© 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent...
-
Upload
ruby-fleming -
Category
Documents
-
view
217 -
download
1
Transcript of © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent...
![Page 1: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/1.jpg)
© 2015 Evergreen Consulting, LLC
DISTRIBUTION M&A 2015IT DOESN’T GET ANY BETTER THAN THIS
Brent R. GroverEvergreen Consulting, LLC
![Page 2: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/2.jpg)
© 2015 Evergreen Consulting, LLC
"COMPETITION BETWEEN BUYERS IS AT AN ALL-TIME HIGH. THUS, WHEN A QUALITY COMPANY HITS THE MARKET, BOTH PE
FUNDS AND STRATEGICS ARE WILLING TO STRETCH FOR IT, KNOWING THAT THEY ARE
SUPPORTED BY AN EXTREMELY ROBUST DEBT MARKET.”
WILLIAM BLAIR REPORT, 2014
![Page 3: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/3.jpg)
© 2015 Evergreen Consulting, LLC 3
Brent R. GroverEvergreen Consulting, LLC
30100 Chagrin Blvd., Ste. 111Cleveland, OH 44124
(216) 360-4600 ext. 101
40 years as CPA35 years as Adjunct Professor25 years as Distributor15 years as Consultant12 years as Author10 years as NAW Institute Research Fellow8 years as APIC Partner3 years as UID Faculty Member
= 148 years of experience
![Page 4: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/4.jpg)
© 2015 Evergreen Consulting, LLC
![Page 5: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/5.jpg)
© 2015 Evergreen Consulting, LLC
ABOUT TODAY’S FINANCIAL MARKETS
![Page 6: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/6.jpg)
© 2015 Evergreen Consulting, LLC
ABOUT BUYING DISTRIBUTORS IN 2015
![Page 7: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/7.jpg)
© 2015 Evergreen Consulting, LLC
Buying Distributors
• Seller’s market
• Owners want to sell at the “top” of the market
• Never enough great companies on the market
• IB’s running sales processes (i.e, auctions) for distributors
![Page 8: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/8.jpg)
© 2015 Evergreen Consulting, LLC
Target selection
• Acquisitive distributors need a good buying process (playbook)
• Most IB’s prefer sell-side work
• Starts with your strategy
• Acquisitions filter: prioritize the targets
![Page 9: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/9.jpg)
© 2015 Evergreen Consulting, LLC
Target cultivation
• Rules of diplomacy apply
• Highest and best use of executive time
• Communication builds trust
• Patience: 2-3 years?
• Goal: intercept target, avoid auction
![Page 10: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/10.jpg)
© 2015 Evergreen Consulting, LLC
Assessing value
• Many valuation methods, each of which is a guess
• Good comparables hard to find
• No two deals alike
• “EBITDA”
• Add-backs & adjustments
• Projections & assumptions
![Page 11: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/11.jpg)
© 2015 Evergreen Consulting, LLC
Negotiation
• Term sheet
• Letter of Intent
• Definitive purchase agreement (assets or stock)
• Price & terms
• Escrows and post-closing adjustments
• Warranties & representations
• Real estate
• Employment, consultation
![Page 12: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/12.jpg)
© 2015 Evergreen Consulting, LLC
Due diligence
• 30-60 days
• Quality of earnings
• Data room
• Environmental
• Customers
• Suppliers
• Employees
• Subsequent events
• Renegotiation
• Break-up fees
![Page 13: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/13.jpg)
© 2015 Evergreen Consulting, LLC
Integration
• Start before closing
• Avoid “conqueror syndrome”
• Place the right person at the acquired company
• Don’t make promises that you can’t keep
![Page 14: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/14.jpg)
© 2015 Evergreen Consulting, LLC
ABOUT SELLING A DISTRIBUTOR IN 2015
![Page 15: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/15.jpg)
© 2015 Evergreen Consulting, LLC
Selling A Distributor
• “The right time to sell is when someone desperately wants to buy your business”
• Once in a lifetime event for most
![Page 16: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/16.jpg)
© 2015 Evergreen Consulting, LLC
Ownership succession
• Family, manager(s), ESOP
• Japan - grooming scion
• Dynasties
• Estate planning
![Page 17: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/17.jpg)
© 2015 Evergreen Consulting, LLC
End-game strategy
• Is the question what to do, or when to do it?
• Strategic or financial
• Reinvest and get a “second bite of the apple”?
![Page 18: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/18.jpg)
© 2015 Evergreen Consulting, LLC
Getting the house in order
• Other stockholders
• Books and records
• Housekeeping
• Taxes
• Environmental
• Real estate
![Page 19: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/19.jpg)
© 2015 Evergreen Consulting, LLC
For sale by owner?
• Only going to do this once
• Your lawyer and CPA?
• Competition
• Process
![Page 20: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/20.jpg)
© 2015 Evergreen Consulting, LLC
Secrecy
• Vulnerability
• Who must know?
• Suppliers
• Damage control
![Page 21: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/21.jpg)
© 2015 Evergreen Consulting, LLC
After-tax, after expenses
• Debts
• Post-closing adjustments
• Federal income taxes
• Capital gains or ordinary income rate?
• State income taxes
• Expenses - banker, attorney, accountant
![Page 22: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/22.jpg)
© 2015 Evergreen Consulting, LLC
How much is enough?
• Lifestyle and retirement goals
• What are you going to do now?
• Buying another business
• Cash flow from investments
• Next generation
![Page 23: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/23.jpg)
© 2015 Evergreen Consulting, LLC
ADVICE FROM DISTRIBUTION M&A
EXPERTS
![Page 24: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/24.jpg)
© 2015 Evergreen Consulting, LLC
NAW GUIDE SURVEY HIGHLIGHTS
![Page 25: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/25.jpg)
© 2015 Evergreen Consulting, LLC
NAW survey results
• 42 sales in 2010-2014
• 20% stock purchases
• $954 million revenues
• > $200 million purchase price
![Page 26: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/26.jpg)
© 2015 Evergreen Consulting, LLC
NAW survey results• One seller in six
approached the seller, several through bankers
• Nearly 40% through industry relationships
• One in eight was an auction
• None of the buyers used a finder
![Page 27: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/27.jpg)
© 2015 Evergreen Consulting, LLC
NAW survey results• Deal expenses 1.4% of
price
• 40% of sellers stayed on > one year
• Disputes in one of seven
• Escrow claims in one of four
• Success rate 7.5 on scale of 10.0
![Page 28: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/28.jpg)
© 2015 Evergreen Consulting, LLC
NAW survey results
• 3.9% ROS
• 30% of sales
• 1.8X premium
• 6.1X EBITDA
![Page 29: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/29.jpg)
© 2015 Evergreen Consulting, LLC
TEN THINGS YOU CAN START DOING NOW
1. Advisory board2. Strategic planning3. Acquisition filter4. Acquisition process5. Point person for acquisitions6. Deal attorney7. CPA with deal experience 8. Investment banker with distributor deal
experience9. Exit strategy 10.Read a good book about distribution!
29© 2015 Evergreen Consulting, LLC
ISSA October 2015
![Page 30: © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC.](https://reader035.fdocuments.us/reader035/viewer/2022062422/56649f1d5503460f94c3392d/html5/thumbnails/30.jpg)
© 2015 Evergreen Consulting, LLC 30