The Marathon of Strategic Acquisitions: Making it to the Finish Line - - PowerPoint PPT Presentation

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The Marathon of Strategic Acquisitions: Making it to the Finish Line - - PowerPoint PPT Presentation

Mar 14, 2023 156 likes •343 views

The Marathon of Strategic Acquisitions: Making it to the Finish Line Rebecca White Director Western Reserve Partners LLC April 12, 2016 l l l Rebecca Lynn White For more than a dozen years, Rebecca has worked closely with a variety of middle

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Rebecca White

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Director

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Western Reserve Partners LLC

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April 12, 2016

The Marathon of Strategic Acquisitions: Making it to the Finish Line

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An M&A International Inc. firm

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Rebecca Lynn White

Rebecca Lynn White Director & Head of Capital Raising Western Reserve Partners LLC (216) 574‐2109 rwhite@wesrespartners.com For more than a dozen years, Rebecca has worked closely with a variety of middle market and public companies, assisting them in finding solutions to achieve their growth and liquidity goals. She started her career in the M&A Group at KeyBanc Capital Markets and joined Western Reserve Partners LLC in 2005. Currently, Rebecca is Director and Head of Capital Raising at Western Reserve Partners LLC. She has successfully closed more than 35 transactions, including sell‐side M&A, capital raising, bankruptcies and fairness opinions. Rebecca has a passion for assisting industrial/manufacturing companies and has also advised a variety of consumer products and business services companies throughout her career. As a result, she has developed extensive knowledge of a variety of niche industries and respective growth drivers, ranging from metal fabrication to non‐ woven materials to ice cream manufacturing to ready‐mix concrete. Rebecca received a B.S. in Mathematics and Accountancy from Mount Union College and her M.S.M. in Operations Research with a concentration in Finance from the Weatherhead School of Management at Case Western Reserve

  • University. She was named as a Smart Business “Women Who Excel” finalist in 2014. Rebecca is a founding board

member of the Women in Manufacturing Ohio Chapter and currently serves as the Treasurer. She also serves on the Board of the Association of Corporate Growth (ACG) Cleveland. While her career and board activities keep her running throughout the day, Rebecca laces up her running shoes and hits the road each morning at 5AM. She has completed 24 marathons, including 11 Boston Marathons…and counting. Rebecca welcomes connections at: www.linkedin.com/in/rebeccalynnwhite @RebeccaLWhite1

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The Acquisition Process Lace up your shoes – It’s a marathon!

Identify & Contact Targets Assess Value Submit Offer & Negotiate Due Diligence Documentation & Final Negotiations Refine Acquisition Strategy Post‐Close Integration

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Which Race Are You Going To Run? End Markets Geographies Products/ Technology Capacity Vertical Integration Distribution Size Employees Cultural Fit

Identify & Contact Targets Assess Value Submit Offer & Negotiate Due Diligence Documentation & Final Negotiations Refine Acquisition Strategy Post‐Close Integration

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Develop a Training Plan

0.0 2.5 5.0 0.0 2.5 5.0

VALUE S Y N E R G Y

HIGH‐VALUE / HIGH‐SYNERGY LOW‐VALUE / HIGH‐SYNERGY HIGH‐VALUE / LOW‐SYNERGY LOW‐VALUE / LOW‐SYNERGY 11 3 3 8

Identify & Contact Targets Assess Value Submit Offer & Negotiate Due Diligence Documentation & Final Negotiations Refine Acquisition Strategy Post‐Close Integration

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Size Up the Competition

Valuation Considerations:

  • Historical and projected financial

performance – focus on EBITDA

  • Growth trends, scalability and
  • pportunities within the industry
  • Acquisition trends among competitors
  • Acquisition target’s desires, personal

goals and abilities to execute their growth plan

  • Asset vs. Stock deal

Identify & Contact Targets Assess Value Submit Offer & Negotiate Due Diligence Documentation & Final Negotiations Refine Acquisition Strategy Post‐Close Integration

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Start the Race Speed Price Structure Certainty to Close

Identify & Contact Targets Assess Value Submit Offer & Negotiate Due Diligence Documentation & Final Negotiations Refine Acquisition Strategy Post‐Close Integration

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Determine the Pace

  • Recognize potential

risks and synergies

  • Leverage third party

advisors

  • Avoid “deal fatigue” –

maintain an efficient process

Identify & Contact Targets Assess Value Submit Offer & Negotiate Due Diligence Documentation & Final Negotiations Refine Acquisition Strategy Post‐Close Integration

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An M&A International Inc. firm

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The Final Mile

  • Working capital targets
  • Indemnification and escrow provisions
  • Tax implications
  • Employment contracts, non‐competes

and co‐investment opportunities

Identify & Contact Targets Assess Value Submit Offer & Negotiate Due Diligence Documentation & Final Negotiations Refine Acquisition Strategy Post‐Close Integration

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An M&A International Inc. firm

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After the Finish: The Finish Line Chute

57% 85% 70% 9%

“of the merged concerns lagged behind industry averages …”

~ Mercer Management Consulting, Wall Street Journal, 1997

“of all strategic alliances fail or fall short …”

