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Mergers and Acquisitions
- 1. 1 MERGERS & ACQUISITIONS MINNEAPOLIS 1300 Godward Street NE, Suite 6000 Minneapolis, MN 55413 612-455-0880 SAINT PAUL 3212 Rice Street Saint Paul, MN 55126 651-484-2677 CHICAGO 8745 W. Higgins Road, Suite 220 Chicago, IL 60631 773-243-1603 MILWAUKEE 330 S Executive Drive, Suite 102 Brookfield, WI 53005 262-901-0086 LAS VEGAS 2300 West Sahara Avenue, Suite 800 Las Vegas, NV 89102 702-364-2551 We Build Bridges Between Buyers & Sellers
- 2. 2 Why Use Sunbelt? § Largest Worldwide, National, and Regional Presence § Confidential Proactive Marketing Brings More Acquirers § Our Unique Comprehensive Process Drives Highest Value § Worldwide Leader in Lower Middle Market § Experienced Team has led Thousands of Transactions WHY USE SUNBELT
- 3. 3 Largest Worldwide, Regional, and National PresenceLARGEST WORLDWIDE, REGIONAL, AND NATIONAL PRESENCE § Founded in 1978 § 200 + Offices Worldwide § 1,400 Professionals § 50 Member Midwest Team – Largest Geographic Group § Sunbelt Business Advisors Specializes in Lower Middle Market Companies with $5 to $50 Million + in Revenue. § Sunbelt Sells More Businesses than any Firm in the World
- 4. 4 Services & Expertise – While we know many industries… Sell Side Engagements Buy Side Engagements Corporate Divestitures INDUSTRY EXPERTISE • Manufacturing • Service • Distribution • Constr./Trades • Technology • Energy • Transportation We don’t Specialize in Industries - We Specialize in Transactions SERVICES & EXPERTISE
- 5. 5 Strategic Sales Process: Middle Market vs Main Street MERGERS & ACQUISITIONS u LOWER MIDDLE MARKET TRANSACTIONS u $5-$50 + MILLION REVENUE Typically outbound in nature— Sunbelt calls decision maker to illustrate opportunity • Subset of team focuses here • Large number of team members to make initial call and funnel to investment banker • Sunbelt does more strategic sales than any other boutique firm by far • Manpower plus leverage of Sunbelt offices internationally creates best price and terms • Analyst Team dedicated to identifying best buyers • Confidential • In-bound in nature • Buyers reach out to Sunbelt • Mass marketing • Over 10,000 listings on web site • Marketed through 14 web sites • 12,000 unique buyers in database • Brokers match buyer needs, ability, and net worth with listings • Supermarket effect • Buyers more likely to be local or regional • Confidential • Outbound in nature • Strategically market and illustrate opportunity to buyers • Heavy collaboration to execute deal with precision • Analyst team dedicated to identifying best buyers • Manpower + leverage of Sunbelt • Offices internationally creates best price and terms BUSINESS BROKERAGE u MAIN STREET TRANSACTIONS u UNDER $5 MILLION REVENUE M&A vs. BUSINESS BROKERAGE
- 6. 6 Client Objectives Realize Ownership’s Personal and Financial Post-Closing Goals § Confidentially Market the Business § Maximize Acquisition Candidates § Maximize Selling Price § Maximize CASH at Closing § Minimize Tax Burden § Minimize Post-Closing Risks CLIENT OBJECTIVES
- 7. 7 Our Unique Comprehensive Process § Capitalize on client control during LOI stage § Secure concessions from acquirer during pre-LOI Stage § Client loses control in due diligence § Maximizes price & terms § Multiple buyers keeps seller in control § Secures optimal tax strategy § Saves legal and accounting fees OUR UNIQUE COMPREHENSIVE PROCESS
- 8. 8 Transaction Management SystemTRANSACTION MANAGEMENT SYSTEM: STAGE 1 Valuation Engagement Prepare CBP Marketing IndustryPEGsStrategic Buyers Financial Buyers Information Management
- 9. 9 Transaction Management SystemTRANSACTION MANAGEMENT SYSTEM: STAGE 2 IOI/LOI Offer NegotiationsBuyer Seller Buyer Accountant Seller AccountantDue Diligence
- 10. 10 Transaction Management SystemTRANSACTION MANAGEMENT SYSTEM: STAGE 3 Purchase Agreement Closing DocumentsBuyer Seller Buyer Attorney Seller AttorneyClosing $$$
- 11. 11 Engagement Timeline 0 5 10 15 20 25 30 35 40 Closing Due Diligence Structuring and Negotiating Management Presentation Marketing Planning Week ENGAGEMENT TIMELINE
