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M&A Source Spring 2012 Conference - San Antonio  Personal Invitation from the Chairman Register Today Conference Schedule at a Glance 6 High Quality Panel Presentations The Private Equity Expo This will be one of best events ever! Sign Up Today!
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Chairman's Message Chet Walden, CBI, BCI, M&AMI, FIBBA  General MacArthur once said “a general is just as good or just as bad as the troops under his command make him.” Never has there been a truer statement.This year, I have been fortunate to be surrounded by some of the brightest people in the M&A arena. Our team has improved our web site, developed new courses for San Antonio, planned a dynamic conference in June, and assisted in adding benefits to our membership. As you tell us what you think and offer suggestions to improve our organization, we listen. We then bring your requests to the board as soon as practical so that we can implement those possible. Please keep up the communications! I’m excited hearing about how positive your 2012 has been thus far. Across the country, you and we are seeing deal flow picking up and it appears the outlook for second and third quarters is strong as well. It seems our members are not following where the path may lead, but instead are going where there is no path. You are the trailblazers! And San Antonio is all about you. The educational courses, the PEG Expo, the panel discussions, the opportunities to network with fellow intermediaries from around the country and learn how they handle challenges - - it’s all there just waiting for you. From the conference, you’ll learn new things, hear new ideas, and maybe even change the way you think about doing business. All in preparation for finishing out a strong 2012. I invite you to read the other articles in this newsletter -- they are informative and stimulating. Stay in touch, my friends, and plan to meet us in San Antonio. This will be the conference that spurs you on to bigger and better things! Click Here to view a Personal Video Invitation From Chet Walden
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Headlines Highlights from M&A Source Exit Doors are Wide Open for Business Owners Payday With the PEGs: One More Reason to Attend the Spring Conference RWI Congratulates Chet Walden M&A Source Membership Benefits Update Industry News "U.S. Private Equity Firms Wait for Deals in Europe" "SEC Registration Captures More Hedge Fund Advisers" "Buyout Season Is Back for Private Equity" "Senate Seeks to Toughen a Bill Aimed at Start-Ups" "Growing Your Business Through Acquisition" "Can Your Business Be Sold?" "Hotels & Resorts Deals Make Biggest Splash in Southeast" "Business Transitions: Navigating Your Way Through a Business Sale" "How to Value Inventory When Buying a Business" "PitchBook Fund Returns Report Shows Private Equity Asset Class Resilience" "U.S. Banks to Pursue Small-Business Lending in 2012, Survey Says" "Merger and Acquisition Deals Expected to Increase in 2012" Highlights from M&A Source Exit Doors are Wide Open for Business Owners  We here at Summa Financial Group have seen quite a rise in activity in 2012 over 2011 for mid-sized companies. In spite of some signs of an expected second dip in the overall economy in 2011, the M&A Market now looks to continue strong. The exit doors are opening wider for Mid-Market sized businesses. Record levels of corporate cash and historically low interest rates may provide the catalysts to fuel a rise in the level of merger and acquisition (M&A) activity this year, according to a survey of 825 executives conducted by KPMG LLP, the audit, tax, and advisory firm, and Knowledge@Wharton, the research and analysis arm of The Wharton School of the University of Pennsylvania. Nearly seven of 10 respondents expected their companies to make at least one acquisition in 2012, compared with 57 percent in 2011. Some executives said the need to expand geographic reach was the primary M&A motivator, while the need for entering new lines of business and expanding their customer bases were the next two most popular rationales. The M&A market is heating up There are more and more private-equity firms targeting investments in the Mid-Market, $2million to $50 million range. We have been data basing these because most of our targeted clients are in that value range. In addition, investors, entrepreneurs and corporate buyers have been busy making small to mid-sized acquisitions in recent months after some spent the last few years sitting on the sidelines. Business owners, especially those in manufacturing, have seen improved financial performance, are now finding once-elusive exit strategies emerge in the slowly rebounding economy. These companies are seeing better performance, and they're more optimistic about the future. With more credible forecasts we have been able to convince buyers that the business has good growth potential. M&A activity among mid-sized businesses mirrors the increased buying and selling by corporate titans we read about in the newspapers. The Retirement