Transaction Lessons and Reflections

Each transaction is as unique as a fingerprint, but there are similar traits among all successful transactions. To attempt to answer these questions with a concrete example, we reviewed a recent transaction with both the seller and buyer and compiled the lessons learned.

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5 Tips For Selling Your Business

Selling an aftermarket business can be a complicated and time consuming process. There are some things you can do to make it easier and faster. There is no magic formula that ensures you’ll be able to quickly sell your aftermarket company. However, here are a few insider tips that can expedite the process and help you get the best deal possible:

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7 Signs Your Ready To Sell Your Business

It’s not easy to decide to sell your parts/service business. If you are like most owners of a distributorship or repair garage, you have probably been putting your heart and soul into building your business. In some cases you are even carrying on a long-standing tradition of running the family business.

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The Tax Opportunity Window: It’s Open…But For How Long?

This edition of The Advantage addresses ways to reap the benefits of changes that will be occurring in tax laws over the next two years. It is possible to reduce your tax liabilities by simply transferring the executive operations of your business to the next generation. In the course of researching this topic, we came across an article by Gary Pittsford, the President and CEO of Castle Wealth Advisors, LLC, in which he explains several strategies that are important to consider if you are fortunate enough to have relatives to leave your business to and are interested in capital preservation for your family.

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Five Reasons to Consider Selling Your Business

An Intelligent Strategy allows you to not only determine the right path for your business, but gives you the objectivity to determine if you are in a position to pursue it. With your Strategy in hand, you just might find that selling is the answer to your long- and/or short-term challenges!

Reason 1: Changing Market or Financial Climate
One day you are meeting or exceeding quotas, the next you notice that product sales are dropping off. What’s going on?
One of the problems may be reduced consumer spending. Soft sales across your segment are bad news whether you want to hold on to your company or sell it.
Businesses that retain or grow their market share demonstrate that they are meeting consumer demand. If you experience persistent erosion of market share, something serious needs to be addressed before you’re crowded out by competitors that have captured the attention and loyalty of your customer base. Would a change in marketing, distribution, product mix, or new merchandising design help you regain business?Or is it time to sell to a company with deeper pockets and wider mass appeal?

Reason 2: A Souring Partnership
A souring partnership can be a death sentence for a company, because businesses are based on trust and relationships. A partner who is not carrying his or her weight – such as a lack of financial support, failure to devote adequate time to the business, or creating ethical or legal problems – erodes confidence. The relationship may be easier to end than to mend/ the decision to sell and move on could be the healthier choice.

Reason 3: Cash Flow Issues
Negative cash flow is a real spoiler. There are many factors that cause the problem, from slow sales to increased overhead, insufficient margins, or unanticipated capital investments or expenses. Some businesses have lines of credit in place that allow them to use cash flow to cover business growth when profits are high, with financing kicking in to provide a cushion during a downturn. But if interest rates no longer make that economically feasible, or your bank doesn’t see you as a good credit risk, lack of cash reserves could create problems that make selling a smart decision.

Reason 4: No Successor Available
If the primary owner/operator of a family-run business begins to look to retire or have health issues, succession planning may depend on whether someone is available to take over the reins. If not, it might be best to sell the business and share the proceeds through a family trust or an inheritance.

Reason 5: Divorce
When a couple owns a business and divorce is looming, the effect on morale and operations can be devastating. This is a good time to re-evaluate your focus on running your business, with an eye on selling it. Is this something you want to do for the rest of your life? If so, it may make sense to move to a new location and reopen under a new name. Or this might be the ideal time to clean the slate for a new career.

