dispute between one of the UK’s largest supermarket chains and the suppliers of the distinctly British condiment. The feud escalated last year after Tesco refused to agree to Unilever’s price increases, however the dispute was resolved in October and Marmite was back on supermarket shelves. But now, the supermarket giant’s £3.9bn takeover of wholesaler Booker is expected to reignite Tesco’s feud with Unilever as critics argue the deal will create an incredibly dominant player in the sector.

The wholesaler currently supplies products to convenience store chains, as well as high-street restaurant chains including Wagamama and Byron. The company also generates one fifth of its £5bn annual sales from its Booker Direct online service, which counts cinemas and Marks & Spencer among its customers. While the deal has been celebrated by Tesco’s investors, the reaction from the grocery sector has been mixed. The concern from both Tesco and Booker’s competitors stems from the fact that the relationship between the UK’s largest supermarket chain and one of the top wholesalers will result in a monopoly on pricing.

Although the Competition and Markets Authority (CMA) has not yet stated whether it will investigate the merger, it is expected to take an interest. The Booker franchise model for chains including Budgens, Londis, Premier and Happy Shopper chains are direct competitors of Tesco’s One Stop brand as well as its Metro and Express convenience store locations, and the CMA will be keen to examine the merger’s influence across the supply chain. The franchise model is a particular area of contention, and regulators will have to determine whether convenience stores such as Londis are viewed as a Booker retail outlet or a Booker customer.

Industry experts have speculated that consumer brands, including Coca-Cola and Procter & Gamble are supportive of the deal, whereas Tesco and Booker rivals, including Spar, Nisa and Costcutter, are rumoured to have “strong opinions” and to be planning a “coordinated attack” against the deal, according to the Telegraph.

The deal is unlikely to complete until the end of 2017, or even next year. However the initial reaction suggests that the closing of the transaction is likely to be held up by further scrutiny from competitors and industry experts. Deal making isn’t always straightforward, and businesses quite often face a number of barriers before a merger successfully completes.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

Ealrier this month, The Information reported that Airbnb is in talks to acquire social payments start-up Tilt, a move that would allow the users of the home share service to split the cost of their trips.

According to the report, speculative prices for the Venmo competitor come nowhere near the $400 million valuation given in 2015, following the company successfully raising just over $62 million from four rounds of funding.

Airbnb’s recent expansion into experience with Airbnb Trips has taken the company beyond being an accommodation booking service into more of a fully-fledged travel agency, providing tours, localised activities and unique experiences in 12 cities across the globe.

At around the same time the company launched Trips, Airbnb revealed it had partnered with AirPlus International, a business travel management firm to provide a business travel solution that includes booking, payment, billing and expenses management. Airbnb’s move into offering users an integrated platform for payments goes a long way in validating the Tilt acquisition rumours.

From Tilt’s perspective, an acquisition could be the welcome change it needs following a challenging period. The start-up faces aggressive competition in the form of GoFundMe, which currently dominates the crowdfunding sector and secured a valuation of $600 million following a new financing round last June. Having been overshadowed in the crowdfunding sphere and moving to specialise on social payments since its launch in 2012, an acquisition by Airbnb, a business which is in the process of rapid expansion, could be just the ticket for Tilt.

Neither party has commented on the rumours, but last December Airbnb co-founder and CEO Brian Chesky hinted that Tilt was on the company’s radar during a Twitter exchange. Following a user suggesting that Airbnb should provide a group pay option with Tilt, Chesky cryptically responded, “ask and you shall…”. We’ll certainly be keeping a close eye on any developments so keep watching our blog for further updates.

For more industry news and insights from across the globe stay tuned to our blog and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

We’re just over a month into 2017 and already rumours are circulating about a magical mega deal set to take place this year. Despite the lack of evidence to back-up a Disney acquisition of Netflix, there has been much discussion throughout the industry about whether such an acquisition can and will actually happen.

Worth $56 billion, Netflix is the world’s biggest subscription-streaming service, with more than 80 million paying customers. This elevated position in the content streaming industry means that its price tag would be somewhere in the region of an eye-watering $70 billion. The question is, given that Disney could engineer its own platform for a fraction of the price, why would it spend so much on Netflix?

In fact, Netflix would provide Disney with a robust platform and a brand everyone knows to screen its premium programming and sports content across the globe. There’s also the benefit of Disney having access to a wealth of data on viewer engagement and the prospect of the company adding top Netflix talent to its leadership team. Also, Disney chief executive Bob Iger has publicly expressed a desire for the company to adapt to keep up with the modern content distribution landscape and there are rumours he’s looking to complete a major digital acquisition before his contract expires in June 2018.

