Better. Not Broker.

 This is a sad story about the decline of a small town manufacturer. When the economy went into recession, the company contracted from $6MM to $4MM and became unprofitable.

The owner hired a broker to sell the plant. A year passed without any offers from any qualified buyers. Another broker was hired. Of course, by now, the ‘for sale’ issue was universally known throughout the town and morale plunged. Know what else plunged? Business. Being ‘for sale’ is not a great position to have when trying to land new clients. Their revenue contracted further to $3.5MM. They became more unprofitable.

That year also passed with no offers from qualified buyers.

So the owner hired a third broker. And lo and behold….

The last mile is the hardest

Two partners, Bob and Tom, were getting tired. They had met years ago while both employed by the same company and together had developed a better mousetrap. Now it was 18 years later and they were looking for a way out.

 

The business they co-owned did alright and had provided well for their families but would best be described as a life-style business.

What would you do if you owned this company…

Paul was in a quandary. He had built up a nice company and captured a decent portion of a rising segment. But looking into the future, he saw trouble ahead. As his segment matured, he forecasted that the segment would commoditize, revenues would drop, and margins shrink.

Like most business owners, dropping revenue and shrinking margins takes the fun out of the game. However, a service segment had emerged. It was in a fledgling stage but showed incredible growth potential.

 

At first glance, Paul thought his options were:

1) Get out now
2) Ride the wave and get out in a couple of years
3) Build a service division

 

What would you do? What did Paul do? 

Choices (it’s all about risk)

This company had struggled for years to reach profitability when I received the call to talk to the founder about his choices in the marketplace.

Why not consider a back up plan in case the funding source you are counting on does not materialize? After all, being a partner in your project is better than failure, which often has personal repercussions beyond the business losses.

Criteria Modeling; Finding the Perfect Candidate Fit

Many of us have been through the unsatisfying experience of a the management team determined to grow through acquisition without adequate definition. We travel, research, investigate, many opportunities without any return.

Get Your Ducks In Row On Shareholder Buyout Terms

As the climate for mergers and acquisitions improves, savvy companies are seeking and evaluating good candidates. Tuning up their own shareholder buy-sell provisions is an important step that acquiring companies need to take to get their ducks in a row. This should be done before an m&a deal that adds or changes shareholders.

Fueling Acquisition Success

5 Hidden Causes for Failure
5 Remedies for Increasing Success Rate

Contributed by Joe Torrez http://www.torrezbv.com/

As a corporate development specialist or a transaction advisor, you have a vested interest in increasing the likelihood of success of the transactions you manage.

The Lion’s Way or The Right Way?

Author 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.

Warren Buffett Let’s Cat Out Of Bag

“Don’t ask the barber if you need a haircut”, doesn’t sound like the deep philosophical guidance that could account for why only 17% of acquisitions add value, unless of course that wisdom were coming from Warren Buffett.

Don’t ask the broker if you should do the deal. Players don’t get paid if you don’t do that deal. Of course you should do that deal.

Risk Management Discussion Thread

The 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.

The True Tale of a Deal

Many of us read INC Magazine. I hope you’ve been following the tale of Norm Brodsky’s effort to sell his company. His chronology began in 2006 and continues today.