What to Do if You Decide to Sell
If you come to the conclusion that selling makes sense, you need to do everything you can to ensure your company maximizes its value and avoid losses before the sale closes. The “short list” of considerations includes:

  • Maximize the value of the deal. To do this, you need to determine the metrics that a buyer cares about (i.e. EBITDA, loan-to-debt ratio, inventory turns, etc.), and have a strategy to bring them in line with expectations, improving the multiples and value
  • Preparing your business to sell, assuring that all legal paperwork and financial documentation is in order.
  • Keeping your business running as profitably as possible.
  • Establishing boundaries on matters such as employment agreements, payment terms, non-competes and compensating key people.
  • The pros and cons of keeping the transaction secret from staff, competitors and/or customers.
  • Deciding whether to hire a specialist, to help assure you don’t get blind-sided by the tactics a buyer may use to leverage a lower price.
  • Minimizing tax consequences.
  • Liquidating remaining inventory or assets after the sale is complete.

Addressing these issues early on is what creates real value at the end of the process. Without putting an Intelligent Strategy in place at the outset, you may find yourself planning inadequately, and failing to achieve a satisfactory conclusion. It is often the smartest thing you can do to bring in an independent expert before you even make your mind up whether – or not – to sell.

Why to Use an M&A Intermediary: Part 2

Consider the following:

  • Confidentiality — Whether you’re looking to buy or sell, once you put the process into motion it signals to the world that your business is in play. Your employees, customers, competitors and suppliers may take damaging steps to protect themselves from a perceived threat. An M&A consultant will protect the identity of both you and your company by making contact on your behalf, describing your company only in general terms. Prospects are required to sign a nondisclosure agreement before your company’s name is even disclosed.
  • Expertise — Unless you’ve been through the M&A process many times, you can’t have the wisdom that comes with experience. A seasoned M&A intermediary will level the playing field for you.
  • Business Continuity — Buying or selling a business is a very time-consuming process for owners who are already wearing many hats. Taking on the many additional tasks required can get in the way of necessary business functions, risking damage to your reputation and/or profitability. By hiring an intermediary, you can keep your focus on running your business while the professionals take care of the details.
  • Maximizing Prospective Partners — Being in this business on a daily basis allows M&A intermediaries to develop and maintain strong networks. This gives us the tools and resources to discretely reach the largest possible base of buyers or sellers, including both domestic and international sources.
  • Winnowing Candidates — Once appropriate candidates are identified, professional M&A intermediaries screen them to ensure that they are viable and serious. An intermediary who is experienced in your channel can reach buyers and sellers through a variety of avenues that are not available to you. We not only screen and qualify parties but also negotiate with them on your behalf.
  • Marketing — A professional M&A intermediary has the experience to present your offering in its best light to maximize your objective. We know from experience the key values sought by targeted prospects, how to position your attributes and assets and minimize your liabilities and shortcomings.
  • Valuation — Putting a value on a sell or buy opportunity can be difficult and complex…and absolutely critical to a successful transaction. Your intermediary has access to business transaction databases that can be used as guidelines or reference points, and will help you determine all the factors that should be considered. We invest the time to learn your business proposition and develop pro-formas or recast financials as the case may be.
  • Maintaining the Buyer/Seller Relationship — Given the high stakes, the sale of a business can become personal and contentious. Since buyers often want a holdback contingent on the performance of the company post-closing, it may also be critical for parties to work together after a deal is reached. An intermediary acts as a buffer, improving the likelihood of success, and minimizing confrontations that can occur when buyers and sellers represent themselves.
  • Financing — In today’s climate, you need an M&A intermediary who has relationships with banks and private lenders that understand the automotive and commercial vehicle aftermarket arena. In addition, an experienced M&A team is familiar with the ins and outs of SBA and other Federal and State programs that are available.
  • Closing the Deal as Quickly as Possible — Since the sole function of the M&A intermediary is to complete the transaction, engaging one significantly improves the likelihood that your deal will be closed quickly. The faster the sale is completed, the lower the risk of employee problems, customer defection and predatory competition.

We hope these points give you an idea how much benefit an M&A Intermediary can bring to buying or selling a business. Feel free to call and speak with one of our founders to find out more about how we can support you with a successful M&A transaction.