factor The market is filled with aging baby boomer owners looking for the optimal time to sell their businesses. In 2008, when the economy crashed, some had unrealistic expectations of what they could sell their businesses for and now it is four years later, and they still want to retire. Meanwhile, these company owners focused on managing their existing operations. Some say the owners developed a bunker mentality. We are starting to see those company owners come out of their bunkers and back into the marketplace with descent growth projections. The market now more than ever reflects pent-up demand among both buyers and sellers. At the same time financial buyers such as private-equity firms had raised plenty of capital but couldn't find growing companies. Now, there are strong cash reserves on the part of these buyers who need to put their money to work or give it back to their investors. The sellers are performing better, so they can now get a better price. It also helped that interest rates have stayed low. However, Sellers shouldn't jump into the market just because activity is picking up, unless their business is at a point such that it will obtain the maximum price possible. Whether it's a good time to sell depends on the business in question. M&A Source intermediaries understand how to find the hidden values that go beyond the numbers and take an objective look at the factors that make their company unique and valuable to an acquirer. The exit doors may not ever be open wider. Kevin Dempsey, CBI, CMC, CMEA M&A Source Incoming Chairman Summa Financial Group Payday With the PEGs: One More Reason to Attend the Spring Conference  Why attend The M&A Source Conference? Because it leads to Paydays with PEGs!Here is what a few of our members are reporting: Ron Chernak, First Business Brokers, Ltd.: $415,000 with Benford Capital Partners, LLC George Petrulis, Kensington Services, $660,000, DN Partners/Gaslight Capital Partners John Zayac, IBG Capital, $725,000 with River & Associates John Zayac, IBG Capital, $481,000 with Addison Capital Partners George Lanza, Plethora Businesses, $585,000 with Palm Beach Capital, LLC George Lanza, Plethora Businesses, $440,000 with Time Piece Capital, Walter L. Lipski, Capital Advice, $423,000 with Elm Street Capital Partners Bill Loftis, Blue River Financial Group, Inc., Buy-Side Engagement with Glencoe Capital Partners Alan Tronson, Advantage Advisors “My last deal was about $25MM and Mainstreet Capital and four other PEG’s took a hard run at it…the PEG value to me was creating multiple competing buyers.” – Are you serious about your career? Are you interested in making more money? Then you cannot afford to miss the upcoming M&A Source Spring Conference where panelists will be presenting the newest hot topics that have closed the latest deals! Mingle with the PEGS during the Middle Market Private Equity Expo, a gathering of the country’s most active PEGs looking for acquisitions, and attend the new educational courses, so that your investment of time and money will yield exponential returns! If you have had Paydays with PEG's, we want to hear about them! E-mail me at [email protected]. The information will be posted in the "members only" section of The M&A Source website. See you in San Antonio! Dora Lanza, M&AMI, CBI, CSBA 2012 M&A Conference Planning Chair Plethora Businesses RWI Congratulates Chet Walden It is with great pleasure the RWI companies congratulate Chet Walden, founder of Walden Businesses, for recruiting the most new members during the 2011 M&A Source Membership Drive. We applaud Chet Walden and all other membership drive participants for their respective contributions to enhancing the depth and breadth of our fine organization. In recognition of his personal achievement, RWI is pleased to present Chet Walden with an Apple Gift Card for $500 to purchase an iPad 2. We are certain Chet will find innovative ways to utilize his new iPad to grow and develop his business – and we are looking forward to him sharing them with the rest of the members! Chet – job well done! Reliance Worldwide Investments, LLC is a Broker-Dealer, member of FINRA and SIPC, and MSRB registered. RWI Wealth Management, LLC is a Registered Investment Adviser. RWI Business Services provides business assessment and shareholder value enhancement services. Other companies include RWI Insurance Services, LLC, RWI Valuation Services and RWI Tax Services. The RWI companies provide specialized services to Business Brokers, M & A firms, and their clients. M&A Source Membership Benefits Update  Among the reasons why deal-makers become members of The M&A Source are the many benefits we provide. In case you are not aware of those benefits, each one is listed below:- Education - Webinars - Website - Certification - Communication - Newsletters - Semi-Annual Conferences - Collaborate with Deal Makers - Middle Market/PEG Expo - M&A Source LYNX Database - M&A Source Express The M&A Source has also negotiated free or discounted rates for the following products and services: - Private Equity Info - Pratt's Stats - ShareFile VDR - IBIS World - Hoovers & First Research - OneSource Information Services - Citrix Online (GoToMeeting and GoToWebinar) - M&A Tombstone Postcards A subscription to Private Equity Info costs $495 per year, but a free subscription is available to M&A Source members. The basic ShareFile subscription costs $29.95 per month ($359.40 per year), but a free subscription is available to M&A Source members. Those two benefits alone provide more than $850 worth of free benefits...more than justifying the cost of membership. If you are aware of other free or discounted benefits that we should offer our members, please contact me at [email protected] or 817-663-0001. Joe D. Lindsey, M&AMI, CBI, BCB, LREA Chair: M&A Source Membership Committee Dailey Resources Industry News U.S. Private Equity Firms Wait for Deals in Europe Commercial Appeal (TN) (04/01/12) Several U.S. private equity firms have been raising funds to buy what they believe will be fire-sale-priced loan portfolios, corporate bonds, and other assets from troubled European financial institutions. Among the firms looking to buy are Carlyle Group, Apollo Global Management, and Oaktree Capital Management. For the past year private equity firms have raised $23 billion to buy European assets, and David M. Rubenstein of Carlyle says “there’s no part of the world that will see so much assets sold at a discount as in Europe.” Bank structural problems are not going away, some say, and financial firms that are holding more than $3 trillion in noncore loans on their balance sheets will have to sell them off or run them down to clean up their balance sheets and meet new regulatory capital requirements. SEC Registration Captures More Hedge Fund Advisers Bloomberg (03/29/12) Sloan, Steven Private advisers at private equity firms and hedge funds must register with the Securities and Exchange Commission (SEC), as required by a rule completed in June that stems from the Dodd-Frank Act. The SEC expects to receive applications from about 1,300 managers, which is up about 70 percent from an estimated 750 advisers when the agency published the final rule in the Federal Register on July 19. The registration provision was included in the 2010 regulatory overhaul to give the SEC a better understanding of what had been an opaque corner of finance. Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, said the increase in registration is a sign of the gaps in knowledge about the sector. The registration requirement applies to private equity companies and hedge funds that have more than $150 million in assets under management, and exempts foreign advisers without a U.S. business and most venture capital funds. Pamela Hendrickson, the chief operating officer of The Riverside Co., a New York-based firm that has registered with the SEC, says the registration process is more complex for private equity companies, noting that the so-called custody rule requires most registered firms to direct client assets to an independent custodian but firms often hold their securities in a vault at a law firm or other secure location instead of paying a third-party custodian. Rep. Robert Hurt (R-Va.) says he is pursuing an exemption for private equity companies. Buyout Season Is Back for Private Equity CNN Money (03/21/12) Farrell, Maureen A rising stock market and low interest rates are spurring the private equity buyout market, and many companies are on the lookout for buyers before rates rise. Private equity firms are looking to buy, as well, because they need to put the mountain of cash they raised between 2005 and 2010 to use. Less than $100 billion per year has been spent on taking companies private since 2008, down from $405 billion in 2006, but experts say this year’s total will at the very least top $100 billion. Some companies that had planned to start auctions last fall held off due to problems in Greece and the downgrade of U.S. government debt, but many are coming back now that the market is more stable. McGraw-Hill, for example, retained Goldman Sachs and Evercore Partners in September to begin a restructuring, but only now has begun talks with potential buyers to spin off its educational publishing division. Other companies on the auction block include DuPont, which is selling off its paint division, Motorola Mobility’s set-top box business, as well as retailers Party City and Savers. Senate Seeks to Toughen a Bill Aimed at Start-Ups New York Times (03/19/12) Wyatt, Edward A bipartisan version of the JOBS Act was passed by the U.S. House in recent weeks, and the Senate is now preparing to vote on a version containing an amendment that greatly differs from the House version. However, it is uncertain whether the 60 votes needed to revise the House bill will be secured. The bill aims to help emerging companies raise funds and court investors, but U.S. Securities and Exchange Commission Chair Mary Schapiro opposes the measure due to concerns that it will erode existing investor protections. The bill defines emerging businesses as those with annual revenue of no more than $1 billion and $700 million or less in publicly held stock. Businesses