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M & A Attorney’s Blog

When was the last time a client brought you in on an acquisition early? You know, before the deal was inked and marching orders were not just “get this done in 60 days and don’t screw it up”.

This message is for you.

It demands thinking outside the box and may cause anxiety (but read on…it could lead to better results for you and your client).

There is no question that the dismal results coming out of M & A are not attributable to poor work done by M & A attorneys.

Rather, it is the client’s poor approach to search, execution, and integration that goes into the process of finding and completing transactions.

Big egos and The Wild West still live on in M & A, and you, the M & A attorney are (unavoidably) a part of this inefficient and high risk process.

Here is the big secret.

Find and get to know reputable providers of research and integration services and recommend them to your clients.

By definition, if your clients are working with smart front end researchers and integration people, you will be brought in early (because of A, professional courtesy, and B, they can’t do their jobs without you).

Research and integration done properly;

* find an improved field of more qualified target candidates,

* that are put on a better prepared path of transition and integration,

* which almost insures that you will be involved in the process earlier to ask the right questions and find the real answers.

= More success, less failure, happier clients, & longer term engagements with healthy clients.

Think about it.

Mike Tikkanen

Mike@PackardAcquisitions.com

When Finance Is Not An Answer

When all you have is a hammer

A recent phone call proved to be another painful exchange with a hammer toting consultant that could not see value in spending time on any effort other than raising money for his venture.

No matter that the banks are cold, he’s had no luck with presentations to non bank lenders & equity groups, and his client is on the path to extinction if an answer does not present itself soon.

After several attempts at explaining how money comes easier to deals that have the important pieces in place, I found myself throwing in the towel earlier than I used to.

I could feel how firmly the blinders were glued to this man’s head.

It was as if I was trying teach a pig to sing (wasting my time and annoying the pig).

What needed to be understood was, the reason his project was so hard to fund was that parts of it were not far enough along, safe enough, (management, etc) or it just needed to have something not currently present. Money comes to deals that have the necessary pieces in place.

Each struggling venture has one or more part/s that need to be bought, fixed, or found.

Allowing a search for a strategic partner, joint venture, or acquisition target, one gets to pick between money offered at reasonable or unreasonable terms, and another set of alternatives that may or may not be more attractive than a straight play for money.

In business as in life, having choices is better than not having choices.

Have something to add? Your own business wit?

Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.

A Most Unproductive Search

About three years ago a CFO talked to me about his company’s acquisition search process. He confided in me that his firm’s president had traveled a great deal to research potential targets with very poor results.

Based on the CFO’s recommendation, the President met with me to discuss our process and tools.

He quickly told me that I could not possibly add to what he knew about his industry or his database for potential candidates and he showed no appreciation for our criteria measurement tools, or the concept of large scale contact and database building & management that our company provides to clients just like his.

He preferred his one-at-a-time trips to visit target companies and sent me on my way.

Two years after our meeting, I checked in again with my CFO contact and asked the direct question, “has your company completed a transaction since we started this discussion (elapsed total time of five years)”? His answer was “no”.

What this company has spent investigating acquisition candidates, one at a time, nationally and internationally over the past five years is many times what they could have ever spent with a professional for profiling and researching target candidates, compiled in an organized fashion to ensure a selection of well chosen candidates.

This is another case of a board hiring an outside president because they recognized the need to grow their company by acquisition.

Companies like this sometimes feel compelled to make transactions that don’t fit.

That’s where data feeding the KPMG study stating that only 17% of acquisitions created a substantial return add value comes from.

Know the acquisition history of the president you hire if you need to have acquisitions done. If you are working with someone with a small history, it is necessary make up for what’s missing. Acquisitions are a complex, costly, and risky process.

Have something to add? Your own business wit?

Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.

Mike Tikkanen
www.PackardAcquisitions.com
952-542-9318

Case Study: Left at the Altar…Again

The owner of Company X had been interested in acquiring Target Y for a long time. Finally, the owners of Target Y were open to discussion.

Owner X traveled to negotiate the deal, corralled the owners of Y, negotiated and negotiated, and (after several months) he finally struck a deal.

Leading up to closing, the final preparations were in process: lawyers and accountants were engaged and deployed, more travel, more due diligence.

At the 11th hour, the owners of Target Y changed their minds and nixed the deal.

Owner X retreated to his office to lick his wounds (and pay the bills).

