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Hart Marx Advisors - Northwood Heavy Duty Leadership 2016

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Tom Marx presented at Northwood University's Heavy Duty Leadership Class in 2016.

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Hart Marx Advisors - Northwood Heavy Duty Leadership 2016

  1. 1. 1 1 © 2016 Hart Marx Advisors, LLC 1 SURVIVING & THRIVING IN A CONSOLIDATING WORLD Tom Marx | July 19, 2016
  2. 2. 2 2 © 2016 Hart Marx Advisors, LLC 2 Tom Marx •  30+ years in a:ermarket o  Marke=ng Communica=ons o  Mergers & Acquisi=ons •  Most segments, channels and products INTRODUCTION
  3. 3. 3 3 © 2016 Hart Marx Advisors, LLC 3 INTRODUCTION
  4. 4. 4 4 © 2016 Hart Marx Advisors, LLC 4 HART MARX ADVISORS Driving Smarter Mergers & Acquisi=ons AUTOMOTIVE PERFORMANCE SPECIALTY PRODUCTS MOTORSPORTS COMMERCIAL VEHICLES & HEAVY DUTY
  5. 5. 5 5 © 2016 Hart Marx Advisors, LLC 5 SERVICES BUY SELL MERGE CONSULTING SERVICES BUY SELL MERGE MARKET RESEARCH EQUITY & DEBT FINANCING DUE DILIGENCE ADVISOR TO PE FIRMS
  6. 6. 6 6 © 2016 Hart Marx Advisors, LLC 6 COMPLETED TRANSACTIONS
  7. 7. 7 7 © 2016 Hart Marx Advisors, LLC 7 CONSULTING
  8. 8. 8 8 © 2016 Hart Marx Advisors, LLC 8 DELIVERING RESULTS
  9. 9. 9 9 © 2016 Hart Marx Advisors, LLC 9 INDUSTRY INVOLVEMENT
  10. 10. 10 10 © 2016 Hart Marx Advisors, LLC 10 Consolida=on •  Larger companies acquire smaller companies using affordable capital to grow o  Economies of scale –  Provides goods/services rela=vely more efficient and at lower cost –  Success aQracts addi=onal investment o  Consolidators will conAnue to acquire for two main reasons –  Furthers their compe==ve advantage –  More transac=ons = beQer processes = lessens cost of acquisi=on Source: Brad Mewes, Sep 2015 Consolidation will continue because it is a virtuous cycle MARKET DYNAMICS
  11. 11. 11 11 © 2016 Hart Marx Advisors, LLC 11 MARKET DYNAMICS Four Stages of Consolida=on •  Stage 1: FragmentaAon o  Acquisi=ons are o:en “one off” in nature and tend to be opportunis=c •  Stage 2: AcquisiAons o  Frequent and rapid at this stage -- scalability becomes key! •  Stage 3: Expansion o  Less frequent but more focused -- core competency with the process •  Stage 4: Maturity o  Acquisi=ons trickle to a stands=ll Source: Brad Mewes, Sep 2015
  12. 12. 12 12 © 2016 Hart Marx Advisors, LLC 12 A:ermarket now at high level of consolida=on and this results in a changing compe==ve landscape •  Crea=ng opportunity and risk for your business MARKET DYNAMICS MARKET DYNAMICS
  13. 13. 13 13 © 2016 Hart Marx Advisors, LLC 13 MARKET DYNAMICS What’s driving the strong M&A ac=vity level? •  Simple Supply vs Demand rules •  Revenue strong across value chain •  Smaller M&A transac=ons have become more aQrac=ve o  Acquirers seek to strengthen infrastructure posi=ons within key a:ermarket segments •  Cheap cost of capital •  Current growth cycle is 4th largest expansion ever
  14. 14. 14 14 © 2016 Hart Marx Advisors, LLC 14 HEAVY DUTY INDUSTRY Today and Tomorrow •  Consolida=ons drive HD sector •  Deals keep happening •  FleetPride and TruckPro •  Distributors •  Suppliers •  OES •  Independent service dealers
  15. 15. 15 15 © 2016 Hart Marx Advisors, LLC 15 M&A SURVIVAL OVERVIEW 1  M&A SCENARIOS 2  WHAT TO EXPECT 3  HOW TO SURVIVE...AND THRIVE
  16. 16. 16 16 © 2016 Hart Marx Advisors, LLC 16 M&A SCENARIOS Sell/ Divest Acquire Merge Ownership Events Private Equity (PE) READY — AIM — FIRE
  17. 17. 17 17 © 2016 Hart Marx Advisors, LLC 17 SELL OR DIVEST •  Exit strategy: planned – or not •  Re=rement and no bullpen •  Accident, illness or worse •  Financial challenges •  Disagreements between partners or family members •  An approach to corporate restructuring •  Get rid of an underperforming or non-core asset •  Capitalize on beQer performing assets or add to core assets •  An offer that cannot be refused •  Freedom – It isn’t fun anymore!
  18. 18. 18 18 © 2016 Hart Marx Advisors, LLC 18 ACQUIRE Grow or fade away •  Strategic acquisi=ons o  Territory o  Market share o  Economies of scale o  Gain new customers, suppliers, management, technology o  Take out the low price leader A B A B A B