While acquiring Netflix would no doubt propel Disney into the big leagues when it comes to subscription streaming, some analysts can’t get past the price and doubt Disney will take the plunge. To put things into perspective Disney paid $7.4 billion for Pixar, $4 billion for Marvel Entertainment and $4 billion for Lucasfilm. Acquiring Netflix would demand a figure more than four times what it paid for these companies combined. Credit Suisse analyst Omar Sheikh commented in a report released on 10th January that such a deal would be tough for Disney to justify, in spite of the benefits it might bring. He said: “We believe Disney will most likely follow the more conservative, organic path and choose not to acquire Netflix.”

In spite of the rumours, Netflix is not actively looking for a buyer and there have been zero rumblings from its camp about a potential buyout. However, it is widely known that the company is spending huge amounts of money to develop new content, with 2017 spending predicted to reach $6 billion. This has put a huge strain on the business and its shares, causing growth to slow considerably. So, perhaps a Disney acquisition is just the ticket that both parties need to go on happily ever after.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

Benchmark International has successfully facilitated the asset sale of Forward Ventures, Inc. (“Forward Ventures”) to Powerhouse Equipment and Engineering Co., Inc. (“Powerhouse Equipment”). The transaction unites two market leaders in the boiler sales and services industry.

Forward Ventures, based in Gastonia, North Carolina, has been providing high quality boiler equipment and services across the southeastern United States since 1971. The company specializes in the service, sales, and installation of boilers and boiler room equipment throughout the region. For over 40 years, Forward Ventures has been committed to providing its clients with the highest level of boiler services and industry-leading technology.

Powerhouse Equipment, headquartered in Delanco, New Jersey, sells new and used boilers and provides boiler services to companies across a wide range of industries, with a focus on industrial and heavy commercial businesses. The company offers its products and services internationally, and partners with leading manufacturers to satisfy the needs of companies worldwide.

Tyrus O’Neill, Director at Benchmark International, said, “It was a pleasure to represent Forward Ventures in this transaction, and on behalf of Benchmark International, we are extremely pleased with the outcome. Achieving our client’s goals and objectives regarding their exit strategy has been a thoroughly satisfying experience and we wish both parties the best of luck moving forward.”

Sunny Yang Garten, Senior Associate at Benchmark International, affirmed, “We have really enjoyed working with our client, Tom Goldner, and the rest of the Forward Ventures team. At the end of the day, we believe our client found the perfect fit to carry on the company’s legacy within the industry.”

Forward Ventures, Inc. President, Russell “Tom” Goldner, stated, “I was extremely pleased with the overall experience provided by Benchmark International’s transaction team. I believe we found the best acquirer for our business to continue to build on the platform that has been created. Thank you to Benchmark International for the extraordinary effort in helping facilitate this deal.”

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.

We are ready when you are.

Website: http://www.benchmarkcorporate.com/
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.

Benchmark International has successfully negotiated the sale of Nefco, Inc. (“NEFCO”) to North American Filtration, Inc. (“NAF”). The transaction represents the conjoining of two leaders in the water and wastewater treatment industry.

Based in Palm Beach Gardens, Florida, NEFCO has been a major provider of engineered fiberglass products to the water and wastewater treatment industry since 1993. The company designs and develops unique baffle systems, launder cover systems for algae and odor control, as well as effluent troughs systems, weirs, scum baffles and other treatment plant infrastructure.

For over 20 years, NEFCO has been committed to finding innovative ways to improve productivity in municipal, industrial water and wastewater treatment plants worldwide. With a current presence throughout the United States and Canada, NEFCO remains dedicated to continuing improvement and growth.

Based in South Carolina, NAF was founded in the late 1970’s. While a number of the NAF family companies operate in the wastewater treatment space, the NAF family continues to grow each year through new acquisitions of other industry-leading providers. NAF currently employees over one-hundred employees across four locations, and has recorded thousands of installations on six continents.

Benchmark International’s Trevor Talkie acted as the lead on this transaction and was successful in pinning down the needs of both parties involved, “Benchmark’s ability to create a competitive bid process for our client was instrumental in this transaction.” Talkie stated, “On behalf of Benchmark International, achieving our client’s goals and objectives regarding their exit strategy has been a thoroughly satisfying experience, and we are extremely pleased with the outcome.” Director, Tyrus O’Neill, added, “Earle [Schaller] has built a tremendous business, and it is clear that NEFCO is a perfect fit for the North American Filtration portfolio of companies. We would like to take this opportunity to wish both parties the best of luck moving forward.”

NEFCO, Inc. President and Founder, Earle Schaller, stated, “Benchmark International’s hands-on approach during all aspects of the transaction process was fundamental in our successful deal closing. I would like to thank the transaction team at Benchmark International, for without the diligence and dedication of each member there, we strongly feel this end result could not have been achieved.”

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.

We are ready when you are.

Website: http://www.benchmarkcorporate.com/
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.

 

 

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