Fast-forward six months (more than a year after the first negotiation meeting). The owners of Target Y call to say they are now serious about doing a deal. Owner X jumped at the chance and negotiated a new deal.

The weekend before closing he receives a call from owners Y that they are entertaining another offer. Owner X demands a final decision by the end of that day. Owners Y call that night and accept his final offer.

At closing the deal fell apart.

Owner X now tells the story and adds that, “Even if the purchase price today was zero – I would walk away.”

The costs: 18 months of focused attention, huge diligence fees and opportunity costs, lots of stress, and no deal.

Moral of the story:  In the world of acquisitions, dating one candidate is not a practical strategy.

A disciplined and focused process in acquisition search reduces risk, time and expense.

It also finds and qualifys more and better candidate while giving buyers an option for dealing with  the unexpected.

Submitted By,

Cliff Allen

Packard Acquisitions
Researching and Profiling
Privately Held Companies for Acquisition

CAllen@Packardacquisitions.com

Office/Cell: 651-226-2853 Fax: 651-578-7567

www.packardacquisitions.com

Have something to add? Your own business wit?

Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.

M & A SPECIAL CIRCUMSTANCES

This is part of an article first appearing in the Twin C ities Business Magazine (July 2009) & was written by Ingrid Case,

Mergers and acquisitions have decreased sharply-except where they haven’t.

….With private equity firms less able to pay top dollar for companies, sellers are less eager to part with their firms—particularly when they remember what those firms might have sold for two years ago. “There is a gap between what sellers consider a reasonable value for their business, and what buyers are willing to pay,” D’Aquila says.

The combination has private equity firms spending time working to manage and improve existing portfolio companies, or sometimes to restructure existing deals. Though some private equity buys still happen, the group as a whole has taken a back seat to strategic buyers.
Pockets of Activity

Sellers who can wait are often sitting tight, declining to sell until valuations recover. “Sellers who are in no hurry have no reason to sell,” says Bruce Engler, head of the M&A group at Minneapolis law firm Faegre & Benson, LLP. “They’ll wait until things get better.”

Some business owners, however, are motivated to sell. A few have health or family issues. Many are concerned that their firms won’t survive the current economic downturn unless they sell. “These are companies selling from a position of weakness,” Engler says, adding that such firms can change hands for as little as two times EBITDA.

Other business owners have little choice about selling. “If it’s a public company, the board of directors have to sell if they think it’s in stockholders’ best interest,” says Ivar Sorensen, managing partner of The M&A Group, a private investment bank in Minneapolis.

Or the firm could be the target of a hostile takeover, an increasingly common possibility in light of significantly reduced stock valuations, says Mike McFadden, co-CEO of Minneapolis-based private investment bank Lazard Middle Market.

When deals do take place, the buyer isn’t always a private equity firm, as was so common in the past few years. Instead, strategic buyers are once again the most competitive and active buyers of other firms.

“Corporate players are better able to make strategic investments now because the competition from the private equity firms has been tempered,” Sorensen says. “Corporations are sitting on huge amounts of available capital. They had a long run of very profitable operations, up until recently. Some have reported huge losses in 2008, but those aren’t always cash losses—they can be write-offs of intangible assets such as goodwill, which has no impact on cash flow, and may even help cash flow by reducing tax liability.” That puts them in a great place to buy.

Strategic buyers are typically looking for a bargain, says Cliff Allen, vice president of business development at Minnetonka-based Packard Acquisitions, which finds businesses that meet prospective buyers’ requirements. “People are looking for deals, for good properties that are undervalued,” he says. They hope to pay a price equal to perhaps four times an acquisition’s EBITDA—saving two to three multiples compared to what they might have paid in 2007.

Cliff Allen

Packard Acquisitions
Researching and Profiling
Privately Held Companies for Acquisition

CAllen@Packardacquisitions.com

Office/Cell: 651-226-2853 Fax: 651-578-7567

www.packardacquisitions.com

read whole article

http://www.tcbmag.com/industriestrends/bankingandfinance/117331p1.aspx
Have something to add? Your own business wit?

Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.

Mitigating Acquisition Risk July 15

We are pleased to announce the next session in our “First Wednesday” seminar series, “The Life Cycle of a Business Acquisition–Mitigating Risks on the Road to Success”.

This interactive panel presentation will cover effective candidate search & profiling, financial due diligence, and integration of businesses.

You will leave with a better understanding of the risks of not paying attention to these areas and a checklist of key success factors.