- 12. 12 Phase 1 – Planning § Retain M & A Advisor § Define Goals, Objectives and Sales Strategy § Obtain 3rd Party Business Valuation § Collect Company Data § Prepare Confidential Business Profile (CBP) § Identify and Analyze Key Potential Acquirers (Target List) Phase 2 – Marketing § Identify and Approach Potential Acquirers § Distribute Teasers & Confidentiality Agreements § Establish On-Going Dialogue with Potential Acquirers § Select Acquirers for CBP Reviews ENGAGEMENT TIMELINE ENGAGEMENT TIMELINE: PHASE 1 & 2
- 13. 13 ENGAGEMENT TIMELINE: PHASE 3 & 4 Phase 3 - Management Presentation § Management Presentations, Conduct Facility Tours § Hold Data Room Visits § Continued Dialogue with Potential Acquirers Phase 4 - Structuring and Negotiating § Solicit Offers § Evaluate Offers; Select Optimum Offer § Negotiate & Execute LOI
- 14. 14 ENGAGEMENT TIMELINE: PHASE 5 & 6 Phase 5 - Due Diligence § Assist in Acquirers Due Diligence § Prepare Purchase Agreement Phase 6 – Closing § Finalize and Execute Purchase Agreement § Disburse Funds § Make Public Announcement if Appropriate
- 15. 15 Dominant Marketing Targeted Marketing § Target list of acquirers receives blind profile § Proactive outbound telephone calls § Select Private Equity Groups receive solicitations based on matching criteria Proprietary Website § www.sunbeltmidwest.com Websites § More than a dozen sites to confidentially match your business to relevant acquirers Traditional Advertising Brings Acquirer Traffic § Corporate Branding via direct mail, magazines, radio* The Sunbelt Network § 1,400 agents in 200+ offices worldwide DOMINANT MARKETING
- 16. 16 The Blind Profile Engages AttentionBLIND PROFILE ENGAGES ATTENTION
- 17. 17 Confidentiality & Knowing the AcquirerCONFIDENTIALITY & KNOWING THE ACQUIRER
- 18. 18 Our 550 Deal Update Reaches Key AcquirersMARKETING: NEW 550 DEAL UPDATES
- 19. 19 Circles of Buyers: Further from You = Greater Value Seller Employees & Competitors High Net Worth Individuals & Small Buying Groups Private Equity Groups Strategic Acquirers Closest to Seller (see the least value) Furthest from Seller (see the most value) CIRCLES OF BUYERS: FURTHER FROM YOU = GREATER VALUE
- 20. 20 Typical Investment Bank Search for Acquirers Your Company Private Equity Groups Strategic Acquirers “Round up the usual suspects” “Our Industry Expertise tells us these companies are non-obvious buyers” TYPICAL INVESTMENT BANK SEARCH FOR ACQUIRERS
- 21. 21 Sunbelt’s New Circle of Value – The NON-OBVIOUS Targeting Strategic Buyers § Sunbelt creates a target list of potential bidders using Sunbelt’s market research capabilities and gathering input from Seller. § Waterfront coverage on PEGs and within your Industry. Private Equity Groups Strategic Acquirers NON-OBVIOUS BUYERS “Bench Markers” EVERY INDUSTRY – EVERY COMPANY HAS NON-OBVIOUS or HIDDEN BUYERS NEW CIRCLE OF VALUE: NON - OBVIOUS BUYERS
- 22. 22 A Word About Private Equity Groups Private Equity Groups (PEGs) Private equity groups are investment managers that makes investments in the private equity of operating companies, either in full buyouts or in partial equity investments. These firms raise funds to be invested in accordance with one or more specific investment strategies. Value as Potential Buyers § They increase the pool of bidders – increasing pressure on strategic buyers and driving price up. § They tend to pay a premium for good management in place in companies that are already profitable. § The price multiples paid by Private Equity Groups are currently at higher, more strategic buyer levels, and trending up. § If they have an existing portfolio investment in our Seller’s industry – the operating company’s strategic needs drive the discussion – driving price and terms to strategic levels. § They will inquire – they comb Sunbelt’s acquisition opportunities regularly. A WORD ABOUT PRIVATE EQUITY GROUPS
- 23. 23 How We reach Private Equity Groups MARKETING MUSCLE § Already resident in our continuously updated CRM system, the key people at these firms will be contacted directly by a Sunbelt Associate. § Analysts and business developers at these PEGs will receive our “550 Deal Update” e-newsletter highlighting this opportunity. § Each of our M&A Advisors and Analysts has worked with multiple PEGs in the past, and will directly call and alert them to this opportunity. § They comb Sunbelt’s acquisition opportunities regularly on our own web-site and will be alerted to the opportunity through several available “deal-sites” maintained specifically for PEGs to manage their review of opportunities, for example – Axial Market. HOW WE REACH PRIVATE EQUITY GROUPS
