Companies in the lower mid-market often are surprised when they attract attention from larger entities, even those whose balance sheets dwarf the target.
I moderated a panel discussion on Strategic Sales at the May M&A Source conference. The session looked at three case studies:
Why do small companies attract this kind of interest?
Large companies have difficulty innovating quickly enough to capitalize on trends. Two of the case studies were in sectors previously considered alternative but now considered mainstream: organic and gluten-free.
In an article in Food Dive, Carolyn Heneghan notes that consumer tastes are rapidly changing and popular brands are losing their luster to new products. Big food companies need innovation and sometimes find it more efficient to buy a company than start from scratch.
In the transportation company case study, the operator had developed deep inroads in a foreign market. The buyer group wanted to reach that market quickly. It was more productive to buy the tiny company than to start from scratch.
With the bread company, the advisor worked with owners to delay a sale for over a year while the production methodologies, distribution network and internal operations were fully documented and put in order to satisfy an acquirer.
With the transportation company, the M&A advisor insisted on preparing a full sales information package even through there was really only one logical buyer. It would have been tempting to just rely on an exchange of documents. But the information package helped show the opportunity clearly to the ultimate buyer.
With the snack enterprise, the investment group developed a detailed growth plan and then worked with the management team to rapidly ramp up production and sales. The company went from $7 million in sales to over $120 million within three years.
These results are extraordinary, and can’t be duplicated in every case. However, they illustrate the value of a good advisor and a good M&A process.
BTS News
Manufacturer Sold and New Owner Expands It
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NH-Based Techinical Manufacturing Company Sold
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Be Ready When You Are Ready
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Looking at a Sale Through the Right Lens
Sometimes our vision about the future is blurry because we aren’t considering the whole picture but only parts of it.
5 Deal Points from the Trenches
Today I work with clients of Business Transition Strategies who are implementing Growth Through Acquisition strategies. Here are a few observations from working on a wide variety of projects.
Tax Changes Could Hurt Net Proceeds
Changes proposed to the capital gains tax suggest they may need to get 30% more in a transaction in the future just to net the same value they would get today.
Good Ideas From Shark Tank Deal
One of my colleagues in Cornerstone Alliance was front and center in a recent Shark Tank exercise. A business that had been sold was put in front of four potential buyer groups.
Buyer Trends in Lower Mid-Market
Other businesses are a significant market for companies being sold within the lower mid-market.
Case Studies
Precision Machining Company
Initially, liquidation was a serious consideration. It would offer a quick exit but would hurt loyal employees and disrupt the customers who had come to rely on its quality production.
Green Product Company
Our client owners could dig in for the long haul…However, this would take five years or more. Owners simply lacked the horsepower to do it.
Water Purification Company and Young Buyers
Owners decided they wanted to retire. They also wanted to be fair to the staff who had been loyal to them. Could the company be sold, the staff retained and the facility remain in use?
Magnetics Company with High Profile Customers
(T)he manufacturer would need to focus on growing EBITDA to capture interest from major strategic buyers and achieve a higher multiple of earnings.