OnPoint Consulting – Steve Sapletal

Olsen Thielen CPAs – Mike Bromelkamp

Packard Acquisitions – Cliff Allen

The seminar will be held on Wednesday, July 15 at Olsen Thielen CPAs Roseville office, 2675 Long Lake Road (just west of 35W and County C). ST Paul MN

To register, send an e-mail to events@otcpas.com or leave a message at 651-621-8557.

Olsen Thielen CPAs and EBITDA Partners

Barbara Graf | Marketing Coordinator | Olsen Thielen & Co. Ltd. | 2675 Long Lake Road | St. Paul, MN 55113 | Phone: 651-621-8557 | Fax: 651-483-2467 | www.otcpas.com

Preparing to Make an Acquisition

Preparing to Make an Acquisition

Given the current economic conditions, you may

be facing an opportunity to acquire a long-time

competitor who is now struggling. Acquisition

might open the door to a new market, or it might

mean the addition or expansion of a line of

complementary products.

Some acquisitions, like marriages, are made in

heaven. Such a union of two companies can

boost revenues, cut costs and increase market

share. Other deals – also like some marriages –

are made in hell. There are turf battles,

management deadlocks and employee morale

issues that can easily undermine the entire deal.

The challenge in making an acquisition work is

to define and then stick to a solid process – from

target selection to approaching your commercial

bank for financing.

Assuming you have decided to embark on an

acquisition strategy, how do you identify an

appropriate target?

The “right” opportunity might mean gaining

access to a cutting-edge technology, or bailing

out a financial or management distress situation.

The result may be reduced costs due to increased

synergies, or positioning the new organization

for growth.

When selecting a target, one or more of the

following outcomes should be expected:

1. The deal will lower your overall costs.

2. You will be able to increase the combined

company’s market power by spreading the

stronger brand name over a wider product or

service base.

3. The acquisition will change the competitive

landscape.

Once you have eyed your target, serious due

diligence begins. Let’s look at some potential

pitfalls that would need to be addressed:

1. Compelling strategic rationale. Make sure

you can answer the question, “Why am I doing

this?”

2. SWOT analysis. Have you identified the

company’s core strengths, market

opportunities, and any potential threats?

3. Customer satisfaction. What are the

customers of the target company buying, and

what do they define as satisfaction?

4. The “people” factor. If you are not paying

attention to employees and what this means to

them, you can kiss a great outcome goodbye.

Now, when it comes to actually financing the

acquisition, you’ll no doubt talk to your

commercial banker. At Fidelity Bank, we

consider ourselves an impartial third party in

helping our clients in acquisition mode,

beginning at the exploration stage. Let’s take a

look at some critical issues we like to keep in

mind when working with a client who is

seeking financing for an acquisition:

1. Payback. Before making that critical “go,

no-go” decision, you need to measure

objectively the payback period on the purchase

price.

2. Not So Sudden Impact. Set realistic

expectations. Do not underestimate the

challenge of achieving synergy and savings.

3. Consider Collateral. Remember, however,

that advance rates on many asset types have

decreased during this economic downturn.

4. Structurally Sound. The important thing

here is to keep in mind that all the pieces of the

deal have to cash flow, especially with bank

financing playing a smaller role in the overall

structure of acquisitions.

Showing your commercial banker that you

have considered each of these last four areas

and have addressed all the issues covered above

will contribute significantly to getting the deal

done, quickly and efficiently.

First appearing in the Minnesota Business Journal 4/19/09

Given the current economic conditions, you may be facing an opportunity to acquire a long-time competitor who is now struggling. Acquisition might open the door to a new market, or it might mean the addition or expansion of a line of complementary products. Some acquisitions, like marriages, are made in heaven.

Such a union of two companies can boost revenues, cut costs and increase market share. Other deals – also like some marriages – are made in hell. There are turf battles, management deadlocks and employee morale issues that can easily undermine the entire deal.

The challenge in making an acquisition work is to define and then stick to a solid process – from target selection to approaching your commercial bank for financing. Assuming you have decided to embark on an acquisition strategy, how do you identify an appropriate target? The “right” opportunity might mean gaining access to a cutting-edge technology, or bailing out a financial or management distress situation. The result may be reduced costs due to increased synergies, or positioning the new organization for growth. When selecting a target, one or more of the following outcomes should be expected:

1. The deal will lower your overall costs.

2. You will be able to increase the combined

company’s market power by spreading the

stronger brand name over a wider product or

service base.