- 24. 24 Case Study 1: OverviewCASE STUDY 1: OVERVIEW SITUATION Product manufacturer with 8 shareholders, many at or nearing retirement age. Company had been approached with unsolicited offers. ISSUE Lack of an exit strategy led to indecision on unsolicited offers. DECISION Engaged Sunbelt to comprehensively approach the International and National universe of acquirers. RESULT 5 written offers and a sale price above the company’s target price and terms.
- 25. 25 Case Study 1: Maximizing Value Targeted 1000 Qualified 200 Received CBP 48 Indications of Interest 15 Offers 5 Sold To 1 Start Finish 9Months $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 Buyer 1 Buyer 2 Buyer 3 Buyer 4 Buyer 5 First Offer Auction Premium CASE STUDY 1: MAXIMIZING VALUE
- 26. 26 Case Study 1: Maximizing Value $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 Buyer 1 Buyer 2 Buyer 3 Buyer 4 Buyer 5 First Offer Auction Premium CASE STUDY 1: MAXIMIZING VALUE
- 27. 27 Case Study 1: Maximizing Value RIDDLE What happened to the Price when Walmart (a major distribution channel) reduced it’s orders by 40% the week before closing? ANSWER ? CASE STUDY 1: MAXIMIZING VALUE
- 28. 28 Case Study 1: Maximizing ValueCASE STUDY 1: MAXIMIZING VALUE RIDDLE What happened to the Price when Walmart (a major distribution channel) reduced it’s orders by 40% the week before closing? ANSWER Nothing
- 29. 29 Case Study 2: Metal Fabricator; $4.5 million EBITDA Targeted 1000 Qualified 100+ Received CBP 40 Indications of Interest 17 Offers 14 Sold To ? Start Finish 9Months $- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 Buyer 1 Buyer 2 Buyer 3 Buyer 4 Buyer 5 Buyer 6 First Offer First Offer Final Call: 14 offers CASE STUDY 2: METAL FABRICATOR - $4.5 MILLION EBITDA
- 30. 30 Valuation Multiples are Driven By Risk & GrowthVALUATION MULTIPLES ARE DRIVEN BY RISK & GROWTH § Growing Industry § Proprietary Product/High Barriers to Entry § Strong Brand § Intellectual Property / Patents § Consistent and Growing Revenues & Earnings § Customer Diversity § Management in Place Post Closing § Audited Financials § Declining Industry § Commodity Products § Inconsistent Revenues and Earnings § Heavily Dependent on Owner § Partial Sale/Divestiture § Low Barriers to Entry § Large Customer Concentration § Low Repeat Customer Factor § Compete on Price
- 31. 31 Deal ExamplesDEAL EXAMPLES Marek Group Acquires Brandspring Metal Fabricator Atlas Acquires Disability Furniture Mfg. Sysco Acquires Appert’s Northern Tool Acquires K&M Manufacturing EBSCO Acquires Lindy
- 32. 32 Selected Recent TransactionsM&A TRANSACTIONS
- 33. 33 Questions Every Seller Should ask Investment Bankers 1) What’s the Size of your team? 2) How many M&A transactions does your firm have an engagement agreement with? 3) How many offices do you have? Do you have International presence? 4) Process for maximizing price for your clients? 5) Do you have dedicated M&A Analysts on staff? 6) Does your firm have a dedicated marketing department? 7) Who does your firm represent, is it exclusive, who pays your fee? 8) Do you know our Industry? 9) What Type of Acquirers are you targeting and give me three examples of each? QUESTIONS SELLERS SHOULD ASK INVESTMENT BANKERS
- 34. 34 Questions Every Seller Should ask Investment Bankers 1) What’s the Size of your team? 1,400 Dealmakers; 50 in Midwest – 10 devoted to M&A in Midwest 2) How many M&A transactions does your firm have an engagement agreement with? 3) How many offices do you have? Do you have International presence? More than 200, with offices in Asia, Europe and South America 4) Process for maximizing price for your clients? Reach & funnel, dedicated strategic development, Business Development team to follow up on Target Lists 5) Do you have dedicated M&A Analysts on staff? Yes, our Senior Analyst & Analyst manage dedicated research on Valuation, M&A Markets, and the targeted search for acquirers. QUESTIONS SELLERS SHOULD ASK INVESTMENT BANKERS
