the purchase
DESCRIPTION
TRANSCRIPT
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The Purchase & Sale Process
Alternative Solutions
Solution Positives Negatives
Operational RestructuringRetain Control
Minimal Transaction Costs
Risky - Uncertain TimeframeMay Only Be A Temporary
Solution
New Financing:Equity / Debt / Hybrid
Keeps Company As Going Concern
May Be Difficult To ObtainDifficult Debt Markets
Potential Equity Dilution
Divestiture / Sale of Stock / Asset Sale
LiquidityCompany Controls Process
Relatively Quick
Change Of Control / Assumption of Liabilities
Issues
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The Purchase & Sale Process
Illustrative Sale Process Timeline
SUCCESSFUL TRANSACTION
PRE-MARKET PREPARATION
MARKETING PHASE I
MARKETING PHASE II
DUE DILIGENCE AND
DOCUMENTATION
Months: 1 – 2 Months: 3 – 4 Months: 5 – 6 Months: 7 – 8
Analyze financial and strategic objectives
Begin internal due diligence
Develop financial performance and addbacks analysis
Prepare offering memorandum
Research industry
Compile buyers list
Contact potential buyers
Manage all correspondence
Maintain confidentiality through process
Receive and analyze all indications of interest
Begin assembly of data room
Begin management presentations
Begin extensive buyer due diligence
Evaluate proposals with client
Negotiate and execute LOI
Facilitate requests for information and buyers due diligence
Negotiate and finalize terms of purchase agreement
Financial and strategic analysis
Internal due diligence
Projections and addbacks analysis
Offering memorandum
Industry research
Buyer list
Contact potential buyers
Confidentiality agreements
Distribute marketing materials
Indications of interest
Data room
Management presentations
Buyer due diligence
Proposals evaluation
Negotiate and execute LOI
Information request and due diligence
Final bids
Necessary approvals
Purchase agreement
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The Purchase & Sale Process
Financial vs. Strategic
Financial Strategic
Valuation likely lower than Strategic
Management of greater importance
Need to invest capital Synergies if add-on
acquisition
Strategic
Capture benefits of scale Market penetration Brands / products /
technology Distribution channels Management team Real estate Inventory Competitive value Time
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The Purchase & Sale Process
Finding the Right Buyer
Look for buyers with synergistic / strategic fit that will justify higher multiples Explore several alternatives concurrently Private equity groups have an abundance of capital and a mandate to pursue platform
and add-on acquisitions Consolidations and “roll-ups” drive a large portion of M&A activity
Consolidations and roll-ups aim at reducing redundant capacity while capturing the benefits of scale and technology
Strategic buyers are willing to use their currency to acquire earnings, brands, technology and management, among other things
Competitive bidding is occurring
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The Purchase & Sale Process
“What Do Buyers Want?”
The highest values are paid for a business when the buyer falls in love with the company. What makes a buyer fall in love?
The buyer can relate to the company’s history
The buyer is able to easily understand the company’s business model
The buyer can understand downward trends in sales, profits and cash flows and perceive the upside opportunity
The buyer is able to understand the risks of the business and also understand why and how these risks can be managed and mitigated
Opportunity for a successful turnaround
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The Purchase & Sale Process
Maximizing Value
Professionalism A well-thought out business strategy Reputation Top-notch customer service Consistency and reliability Effective and efficient systems and
excellent record keeping Near term, medium term and long term
planning An aggressive but realizable three year
plan A story line to the business
A business that is transferable and not wholly dependent on the founder or one manager
Innovative product offerings Diversified, loyal customer base Brand equity Absence of short cuts Avoidance of buying sales
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The Purchase & Sale Process
Evaluate strategic alternatives Manage due diligence process Concise, complete descriptive memorandum Formulate business plan Structure strategy Exhaustively identify and qualify optimal
buyers / investors Actively market the company Assemble the deal team Manage various constituencies Negotiate terms Participate in all aspects through closing Lead the process to minimize management
involvement and disruption to operations
Maximize transaction value
Experience and market knowledge Industry expertise in M&A, Corporate
Finance and Restructuring Senior-level attention throughout the process Someone who puts your interest above their
own A track record of successful transactions
What do investment bankers do? Critical Attributes
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The Purchase & Sale Process
Qualifications of Barrington Associates
Leader in middle-market transactions Over 20 years of middle-market deal experience Extensive experience and proven track record in sell-side middle-market M&A Access to and credibility with potential strategic and financial buyers Superior execution capabilities Consistent delivery of exceptional selling prices Committed, fully-staffed deal team Prove track record – completed over 400 sell-side transactions with an aggregate deal
volume in excess of $10 billion Reputation for integrity and hard work California presence Global reach
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The Purchase & Sale Process
Barrington Associates, headquartered in Los Angeles, CA, is one of the largest and most active independent investment banks in the United States focused exclusively on providing high-quality merger and acquisition, restructuring and corporate finance advisory services to middle market companies. Our culture and focus are personal service, integrity, superior results and unbiased analytical advice. Since the firm’s founding in 1982, Barrington Associates has emerged as a leader in middle market transactions, having successfully completed over 400 transactions with an aggregate market value in excess of ten billion dollars. You can find more information on Barrington Associates at www.baib.com.
