Posts Tagged m & a
Dissecting Deals of Necessity
Posted by Packard Acquisition Research in Acquisitions, M&A,, Mergers on March 27, 2009
Dissecting Deals of Necessity
ken.macfadyen@sourcemedia.com
Value Insights
Posted by Packard Acquisition Research in Acquisitions, Business valuation, business finance, Mike Tikkanen, Packard Acquisition, Risk on January 25, 2009
What We Know That Just 
Ain’t So, or
Value Insights
Unanticipated mundane external factors are most often responsible for dumping our transactions into the 80% that don’t add value category.
Carefully developed evaluation and due diligence models offer the best chance of uncovering the questions that if answered properly, will cause us to avoid the failures that affect the great majority of acquiring companies.
To have great evaluation and due diligence models without a strong team that can recognize, develop, and work with the tools will drop you short of your goals also.
The assumptions made in the board room about the talents, team members, roles, responsibilities, systems, and procedures, determines the accuracy of the search and the effectiveness of the due diligence.
A smart team with the right resources can execute the complex task of acquisition at a far lower risk factor than a half smart team with almost the right resources. The losses can be staggering. The investments in team and resources are quite modest in comparison.
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Family M & A Issues
Posted by Packard Acquisition Research in Family business, M&A,, Mike Tikkanen, Packard Acquisition, Risk on January 22, 2009
or, Drugs In The Workplace
Bob almost gave his entire business and estate to a cocaine addict.
Blood is thicker than water, and this can make us thick in our thinking. The good news is that dad changed his mind and did not leave his business to his son, mostly because the key employees had the chance to express their views.
Dad was forced to deal with the grim reality that his son had stolen large sums of money from him when dad let the son operate the company during his hospitalization. Dad also discovered that the smart and loyal long time employees actually hated the drug using son and would quit if he were the CEO/president. Dad put the company up for sale and died a short time after it sold.
The company was sold to a high bidder, and the owners wife was set for life after the sale. The son was allowed a significant sum to start his own business. It all worked out in the end.
Close call.
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Better Processs = Better Candidates
Posted by Packard Acquisition Research in Acquisitions, Business models, Equity, Risk on January 13, 2009
Corporate buyers with access to cash receive far better returns on their acquisition dollars during recessions. Troubled deals that would be done in good times are being liquidated, mundane companies are finding it hard to get a fair multiple, and cash is at a premium.
All this points to acquisition as a growth strategy.
Those that discipline their acquisition process will improve their return on investment.
Advisors can help their clients to:
* assemble a smart team that will include the talent they need. It may include other outside advisors.
* determine precisely what fits (challenging assumptions) and create a weighted averages criteria model that measures candidates and allows comparison in ranked order.
* Create a plan for building and contacting a large number of specifically chosen candidates with a well crafted contact letter,
* Build a system for compiling and managing large quantities of information from the many companies that will be reviewed over the coming months,
* Plan for audits (financial and non financial), due diligence, integration, transition, and monitoring of all aspects of the transaction.
And most important, to see that having the tools, systems, and protocols in place to discover and research the best candidates, manage the information, put the right people and procedures in place in a timely fashion (acquisitions are time sensitive) makes all the difference in the world.
2009 will be a terrific year for a disciplined approach to strategic acquisition, Multiples are low, opportunities are stacking up, cash is hard to find and owner financing will be abundant.
Note: The failure rate for an undisciplined approach to acquisition still exceeds fifty percent. It pays to do your homework.
MTikkanen@ PackardAcquisitions.com (we can help)
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Practical Advice
Posted by Packard Acquisition Research in Acquisitions, Business models, M&A,, Mergers, Mike Tikkanen, Packard Acquisition, Risk on January 2, 2009
Now is not the time to be recommending selling to your client. Finance is tight and buyers are being brought deals that they could not have found with great effort a short time ago. Values are suffering. Selling is hard.
Could it be a good time to reevaluate growth through acquisition (even to firms more intent on internal growth or even exit planning?).
Here’s why it might be:
Strong players can make deals that will not be possible in strong markets. Transactions must be made with the finance and terms that are available. Money is tight and owner finance is far more common today than it was two years ago.
Growing companies prior to exit is a pragmatic approach to growing value, especially if the growth is low risk.