- 35. 35 Questions Every Seller Should ask Investment Bankers 6) Does your firm have a dedicated marketing department? Yes, in additional to our full time M&A dealmakers, we have a full business development team. 7) Who does your firm represent, is it exclusive, who pays your fee? Sellers who engage us for M&A advisory on an exclusive basis; no dual agency. 8) Do you know our Industry? We are not necessarily specialists in your Industry – we are specialists in companies of your size. Industry specialists tend to miss buyers who will pay more. 9) Which Acquirers are you targeting and give me three examples of each? PEGs; Adjacent Space; Existing Space; NON-OBVIOUS ACQUIRERS QUESTIONS SELLERS SHOULD ASK INVESTMENT BANKERS
- 36. 36 Sunbelt Midwest M&A Team Mr. Evert specializes in facilitating the acquisition and sale of middle market businesses in the manufacturing, service and franchise sectors. Mr. Evert has served as a member of the Board of Sunbelt since 2002, and negotiated the sale of Sunbelt corporate in 2006. Mr. Evert began his career in the early 80's when he founded a video distribution business that grew to over $10 million in sales with over 100 employees. He sold his company to Major Video Concepts, a $400 million distributor and became its V.P. of Sales directing divestures and acquisitions. In ten years with Major, Mr. Evert initiated strategic acquisitions and divestures of companies of $1- $20 million in sales, as well as a $50 million acquisition. Prior to joining Sunbelt Chris worked in strategic acquisitions for a $400 million subsidiary of a “Fortune 200 Private Company”. With Sunbelt, he has assisted clients in many industries including: manufacturing, business services, distribution, consumer products, outdoor products, industrial equipment, transportation/logistics, education, consumer services, franchising, retail, e-commerce, information technology and interactive marketing. Chris is also Managing Partner of Sunbelt Business Advisors. Chris is a member of the Sunbelt Network (the world’s largest business brokerage firm), M&A Source, the Association for Corporate Growth (ACG), and the Financial Planning Association (FPA). Scott Evert; Founder Chris Jones; Managing Partner cjones@sunbeltmidwest.com SUNBELT MIDWEST M & A TEAM
- 37. 37 Sunbelt Midwest M&A Team Since 2005 Dan has been the #1 producer in Sunbelt’s Midwest region. He has transacted over $300 million of business sales and purchases over his career. He is a CPA (inactive), has an MBA from Carnegie Mellon and spent 20 years in the corporate world as COO and CFO at middle market companies, and as controller of an $800 million division of a Fortune 100. This and his years in public accounting underpin an in-depth understanding of markets, business models, profitability drivers and how to position his client’s sale for maximum economic gain. Dan’s analytic approach and straight talk enables confidential, candid discussions with qualified buyers. A hands- on, best-practices process confidentially moves the complex sale process to closing while maximizing the Seller’s cash and minimizing risk. SUNBELT MIDWEST M & A TEAM Dan Mulvaney; M&AAdvisor dmulvaney@sunbeltmidwest.com Jim has been assisting owners realize their business transition goals since 1994. As one who has held corporate positions in marketing and finance, and as a former business owner and a principal of a middle market Merger and Acquisitions firm, Jim brings experience and a deep understanding of the financial and emotional complexities involved with the sale of private and closely held businesses. Jim holds a BSB degree from the University of Minnesota, and is a long standing member of the IBBA. James Borthwick; M&AAdvisor jborthwick@sunbelt-business-advisors.com