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The Purchase & Sale Process
Alexander B. Kasdan, Vice President Mr. Kasdan is a Vice President in Barrington Associates’ Institutional Restructuring Group, where he manages corporate restructurings and mergers and acquisitions transactions involving companies facing financially challenging situations. He has over nine years experience in investment banking and corporate law, assisting corporate clients in domestic and cross-border transactions, including troubled company restructurings, mergers, acquisitions, divestitures and debt and equity financings in a variety of industries. Selected recent transactions in which Mr. Kasdan has participated include the sale of Furr’s Supermarkets, Inc., the representation of Schlumberger Ltd. in its acquisition of CellNet Data Systems, Inc., the representation of Paxar Corporation in the sale of its International Imaging Materials, Inc. subsidiary to Centre Management Partners, and the sale of Imperial SSC Nurseries to Olympus Partners.
Prior to joining Barrington Associates, Mr. Kasdan was employed by Peter J. Solomon Company, a leading independent investment bank in New York, Credit Suisse First Boston and Merrill Lynch. In addition, Mr. Kasdan was Corporate Counsel in charge of business development at Schlumberger Ltd. and a corporate attorney with O’Sullivan Graev & Karabell.
Mr. Kasdan graduated magna cum laude from Middlebury College with a B.A. degree in Economics and Italian. In addition, he holds a J.D. degree from Columbia University Law School and has studied at the University of Florence in Italy. Mr. Kasdan is admitted to the Bar in the State of New York.
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The Purchase & Sale Process
Ironwood Advisory, LLC is focused on turnaround and interim management at ailing companies and advisory services to companies in transition. Ironwood is brought in by investors (venture or otherwise), by creditors, by law firms and by CPA firms. The firm’s objective in turnaround engagements is to return the transitioning, troubled or distressed company to stability and growth or to sell it. In certain circumstances, Ironwood may provide for a "soft landing" by dismantling the company if the parts are worth more than the whole. The objective in all situations is to create or retain for stakeholders the maximum value possible. Ironwood will rapidly analyze circumstances, stabilize the company (if needed), and work with management or control parties to identify and implement necessary changes. Although the firm has strong capabilities to execute in urgent to emergent situations, it can also assist in restructuring or transition management on an 'early warning' or pre-emptive basis. Ironwood has access to sources for distressed company financing in commercially viable situations as well as capabilities to assist owners in the buying and selling of companies. The partners, senior consultants and advisors of Ironwood have over 150 years combined experience in general and turnaround management. The firm is based in southern California; it has representatives as well in San Francisco, Chicago and New York. Additionally, Ironwood Advisory (www.ironwoodadvisory.com) is strategically affiliated with Recognition Group (www.recognitiongroup.com), a turnaround firm based in New York City.
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The Purchase & Sale Process
Edward C. Story, Managing PartnerMr. Story is an experienced executive and entrepreneur in fields as diverse as health care and electronic stock markets. His background includes work and leading roles in strategy, operations, technology management, marketing and sales for the start-ups and turnarounds of businesses. He is a founder and Managing Partner of Ironwood Advisory, LLC, a firm devoted to team-based turnaround of companies in transition including re-financing and sale, if needed. The firm is based in southern California; it has representatives as well in San Francisco, Chicago and New York. Additionally, Ironwood Advisory (www.ironwoodadvisory.com) is strategically affiliated with Recognition Group (www.recognitiongroup.com), a turnaround firm based in New York City.
In the financial services industry Mr. Story has held executive positions at investment management firms, including Wilshire Associates, where he had divisional marketing and sales responsibilities. He is one of three founding partners of Plexus Group which worked with Instinet to successfully launch The Crossing Network, the (then) totally new process of automated, computerized after-hours trading for money management institutions. Reuters bought out Plexus’s rights to The Crossing Network in 1990. Subsequently, Mr. Story helped launch Plexus’s trade cost evaluation product: the Alpha Capture System ™. This system made practical the theoretical concept of “implementation shortfall” in analysis of stock trading costs.
Mr. Story was Chairman of the Board of Investors’ Fiduciary Services (proxy advisory services), which was acquired by CDA/Thomson. He helped the Chicago Stock Exchange bring to market The Chicago Match, an advanced electronic trading system for equities. Subsequently, Mr. Story served as President and CEO of High Performance Markets, which was wholly owned by OptiMark Technologies and formed to investigate non-securities markets for application of patented systems.
In the years before entering the investment management industry, Mr. Story was Executive Director and head of operations for a 120,000 member HMO. He later started and operated a business consulting and turnaround firm in the health care management field. Throughout, Mr. Story has concentrated on turnaround or strategic improvement of client businesses.
Mr. Story has served on the Boards of various charitable and business organizations. He has traveled widely and has spoken on subjects of interest in various industries. He holds a Masters in Business Administration from Harvard Business School and a Bachelor’s in International Relations from Pomona College. Mr. Story was an officer in the United States Army (Infantry) and served in Vietnam where he received the Bronze Star. He is a licensed and active pilot.
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BARRINGTON ASSOCIATES
Alexander B. Kasdan
Vice President
11755 Wilshire Boulevard
Twenty-Second Floor
Los Angeles, CA 90025
(310) 479-3500
Fax: (310) 477-4955
IRONWOOD ADVISORY, LLC
Edward C. Story
Managing Partner
4750 Lincoln Boulevard
Suite 452
Marina del Rey, CA 90292
(310) 827-1600
Fax: (310) 388-6035
Contact Information
THE PURCHASE & SALE PROCESS
July 17, 2002
The Anderson School at UCLA Los Angeles, CA
BUYING AND SELLING A COMPANY IN A TOUGH ECONOMY
HOW TO MAXIMIZE PRICE AND LIQUIDITY IN A BUYERS MARKET