Fifty Years Of Great Leadership (what’s so special about Warren Buffet?)

The man (boy) bought his first farm when he was 14.  I was still a paperboy at 14 and certain that my savings would buy the V8 Chevrolet that I had been dreaming of.  

Warren is really smart & genuine and he empowers people (24 people run Berkshire Hathaway).  

His sense of community is incredible. Giving away 85% of his wealth and begging legislators to raise taxes on the rich to make a more fair economy.

On top of all that, I hear that the BH shareholder meeting in Nebraska tomorrow will be more fun than a barrel of monkeys.

A toast to great leadership.

 

 

 

 

 

 

 

 

About A Man & His Idea

Roses on Wall25 years ago I met Phil Crowley when his struggling public company, Southern Kitchens, was introduced to me by two of the initial investors (they thought I might be able to help save the company).

Phil started out as a man with a vision of making money and doing good, and he pushed harder and harder until it became reality.  He wanted to employ people that had strikes against them and found it difficult to find good jobs.  He knew that men without meaningful work had a hard time showing their families what a good life would look like.

The Company manufactured packaged food products for the vending industry and went from just an idea and zero sales to about five million in sales, about fifty ex-offenders working at the plant, and a few hundred investor/shareholders over ten years because of Phil’s persistence and passion.

Most of Phil’s workers never had a good job before.  Those men taught me lessons in respect and how good work is valued.

Phil was not a dreamer, he handled theft and the problems common to the people he worked with.  For six months I watched Phil run a difficult business and observed the pride and dedication of a work force of men (mostly) that had never had a good job before.

Phil did not get a chance to see his vision become the new national model of capitalism and not because his vision was flawed or that it could not have worked.

He paid a good wage, the work was clean, and the hope of workers owning publicly traded stock would build wealth beyond just the weekly paycheck.

The essence of his vision could revolutionize jobs in the inner city and make life better for so many people, workers and their families and revitalize hundreds of American communities.

What happened to Southern Kitchens we read about today all too often; events outside of Phil’s control put the company into a stressful situation that demanded a partnership or buyout.

The Southern Kitchens French Accent partnership was very poorly chosen (think Bernie Madoff) and the company was soon run into the ground by the French Accent management (who went to jail) and all the people that so needed their jobs lost their jobs and the company collapsed.  Phil’s right hand man killed himself – he had built his life around this company as had Phil.  Phil died a few years ago, I think of a broken heart.

It would not hurt us to revisit Phil Crowley’s new model of capitalism.

The Lion’s Way or The Right Way?

tigerAuthor Seth Godin has a book in his creative inventory called “Survival is not Enough”. In it, he writes about corporate DNA (he calls it mDNA) which includes everything that makes a company what it is….products, brands, people, IP, et al.

In it, he writes about acquisitions of other companies and that one of the primary reasons for an acquisition is to add new DNA to the acquirer’s corporate DNA to make it stronger. Continue reading “The Lion’s Way or The Right Way?”

Risk Management Discussion Thread

african art 2The following are the astute observations of Carl Hagberg, pulled from an online acquisition Risk Management conversation about M & A, shareholder value, and strategic issues. My comments (that Carl refers to) follow in the More section.

Carl is Editor and Publisher at The Shareholder Service Optimizer
Greater New York City Area http://www.optimizeronline.com/

& he is Chairman & CEO at Carl T. Hagberg and Associates

As an investor, I am extremely concerned by the perfectly awful returns on investment – overwhelmingly terrible ones as the above-cited numbers point out – that have been booked year after year as a result of bad acquisitions by public companies. Continue reading “Risk Management Discussion Thread”

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

Cliff Allen

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.

ACQUISITION / JOINT VENTURE BRIEFINGS

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& reducing transaction risk


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

Individually Tailored to your company strategy and acquisition team

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For more information contact: 

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CAllen@PackardAcquisitions.com 651-226-2853

www.packardacquisitions.com

 

Better Tools for Finding Better Prospects
Better Prospects = Better Transactions
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Are You Squandering Invisible Assets?

damon
LinkedIn and Facebook are electronic rolodex’s (did I just ‘date’ myself?) that can visually show how ‘connected’ people are – but what happens to people’s connections in the wake of the acquisition?

Ideally, as part of the pre-acquisition research, you would develop a feel for connections – industry, associations, advertising, buying – so you don’t jettison valuable connections unnecessarily or accidentally.

But in the trenches of integration, the acquirer’s team tends to (all too easily) assume that what they do and how they do it is superior to the acquired. This is a dangerous assumption.

Are there executive members of the acquired’s team in key trade association positions?
What media-buy contracts have the acquired’s team negotiated?
What industry connections to key suppliers are in jeopardy if you consolidate buying?
What history, loyalty, and goodwill to people take with them when they are let go?

I think everyone in business has heard, “Our people are our greatest asset” about a gazillion times. But in the heat of an acquisition, are people (and their connections) weighted with the appropriate value?

Contributed by Damon Kocina
Strategic Graphics, Inc.
Improve your impression
www.StrategicGraphics.com
www.LinkedIn.com/in/DamonKocina

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 Potholes

108-0872_imgACQUISITION POTHOLES:

The Facts:

A KPMG study conducted in 2000 determined that only 17% of Mergers and Acquisitions examined created a substantial return and, even more discouraging, 53% destroyed value. Validating these findings, a six year study by Business Week showed that 61% destroyed value that existed prior to the acquisition (BW October 14, 2002).

Why?:

Acquisitions run a high risk of failure…there are many potholes on the road to achieving a successfully integrated and operating acquisition that is contributing to the worth of the enterprise.