- 38. 38 Sunbelt Midwest M&A Team Len directs analysis and research for Sunbelts’ middle market M&A team, assisting business owners in finding the right acquiring entity, and positioning their message to the marketplace for an optimal transaction. Len was Director of Business Valuations at RSM McGladrey for ten years prior to three years as the top operations officer for a $3 million healthcare entity. He has assisted hundreds of businesses with determining the value of their company for the purpose of sale or business combination. Len Washko; M&AAdvisor lwashko@sunbelt-business-advisors.com SUNBELT MIDWEST M & A TEAM Ed graduated from the University of Wisconsin, Madison, then joining the largest natural gas distribution contractor in the country. His primary focus was setting up new departments and working on new and innovative ventures for the company. Ed was transferred to overseas as Manager of European Operations setting-up offices in the Eastern Europe arena, and made Manager of Asian operations, residing in China. Returning to the U.S., he was recruited by a manufacturer of underground construction equipment, running a large division specializing in trenchless pipe installation. Before joining Sunbelt, Ed served as Vice President of Sales at a contract packaging company. Ed Krajcir; M&A Advisor ekrajcir@sunbeltnetwork.com
- 39. 39 Sunbelt Midwest M&A Team Domenic Rinaldi; M&AAdvisor drinaldi@sunbeltnetwork.com Mr. . Rinaldi is a seasoned executive who brings over 24 years of proven experience in mergers and acquisitions. Domenic’s career began at Sprint Corp, where he spent 13 years in sales and operations. As VP of their Hospitality Division he led a national organization to $250 million in annual revenue. His experience as COO of an e- commerce travel company offered the opportunity to grow a Silicon Valley startup into an international solutions provider. Domenic’s small business experience running a New York City technology company gave him first hand knowledge of the challenges facing business owners. It was at this private company he learned the business of raising venture capital and driving a small company to profitability, which ultimately resulted in an acquisition. SUNBELT MIDWEST M & A TEAM Scott Hagel; General Counsel shagel@sunbeltmidwest.com Scott joined Sunbelt Midwest in 2014 as general counsel. Prior to joining Sunbelt, Scott spent 15 years in private practice representing public and private companies, private equity firms and management teams in mergers and acquisitions, corporate transactions, corporate finance transactions and securities matters across numerous industries. Scott graduated from the William Mitchell College of Law with honors and received his CPA designation (currently inactive) upon graduating from North Dakota State University.
- 40. 40 Sunbelt Midwest M&A Team Thomas Koehn; M&AAnalyst tkoehn@sunbeltmidwest.com Thomas Koehn is a graduate from the Carlson School of Management at the University of Minnesota where he pursed a degree in Finance and Entrepreneurial Management, and took an extensive dive in mathematics. Serving both the M&A and Business Development teams, Thomas offers research and analytics for the sole purpose of uncovering meaningful data to make compelling arguments and support deal decisions. SUNBELT MIDWEST M & A TEAM Christine Topp; Marketing Analyst shagel@sunbeltmidwest.com Prior to joining the Sunbelt team, Christine managed the Lease Renewal Department for a privately held Commercial Real Estate Company in the Twin Cities. As a licensed Real Estate professional, Chris brings over 25 years experience working with retail and service businesses including big box/corporate, independent and franchise clients. Her experience includes lease assignments (business sale/transfer), analysis, research and preparation of legal documents. Chris understands the challenges and complexities business owners navigate and enjoys utilizing her skills to assist clients with marketing their businesses to maximize their sales price and terms. Christine lives in the Twin Cities with her husband and has three grown children.
- 41. 41 Sunbelt Midwest M&A Team In his role of Business Development Aaron reaches key C-level decision makers regarding acquisition opportunities. Aaron executes a key part of the Sunbelt process in reaching both obvious and non-obvious acquirers. Prior to Sunbelt Aaron built a successful property management company which he sold. Aaron Thom; VP of Business Dev. SUNBELT MIDWEST M & A TEAM