3. The acquisition will change the competitive

landscape.

Once you have eyed your target, serious due

diligence begins. Let’s look at some potential

pitfalls that would need to be addressed:

1. Compelling strategic rationale. Make sure

you can answer the question, “Why am I doing

this?”

2. SWOT analysis. Have you identified the

company’s core strengths, market

opportunities, and any potential threats?

3. Customer satisfaction. What are the

customers of the target company buying, and

what do they define as satisfaction?

4. The “people” factor. If you are not paying

attention to employees and what this means to

them, you can kiss a great outcome goodbye.

Now, when it comes to actually financing the

acquisition, you’ll no doubt talk to your

commercial banker. At Fidelity Bank, we

consider ourselves an impartial third party in

helping our clients in acquisition mode,

beginning at the exploration stage. Let’s take a

look at some critical issues we like to keep in

mind when working with a client who is

seeking financing for an acquisition:

1. Payback. Before making that critical “go,

no-go” decision, you need to measure

objectively the payback period on the purchase

price.

2. Not So Sudden Impact. Set realistic

expectations. Do not underestimate the

challenge of achieving synergy and savings.

3. Consider Collateral. Remember, however,

that advance rates on many asset types have

decreased during this economic downturn.

4. Structurally Sound. The important thing

here is to keep in mind that all the pieces of the

deal have to cash flow, especially with bank

financing playing a smaller role in the overall

structure of acquisitions.

Showing your commercial banker that you

have considered each of these last four areas

and have addressed all the issues covered above

will contribute significantly to getting the deal

done, quickly and efficiently.

ANTHONY GIZINSKI

Vice President

Fidelity Bank

anthony@fidelitybankmn.com

http://www.fidelitybankmn.com

Have something to add? Your own business wit?

Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.

ACQUISITION / JOINT VENTURE BRIEFINGS

Finding more & better target candidates

& reducing transaction risk

Database Building & Contact •  Measurable Criteria  •  Risk Management  • Integration

 

Individually Tailored to your company strategy and acquisition team

Two half day briefings

Summer and Fall dates available

 

For more information contact: 

Mike@PackardAcquisitions.com 952-542-9318

CAllen@PackardAcquisitions.com 651-226-2853

www.packardacquisitions.com

 

Better Tools for Finding Better Prospects

Better Prospects = Better Transactions

*

SOMETIMES, ALL YOU HAVE TO DO IS ASK!

As a proactive business buyer, whether a one-time buyer or someone who acquires companies on an ongoing basis, you must define and pursue various creative means to locate viable companies that potentially offer extraordinary acquisition potential.

Understanding that the best acquisition opportunities are among companies not “officially” for sale and knowing that finding a business to buy that has solid financial return on investment potential can realistically be bought with favorable purchase terms, should be enough motivation for a serious buyer to tenaciously put forth the required effort to find one.

There is a similar challenge within the sales profession for finding high performance sales personnel. This objective is comparable and directly relates to business buyers pursuing quality companies to buy. The old adage: “All the good salespeople are already employed”, should be especially thought provoking for a serious business buyer. The best sales personnel to hire are there for the taking.

It is not that extraordinary businesses cannot be bought; it is just that their business owners have not been asked if they’ll sell or have they been made to make a conscious decision or reached a compelling level of justification to consider selling their company. In most cases, they also have not applied any effort or resources to define their company’s market value to determine if the selling effort would be worthwhile. The best companies to buy are there for the taking.

Sometimes the first person to effectively pursue an opportunity has the easiest course to success. Initiating a compelling company purchase process does not have to be a complicated procedure, the first step can be very obvious and simple. Again, as in selling, sometimes all you have to do is ask!

Mark Smock is President of BUSINESS BUYER DIRECTORY, LLC, “BBD”. His firm is an established M&A listing referral services provider, an integrator of global M&A business-for-sale listings referred to specific BBD business buyer clients. Their business buyer clients pay a nominal, “success only” referral fee only if they purchase the BBD referred company. There is no cost or obligation to look at any referred deal. BBD only refers established companies for sale, with minimum annual EBITDA of $1MM, headquartered within N America, control interest for sale and within any industry. Start up’s, venture opportunities, funding solicitations or joint ventures are not considered.

msmock@business-buyer-directory.com

SEE LISTINGS @ >> http://www.business-buyer-directory.com

Have something to add? Your own business wit?

Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.