Many smaller and undercapitalized firms will accept buyouts on asset based agreements to procure some upside for their business rather than struggle through an unpredictable next year/s and risk losing everything.
Here’s how:
Build a smart team,
Create a smart plan from start to finish:
*determine precisely what fits–weighted averages criteria model
*plan for transition and monitoring of all aspects of transaction integration
Build a big list,
Contact everyone with a basic friendly invitation to talk
Manage and track information (use modern tools for data tracking)
Monitor progress and make adjustments
Risky Ventures
Posted by Packard Acquisition Research in Acquisitions, Business models, Business valuation, business finance, Equity, Equity groups, M&A,, Mergers, Risk on December 7, 2008
Private Equity’s Appetite for Risk
Risk – a four letter word if there ever was one – is reclaiming its rightful role in acquisitions. The last several years have seen a marked disdain for the concept of ‘possible adverse consequences’.
With every indicator moving up – the exposure to danger was nothing compared to the lure of lucrative deals.
Well, the current market conditions have shown us (again) that past performance is no guarantee of future returns. Yep. You could lose it all.
The statistics bear it out. A 2000 KPMG study found that 83% of acquisitions failed to create the expected return and 53% actually destroyed value. A 2002 six-year BusinessWeek study found that 61% of acquisitions destroyed value.
So what has been going on for the past 8 years? Appetite for risk went up. Way up. Now those chickens are coming home to roost.
Is the solution regulations? Experts say no.
Continued bad results will likely attract more regulation. Better tools and more a more expert approach to M & A will provide improved results and lessen the demand for more regulation.
Equity caught some of Greenspan’s “irrational exuberance.” Deals were made that weren’t ideal – they weren’t even good. Equity needs to make sure it doesn’t reward people for deals no matter their outcome. I firmly believe that Equity has cleared its head and awakened from the binge.
It’s about time.
Make no mistake, deals will still be made. Hopefully, they will be more thoughtful and deliberate. Maybe M&A teams will think to use cutting edge tools and outside experts to minimize their risk and increase their reward.
Maybe, just maybe, M&A will have to earn it.
Risk. Knowing it, containing it, and managing it – is the key to successful acquisitions – not governmental regulations.
Effective Acquisition Tools
Posted by Packard Acquisition Research in Acquisitions, Business models, M&A,, Mergers, Mike Tikkanen, Packard Acquisition, Risk on December 7, 2008
Determining the right fit, deal structure, finance, due diligence and integration, & knowing where the rocks are makes the difference between wasted assets and effort and a well planned and executed transaction.
Most of the acquisition teams I’ve interviewed have tons of experience making and closing deals. Each team member has skills in their own area of expertise.
Success requires a team with just the right talents for each step of the process. My experience has been that teams lack meaningful process and tools. Too often, methods are haphazard and results come from frustration and guesswork rather than measurement and planning.
No matter how bright the team is, the complexity of the process and the overwhelming amounts of information necessary to find and complete transactions with well chosen candidates simply keeps the failure rate high (about fifty percent of acquisitions destroy value).
Brokers and lead generating contacts provide brokered deals on a transaction based fee basis. It is not the ideal way to be introduced to candidates.
Here are a few steps to make your next acquisition add and not destroy value.
1) Build a measurable criteria exercise as a critical first step. Every company goes through it in some fashion. Few make it a measurable tool for evaluation. It is not that hard once the definitions are numerically rated to give a ranking score to candidates.
2) Learn how to bring candidates into the fold. Without the ability to contact the larger share of available well chosen candidates (database management and contact savvy), there is just too much left undone to be a representative sampling of the available market. How targets are contacted and what they are told has a great impact on the results you obtain (the quality and quantity of your candidate base).
3) Spreadsheet hell. There are many bad ways to manage the profiling and research results from ten or more candidates. Information needs to be updated regularly. This becomes a big problem if spreadsheets or paper are used. An web tools are worth the investment to have access to current information (it makes information useful).
Unmanageable information is useless. Decisions will be made without the most important information if systems are not in place to make it readily available.
4) Be well counseled for deal structure and finance. The markets at this time especially are hard to read. It is worth the investment to know what current market conditions (valuations/finance) are and not make decisions based on guesswork.
5) Plan for due diligence, integration, and its attendant problems. There are many good companies, software, and process people to help with due diligence and transition.
Attending to the non financial aspects of due diligence and integration pays big dividends.
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