with no more than $350 million in annual revenue would qualify for exemptions from many securities regulations, under an amendment sponsored by Sen. Jack Reed (D-R.I.). The White House voiced support for the House bill, with President Barack Obama urging cuts in "the red tape that prevent many rapidly growing start-up companies from raising needed capital" and at the same time calling for "appropriate investor protections." Another statement from the White House indicated support for Senate amendments to the House bill on investor protection. Growing Your Business Through Acquisition Miami Herald (03/18/12) Cassel, James James Cassel, co-founder and chairman of the Miami-based investment banking firm Cassel Salpeter & Co., says that now is a good time to buy a business, as Baby Boomers are retiring and their children do not always want to inherit the business. Some companies seek to acquire a business as part of a growth strategy, and there are several things they should do to ensure a successful purchase. They can expand their business by buying a direct competitor, a similar firm in a different geographical area, or a company that offers cross-selling opportunities. They should make sure they have the finances to make the acquisition, being realistic about the estimated costs, ensuring their existing business has enough capital, and avoiding too much debt. They should forge relationships with companies they might want to acquire in the future to give them a competitive edge when those companies decide to sell. Additionally, they need to plan the integration of the new business and the transition of its employees in advance, and they should not be afraid to walk away from a deal that is not going to achieve their goal of expansion. Can Your Business Be Sold? Inc.com (03/14/12) Handelsman, Mike Exiting a business can be a tough decision, but owners and their advisors must first determine if the business is a good sale prospect that someone would want to buy whole or in pieces. Buyers are looking to purchase not only assets but also the reputation, clients, and marketplace advantages of a particular business. Experts agree that the business' condition must be assessed in terms of sales and profits over the last three years, costs and operational expenses, current financial condition, liabilities, superiority of products and services, and its reach beyond local and regional clientele or prospects for client growth, among other intangible assets. Once the firm has been assessed, areas for improvement should be strengthened before a sale offering is completed, which will require an action plan for each and a timeline for completion. Once finished, business owners and advisors will determine if the business can be sold immediately or later or eventually be liquidated. Hotels & Resorts Deals Make Biggest Splash in Southeast PitchBook Newsletter (03/14/12) The PitchBook Platform has found that private equity investors have invested in 106 companies in the hotels and resorts sector since 2005. More than a dozen deals in the hotels and resorts industry were completed last year, up from seven in both 2008 and 2009. A total of 35 deals have been completed in the Southeast since 2005, representing 29 percent of activity. The Southeast has been the most active region in the country when it comes to deals in the hotels and resorts industry. The next most active region was the West Coast. Business Transitions: Navigating Your Way Through a Business Sale Colorado Springs Business Journal (03/09/12) Mendoza, Monica Private equity firms have about $1 billion to invest in middle market investments, which are attractive because of their mature business structures and market flexibility. To make the most of this market, middle market businesses must know which investors have money to spend and what they value, and must also have a plan in place for handing their business over to another company. "Middle market companies sell more strategically," said BiggsKofford Capital investment Bank President and CEO Chris Blees. "It's more about identifying the value proposition and then going and finding the right buyer as opposed to throwing it up against the wall in hopes that some buyer comes along." This includes careful market planning and some market research on what companies value including profitability, sales force, customers, and research and development. With only a handful of the country's 200,000 middle market companies going public each year, the rest of the middle market businesses will be purchased by companies seeking to expand their reach or companies interested in increasing their revenue. Blees said there are two distinct types of buyers in the middle market: The strategic buyer, who is looking for intellectual property; and the financial buyer who has money to spend because it was saving its pennies in recent years when smaller companies were brought down by the economy. "Now it's the perfect storm for the middle market company," Blees said. How to Value Inventory When Buying a Business GlobalBX (03/07/12) Business valuation is an important part of