~ McKinsey & Company / Coopers & Lybrand, 1997

“of M&As fail to achieve their financial objectives …”

~ American Management Association, HR Magazine, 1997

“only 9% of European business leaders considered their deal to have achieved its original objective [91% failure] …”

~ The Hay Group, 2007

Identify & Contact Targets Assess Value Submit Offer & Negotiate Due Diligence Documentation & Final Negotiations Refine Acquisition Strategy Post‐Close Integration

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Exhibit A: Corporate Strategy

Industry Trends Corporate Vision

  • Trend #1
  • #2
  • #3
  • #4
  • #5
  • Vision in response to trend #1 (helps to include some that are

measureable and time‐based)

  • #2
  • #3
  • #4
  • #5
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Exhibit B: Acquisition Prospect Criteria

Products/Technologies Geographies Services [or Applications] Customers / End Markets

  • Key product #1
  • #2
  • #3
  • #4
  • U.S.: Kentucky, Missouri, Southeastern states
  • Canada: Ontario, Manitoba, Saskatchewan
  • Europe: Germany, Switzerland
  • Asia: China, Thailand
  • Service or application area #1
  • #2
  • #3
  • #4
  • Key end market #1
  • #2
  • #3
  • #4
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Exhibit C: Ideal Acquisition Prospect

Criteria

Fits within product criteria (1, 2 or 3) Serves the right end markets (x, y or z) Located in a target geography (country A, country B, etc) At least 50% of revenue from service $30‐75 million of revenue 10% EBITDA margins Revenue CAGR of 8%

  • Keep it simple

□ One sheet per business unit □ Best to start with small number of criteria (5 is good, no more than 7)

* We offer this simple tool to help build consistency and discipline when evaluating a diverse set of candidates. When evaluating actual candidates the dot would either be Green, Yellow or Red, providing a quick visual grading system for each target.

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Exhibit D: Financing Sources

Banks Banks Mezzanine Funds Mezzanine Funds Unitranche Funds Unitranche Funds Minority Equity Funds Minority Equity Funds

Cost of Capital Risk

  • Enterprise value driven
  • Mid‐20% cost of capital
  • Cash flow driven and/or collateral driven
  • 7 ‐ 10% cost of capital
  • Collateral and/or cash flow driven
  • 8 ‐ 12% cost of capital
  • Enterprise value driven
  • 12 ‐ 18% cost of capital
  • Cash flow and/or collateral driven
  • 2 ‐ 6% cost of capital

Structured Finance Institutions Structured Finance Institutions

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Exhibit E: Due Diligence Request List

1. List of key historical highlights and evolution of the business 2. Discussion of products, services and sales network

  • a. List of all products / services offered
  • b. List of all geographies covered
  • c. Description of marketing and sales strategies, including sales reps vs. internal sales force

3. General business strategy, including:

  • a. Key sustainable competitive advantages and any aspects of the company that make it

unique in its core markets when competing against others

  • b. Significant growth initiatives in the next several years

4. Customers

  • a. List and description of key customers, along with revenue by customer for the past

three years

  • b. Description of key terms of each contract by key customer
  • 5. Personnel
  • a. Org chart
  • b. Breakdown of employees by division
  • c. Description of benefits policies and compensation (hourly vs. salary)
  • d. Biographies of key management
  • 6. Financial Information
  • a. Detailed quarterly or monthly income statements, balance sheets and cash flows for the

last four years, as well as reviewed annual statements for the last four years

  • b. Income statement and capital expenditure projections for the next two years
  • c. Detailed schedule of adjustments to the income statements
  • d. Description and value of assets owned and leased
  • 7. Description and list of the company’s compensation and insurance policies
  • 8. List of any and all potential outstanding liabilities and pending or threatened litigation
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Exhibit F: Sample Acquisition Process Timeline

Initial Due Diligence Documentation & Final Negotiations Preliminary Discussions with Targets Assess Fit and Value Site Visits Confirmatory Diligence Submit & Negotiate LOI Submit IOI Close

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9

Acquisition Process

Initial Screening & Prep

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Exhibit G: Additional Resources

Books

  • Acquisition Strategy and Implementation, Nancy Hubbard
  • Maximizing Corporate Value through Mergers and Acquisitions, Patrick A. Gaughan
  • Mergers: Leadership, Performance & Corporate Health, David Fubini, Colin Price and Maurizio Zollo
  • Managing Emotions in Mergers and Acquisitions, Verena Kusstatscher and Cary L. Cooper
  • Mergers & Acquisitions Playbook, Mark A. Filippell

Articles

  • “Organizational Identity and Value Creation in Post‐Acquisition Integration: The Spiraling Interaction
  • f the Target's Contributive and the Acquirer's Absorptive Capacities” Helene Loe Colman
  • “Best Practices in Leading Post‐Merger Business Integration” Michael S. Salvador, Donald G. Lang and

Christine Rumsey

  • “Creating Deal Success Through People: Mastering M&A Culture and Integration Issues” Towers

Watson

  • “The Success of Acquisitions: Evidence from Divestitures” Steven N. Kaplan and Michael S. Weisbach