PACE OF M&A MAY 20, 2019 Colonnade Advisors LLC C OLONNADE A - - PowerPoint PPT Presentation

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PACE OF M&A MAY 20, 2019 Colonnade Advisors LLC C OLONNADE A - - PowerPoint PPT Presentation

Apr 20, 2023 113 likes •329 views

PACE OF M&A MAY 20, 2019 Colonnade Advisors LLC C OLONNADE A DVISORS LLC Colonnade Advisors Over $7.6 billion in transaction volume 49 completed transactions 17 founder owned businesses sold 22 published industry whitepapers 2

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COLONNADE ADVISORS LLC

PACE OF M&A

MAY 20, 2019 Colonnade Advisors LLC

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COLONNADE ADVISORS LLC

Over $7.6 billion in transaction volume 49 completed transactions 17 founder owned businesses sold 22 published industry whitepapers 2 partners on every deal

Colonnade Advisors

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COLONNADE ADVISORS LLC

Automotive Development Group Protect My Car APC Integrated Services Group, Inc. Southfield Capital AutoAssure Capital Z Tricolor Auto Group Endurance Omnisure Preferred Automobile Credit Co. Preferred Warranties PayLink Payment Plans, Inc Honor Finance Mepco Insurance Premium Finance

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COLONNADE ADVISORS LLC

Brown & Brown

UDS, ADG, F&I Resources, O’Neil Financial Services, Agency Services, Preserve Extended Protection Plan

Vanguard

Centurion Automotive, Dealership Development

APCO

ADG

The Portfolio Group

Finance Concepts

IAS

Profit Portfolio & Dealer Consulting Group

SWDS

Evergreen Dealer & Insurance Services, Jet Management, United Insurance Group, Olympic Dealer Marketing

Confie Seguros

Cartel

NFP

Auto Group Services

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COLONNADE ADVISORS LLC

WHAT IS MOTIVATING F&I ACQUISITIONS?

Increased distribution Acquisitions lock in distribution channels, providing stability Business line diversity Market share expansion Vertical integration

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COLONNADE ADVISORS LLC

Brown & Brown UDS, ADG, F&I Resources, O’Neil Financial Services, Agency Services Consolidated, Preserve Extended Protection Plan Vanguard Centurion Automotive, Dealership Development APCO ADG The Portfolio Group Finance Concepts IAS Profit Portfolio & Dealer Consulting Group SWDS Evergreen Dealer & Insurance Services, Jet Management, United Insurance Group, Olympic Dealer Marketing Confie Seguros Cartel NFP Auto Group Services

Southfield Capital OTPP Capital Z Partners Genstar Capital Spencer Capital Stone Point Capital ABRY

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  • $1.2 trillion private equity overhang
  • In 2018, 1,175 private equity funds raised an estimated $426

billion (up from $350 billion in 2016)

  • In 2019 – 3,750 funds are out raising capital targeting $977

billion

  • Pension funds are allocating 46% to private equity

compared to 23% in 2011

A MOUNTAIN OF PRIVATE EQUITY NOT YET INVESTED

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COLONNADE ADVISORS LLC

F&I agencies are analogous to retail insurance agencies

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COLONNADE ADVISORS LLC

FRANCHISE VEHICLE SALES

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COLONNADE ADVISORS LLC

LOWER MARGINS HAVE INCREASED DEALER FOCUS ON F&I

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COLONNADE ADVISORS LLC

VSC PENETRATION

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COLONNADE ADVISORS LLC

F&I CONTRIBUTION TO DEALERSHIP GROSS PROFIT IS INCREASING

Source: NADA

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COLONNADE ADVISORS LLC

THE DRIVERS OF VALUE

Do you have an enterprise? Client diversification Strength of client relationship Location Employee stability Eye of the beholder Income Generation

$

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COLONNADE ADVISORS LLC

VALUATION: DEPENDENT ON SIZE AND VALUE DRIVERS

  • Multiple of EBITDA

(earnings before interest, taxes, depreciation and amortization)

  • Often talk about the

“multiple”. But the multiple

  • f what? What is your

EBITDA?

SMALL AGENCY (<$2.5mm) 4x – 6x MID SIZE AGENCY ($2.5mm-$10mm) 7x – 9x LARGE AGENCY ($10mm+) 10x – 13x

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COLONNADE ADVISORS LLC

Financials Revenues Commissions $2,600,000 Incentive bonus 300,000 Revenues 2,900,000 Expenses Payroll 4 Sales Agents 800,000 3 Back Office 300,000 1 Owner 800,000 Total 1,900,000 T&E 350,000 G&A 100,000 Total 2,350,000 Pre-Tax Profit $550,000 Adjustments you think you have Adjusted Financials $200,000 $2,800,000 300,000 3,100,000 800,000

  • 100,000

200,000

  • 600,000

200,000 1,200,000

  • 100,000

250,000 100,000 1,550,000 $1,000,000 $1,550,000 Adjustments Accepted by Buyer Buyer Adjusted Financials $100,000 $2,700,000

  • 300,000

2,700,000 800,000 300,000

  • 600,000

200,000 1,300,000

  • 50,000

300,000 100,000 1,700,000 $450,000 $1,000,000

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COLONNADE ADVISORS LLC

Purchase Price At Close End of Year 1 End of Year 2 End of Year 3 Total Cash $9.9 $9.9 Earnout 9.0 $3.0 $3.0 $3.0 Rollover Equity 2.1 Total Proceeds 21.0 9.9 3.0 3.0 3.0 Cash $18.9 $9.9 $3.0 $3.0 $3.0 $18.9 Equity Ownership 2% 3.2 $22.1

Your Company Buyer Year 3 EBITDA $3.0 $15.0 $23.8 Multiple 7.0x 8.0x Price $21.0 $190.4

DEAL STRUCTURE

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COLONNADE ADVISORS LLC

EARNOUTS ARE CHALLENGING

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COLONNADE ADVISORS LLC

WHY SELL NOW?

Valuations are strong High level of buyer interest Larger agency groups are arising

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COLONNADE ADVISORS LLC

THREAT: DEALERSHIP CONSOLIDATION

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COLONNADE ADVISORS LLC

PREPARE TO SELL

People

  • Non-competes should be in place with the

sales agents long before the process

  • If an MGA, consider bringing independent

agents onto payroll Financials

  • The monthly and annual financials should be

reviewed or audited by an accounting firm Data

  • Be able to easily report revenues and

contracts sold by dealership store, dealership group, selling agent, administrator and product by month for the last three years Retirement

  • Transition key accounts
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COLONNADE ADVISORS LLC

COLONNADE ADVISORS LLC

Gina Cocking (312) 953-2658 gcocking@coladv.com