a business purchase or sale to ensure that buyers are not paying too much and sellers are not selling for too little. To properly evaluate a business' inventory, buyers and sellers must agree on the method used for valuation, such as the original purchase price or the current value of the items. Given that inventory levels will fluctuate during the transaction process, final count and valuation should be done at the close of the sale, and anticipated value for inventory must be provided by the buyer and seller and adjusted if necessary. Should a valuation disagreement arise, both parties should consult with an accountant, and the buyer must account for errors in inventory control software and perform a physical count of inventory when necessary. The condition and quality of items in the inventory should be assessed, with salable items included in the valuation. When buyers and sellers have a good relationship, inventory counts should be done together and buyers can use the opportunity to ask the seller about aspects of the business. An outside inventory service firm should be considered to count and assess items as well. PitchBook Fund Returns Report Shows Private Equity Asset Class Resilience MarketWatch (03/07/12) A new report by PitchBook Data suggests that private equity remains an attractive asset class that has outperformed the public markets during the last three- and five-year periods. According to the research, the best performers were private equity funds, which outperformed venture capital, fund of funds, mezzanine, and real estate. "All areas of private equity posted positive one-year returns in both 2010 and 2011, after having experienced two straight years of negative returns," said John Gabbert, CEO and founder of PitchBook Data. "This has resulted in a significant increase in fund returns multiples and an improvement across the board in median fund IRRs." Among other findings, the report found that for the twelve months ending June 30, 2011, private equity funds posted a 19 percent IRR. U.S. Banks to Pursue Small-Business Lending in 2012, Survey Says American Banker (03/06/12) Stewart, Jackie A February survey of 409 banks across the globe by Arlington, Va.-based Omega Performance indicates that U.S. banks, flush with deposits, will turn to small business lending in 2012 as they seek to boost revenue. Of U.S. bank respondents, 78 percent plan to "actively" pursue small business lending this year, with 76 percent of banks globally planning to do so as well. About 64 percent of U.S. banks anticipate slow growth in small business lending, while nearly 13 percent predict dramatic increases. Another 66 percent of U.S. banks will actively pursue medium- to large-business lending, and 59 percent will focus on consumer lending. Merger and Acquisition Deals Expected to Increase in 2012 Los Angeles Times (03/01/12) Hsu, Tiffany A new report from KPMG and the University of Pennsylvania's Wharton School finds that companies are likely to pick up their merger and acquisition (M&A) activity this year while interest rates are low and they have more cash on hand to spend. Of the 825 executives polled for the study, 34 percent said they are feeling more hopeful about making deals this year, 40 percent feel as hopeful as they did last year, and only 2 percent say they are much less hopeful. Some factors affecting respondents' feelings about the current M&A environment are the sluggish job market, Europe's uncertain fiscal outlook, and the upcoming U.S. presidential election. Nevertheless, companies have been eagerly seeking deals for months, even though agreements now are not as lucrative as they were several years ago. Private equity buyouts reached a three-year high last year of $277.7 billion in deals as emerging markets became more active in dealmaking. Close to 70 percent of the executives queried said they expect their companies to complete one or more acquisitions this year, compared to the 57 percent who said the same last year. |
April 2012
 
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The mission of the M&A Source is to promote members' professional development and interests to better serve their clients' needs, and maximize public awareness of professional intermediary services available for middle market merger and acquisition transactions.
The Source was established in 1991 to address the professional issues of merger and acquisition professionals. This organization currently has more than 200 cooperative intermediaries across the world.
For more information about the Bridge:
M&A Source Headquarters 401 N. Michigan Ave., Suite 2200 Chicago, IL 60611-4267
Phone: 312.321.5112 Fax: +1.312.673.6599 Email: [email protected]
Disclaimer: Any statement of fact or opinion is the responsibility of the author alone and does not necessarily imply the views of the board of directors, staff, or members of the International Business Brokers Association (IBBA). No part of this publication may be reprinted without the written permission from M&A Source Headquarters. © 2012 M&A Source
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