  19. 19. 19 19 © 2016 Hart Marx Advisors, LLC 19 MERGE Mergers are propelled by many of the same reasons as acquisi=ons •  Shared ownership/equity rather than straight buy-out •  Power and value of the en==es allow for control of equity, joint power to make decisions, and shared responsibili=es A B C
  20. 20. 20 20 Strengths or weaknesses of the parties deJines if it’s a merger or acquisition © 2015 Marx Group Advisors, LLC 20
  21. 21. 21 21 © 2016 Hart Marx Advisors, LLC 21 OWNERSHIP EVENTS Succession planning gone RIGHT •  Next genera=on moves into leadership •  Seamless •  All on the same page •  Plan successfully executed with minimum of drama
  22. 22. 22 22 © 2016 Hart Marx Advisors, LLC 22 OWNERSHIP EVENTS Succession planning gone WRONG •  Illness or worse •  Current genera=on won’t let go •  Fric=on builds, frustra=on grows and finally outside therapy comes to rescue •  Drama creates ri:s, slows growth, creates risk •  Plan isn’t executed
  23. 23. 23 23 © 2016 Hart Marx Advisors, LLC 23 ROLE OF PRIVATE EQUITY PE firms drive consolida=on •  Provide funds/exper=se needed to grow the business •  Higher mul=ples mo=vate sale •  Supports succession planning •  Buys out certain family members •  Some acquisi=ons are 100% and some can be par=al cash-out or as mo=va=on to stay •  The ul=mate exit strategy •  Result: You now are accountable to someone else
  24. 24. 24 24 © 2016 Hart Marx Advisors, LLC 24 CHANGE – RELEVANCE TO YOU Have you experienced these scenarios? •  Sell •  Acquire •  Merge •  Private equity •  Ownership event
  25. 25. 25 25 © 2016 Hart Marx Advisors, LLC 25 What to expect •  Survival •  Organiza=onal consolida=on and adjustments •  Your value to surviving en=ty •  Leadership CHANGE – RELEVANCE TO YOU
  26. 26. 26 26 © 2016 Hart Marx Advisors, LLC 26 The inner sanctum •  What does this mean? •  How do I get there? •  How will I know? •  How do I react when surprises happen? CHANGE – RELEVANCE TO YOU
  27. 27. 27 27 © 2016 Hart Marx Advisors, LLC 27 Will I thrive? •  Stay posi=ve •  Find ways to drive collabora=on •  Show objec=vity •  Be focused •  Know when to hold ‘em vs. when to fold ‘em •  And through all this – get your day job done CHANGE – RELEVANCE TO YOU
  28. 28. 28 28 © 2016 Hart Marx Advisors, LLC 28 •  Be me=culous with preparing company for transi=on •  Keeping it quiet—the true meaning of an NDA •  Where do I go to release the tension? •  The ul=mate sign of maturity YOUR COMPANY IS SELLING SINCERITY TRUST
  29. 29. 29 29 © 2016 Hart Marx Advisors, LLC 29 •  Devil is in the details •  Integra=on o:en is the difference between success or failure •  Planning is important – execu=on is everything •  Build a diverse team •  Opportunity knocks YOUR COMPANY IS BUYING
  30. 30. 30 30 © 2016 Hart Marx Advisors, LLC 30 •  Crea=ng financial gain •  Efficiency is key •  Keeping customers happy •  Opportunity knocks •  Do I jump ship? YOU’RE SELLING/MERGING
  31. 31. 31 31 © 2016 Hart Marx Advisors, LLC 31 •  The founda=on for successful M&A •  Make sure that the whole is more valuable than the sum of the parts •  No room for duplicate expenses •  Expect many changes •  Keep focus on the metrics required by board, bank or PE firm YOU’RE SELLING/MERGING
  32. 32. 32 32 © 2016 Hart Marx Advisors, LLC 32 •  Team builder •  Accountable •  Decision maker •  Redesign or refine the company’s culture ALWAYS BE YOUR BEST
  33. 33. 33 33 © 2016 Hart Marx Advisors, LLC 33 •  Retain the best people •  Keep your team informed •  Maintain/increase produc=vity •  Handle issues before panic sets in MANAGE YOUR PEOPLE
  34. 34. 34 34 © 2016 Hart Marx Advisors, LLC 34 SUCCESS IS OFTEN UP TO YOU Demonstrate leadership Listen to points of view Find SoluAons Build the team No room for egos
  35. 35. 35 35 © 2016 Hart Marx Advisors, LLC 35 SHAPE THE FUTURE •  Grow the business •  Build the brand •  Clarify value proposi=on •  Focus on sales •  Target marke=ng •  Streamline opera=ons •  Understand the finances
  36. 36. 36 36 © 2016 Hart Marx Advisors, LLC 36 QUESTIONS? 1 2 3 4 Where are you in the process? What else are you curious about? What are your concerns? What stops you?
  37. 37. 37 37 © 2016 Hart Marx Advisors, LLC 37 Tom Marx | 415.453.0844 x106 tmarx@hartmarxadvisors.com For ar=cles, resources and to sign up to our e-newsleQer please visit hartmarxadvisors.com Contact me if you would like a copy of this presentaAon or further informaAon on buying or selling.

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