A few of the causes of these discouraging statistics can be found in the steps of the process, including:

1. Defining criteria for the ideal target

2. Conducting a ‘pull’ search (rather than waiting for an intermediary to ‘push’ a prospect at you)

3. Researching, gathering information, evaluating, qualifying and profiling the candidates

4. Organizing, managing and comparing the data gathered

5. Ranking the candidates based on the criteria

6. Making a strong and seamless connection between buyer an seller

7. Negotiating in good faith

8. Effective due diligence by competent and qualified experts – not only finance and legal, but risk, technology, branding, etc.

9. Looking beyond traditional due diligence into the human factors of the organizations

10. Having a financial and tax plan in place that will optimize the transaction value (but not the cost)

11. Maintaining current information on the candidate so that material changes are identified

12. Successfully negotiating a fair transaction (or pushing back from the table if things aren’t progressing satisfactorily)

13. Integrating the businesses (to the level desired) quickly and effectively

13. Continuing to manage the new organization with an understanding and appreciation of the corporate memories

A stumble in any area can cause an acquisition to derail (or at at a minimum, to underachieve.) Rely on experts who have successfully driven this road before.

Cliff Allen
Packard Acquisitions
Researching and Profiling
Privately Held Companies for Acquisition
Office/Cell: 651-226-2853
Facsimile: 651-578-7567

www.packardacquisitions.com

Have something to add?

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

Technology Challenges in a Merger or Acquisition

10Technology Challenges in a Merger or Acquisition

Combining two operating businesses presents an unusual opportunity to create an integrated and effective web strategy that will improve the financial results of the new entity.

In the current economy, businesses with a viable web strategy for sales/marketing have posted 26% increases in revenue (year to year periods).  The way they’re doing it is by integrating CRM, email marketing, contact management, and web presence (read web sites).  Businesses going through merger and/or acquisition are faced with integrating two often-different, and sometimes outdated IT infrastructures.  

A web strategy, by virtue of what it takes to develop a viable solution, assuages the disparate integration problem and drives revenue.  The bottom line in any successful web strategy development effort is that the following gets studied:

– key messaging

– sales process

– the customer/prospect buying process

 

Integrating appropriate technology over the knowledge from that study creates the viable web strategy.

 

Here’s what happens in a successful web strategy deployment:

Niche markets are identified

Marketing/Sales campaigns are targeted

Key messaging is automated

 

When a company is making these thing happen, sales growth and revenue result.

 

There are a few consulting outfits who have the methodology and business relationships to pull this off.  Their problem is that business owners can point to countless failures of any one of the technology components mentioned previously; those are namely CRM, email marketing, web sites, and contact management.

 

Technology isn’t to blame, it’s the methodology that’s at fault in those implementations.  Give the result of your merger and acquisition activity a foundation for success.  Start with business process aimed at your specific markets and you won’t go wrong.

 

 

Joe Nemastil

The NT Group

612-279-2160

http://www.thentgroup.com

Have something to add?

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

Preparing Yourself for an Acquisition

fl020002Preparing Yourself for an Acquisition

 

There are a few things to consider when approaching your commercial banker to help finance an upcoming 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.

 

When it comes to financing the acquisition, you’ll no doubt talk to your commercial banker. But how about engaging the bank beforehand to act as a sounding board on the merit of the acquisition itself?

 

Your banker should act as an impartial third party in helping clients in acquisition mode, beginning at the exploration stage. While the banker should certainly have a strong desire to help clients close a deal, he or she must remain impartial and provide direct, honest feedback based on years of experience.

 

Let’s take a look at some critical issues to keep in mind when considering an acquisition:

 

1. Payback. Before making that critical “go-no go” decision, you need to measure objectively the payback period on the purchase price. How long will it take for this to pay for itself? Remember, it is important to pay only for the value your acquisition target has created. The value that your company creates belongs to you already.

 

2. Not So Sudden Impact. Set realistic expectations. Do not underestimate the challenge of achieving synergy and savings. Assume that it will take more time than you are estimating. 

 

3. Collateral is King? 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. With bank financing playing a smaller role in the overall structure of acquisitions, sellers are being asked to shoulder more of the risk and buyers are putting more equity on the table.

 

Showing your commercial banker that you have considered each of these four areas will contribute significantly to getting the deal done, quickly and efficiently.

 

Steve Stoup, Senior Vice President

Fidelity Bank

(952) 830-7230

www.fidelitybankmn.com   

 

Have something to add?

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

Effective Use Of Talent

fh000005EFFECTIVE USE OF TALENT

 

The challenge for the CEO of a company that wants to grow through acquisition is that the CEO is also charged with running the company.  This presents a conflict even in larger businesses that have a dedicated ‘corporate development’ or an ‘M&A’ function.  Too often, an ad hoc acquisition team is recruited from daily jobs and, as a result, neither the acquisition search nor the daily job is done as well as it must be.   No wonder that acquisitions take too long and rarely deliver the value expected. 

 

Compounding this is the attitude that “our industry is small” or “I know all the players”, but the truth is that until you take an objective and broad based look at the opportunities, you really don’t know what will fit the best.  An external perspective is of great value because an expert doesn’t bring a lot of  baggage in the form of preconceptions  about what might add real value.   

 

Consider using a ‘retained search’ firm for finding and researching acquisition targets.  An extensive and well-defined search will allow you and the team to focus on the highest and best use of your time – evaluating the best candidates for acquisition.    After all, the objective is to improve the success rate of your M&A transactions.   

 

Cliff  Allen, Packard Acquisitions

 

Researching and Profiling

Privately Held Companies for Acquisition

Office/Cell:  651-226-2853

www.packardacquisitions.com

 

Have something to add?

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

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