Why to Use a M&A Intermediary: Part 1

The purchase or sale of a business is possibly the most important business transaction you will ever undertake. Whether you’re buying or selling, an M&A intermediary can bring many skills to the table that will add enormously to the value of the transaction. Consider the “short list” of benefits a skilled professional brings to the mix:

  • Increasing the Pool — M&A experts cast a wide net, bringing more qualified prospects into consideration than you could on your own.
  • Separating the Wheat From the Chaff — Professional intermediaries can help you winnow out the lookers from the players.
  • Creating New Combinations — We can help bring together players who will add a new dimension to the deal.
  • Freeing Your Creative Energies — If you’re distracted by the M&A dance, your business can suffer. Hiring an intermediary allows you to concentrate on what you do best-running your company.
  • Keeping Rational — Relying on a third party prevents emotional, unproductive conversations that can derail the process when you negotiate on your own. A good M&A intermediary will help you keep an open mind to make clear-headed decisions.

Why Doing-it-Yourself Just Doesn’t Do it
Ask business owners who have brokered their own M&A deals whether they felt they got a good deal, and you’ll often get responses that range from: “I guess so,” to “It was a complete disaster!”

Often, these very capable business people, who would never buy or sell a home without the services of a real estate professional, fail to put the same thought into their business transaction. Like a realtor®, an M&A intermediary can usually broker a better deal than you could, more than offsetting any fees you pay.

While we’re on the subject of fees, the next question we usually hear is, “OK, I see your point, but what exactly do I get for my money?” In Part Two, we’ll present an overview of what you can expect once you enter into an agreement with an M&A intermediary. From finding prospects, to creating marketing materials, to maintaining relationships throughout the process, an experienced M&A intermediary will offer you a wide range of services with one object in mind: closing the deal to your benefit. (Can’t wait to find out? Call us today for the rest of the story!)

What Should You Look for in a Mergers & Acquisition Intermediary?
Full disclosure again: we feel that Marx Group Advisors is uniquely qualified to complete M&A transactions in the commercial vehicle and automotive aftermarket. We have the breadth and depth of experience in both the M&A and aftermarket arenas. Founder Tom Marx has over 25 years serving the automotive and heavy-duty aftermarket as a marketing, sales and management consultant. Co-founder Paul Cooperstein brings over 25 years of experience in venture capital and M&A transactions.

As experienced pros, we are well connected in the aftermarket and speak its language, which enhances our ability to access and talk to potential participants. We are also adept at identifying and calling on candidates who may have not have yet expressed an interest in participating in a purchase or sale.

Our clients will attest that MGA delivers an experienced, intelligent delivery of services in the most confidential manner. Feel free to call and speak with one of our founders to find out how we can support you with a successful M&A transaction.

Buying or Selling a Business: The Metrics of Intelligent Preparation

Whether you’re preparing to purchase or sell a business, one of the most important ways to analyze your investment is to reach an indepth understanding of the value metrics of the transaction. Sellers need to run these metrics to verify their proposed sales price and buyers need to run these numbers to authenticate the value of the deal and –  if they are looking at more than one candidate – to compare the values of all the deals they are considering.

The Cap Rate

Determining the Cap Rate is the first step to take in your analysis. This is the process of converting a one-year stabilized net operating income (NOI) of an asset into that asset’s actual market value. Capitalization rate (or “cap rate”) is the ratio between the net operating income produced by an asset and its capital cost (the original price paid to buy the asset) or alternatively its current market value. The rate is calculated in a simple fashion as follows:

Capitalization Rate = Annual Net Operating Income ÷ Cost (or Value)

To do this, we must first determine the Net Operating Income (NOI) of the business. There are many ways to do this, but the most effective way is to subtract from Gross Income all of the relevant expenses, making adjustments for the “extra” perks a seller has taken in order to reduce the profits of a business on paper, as is done when a recasted financial statement is prepared. This subtracted total is the asset’s NOI.

Dividing the projected price of the business by the NOI yields the CAP rate. If the CAP rate is greater than the cost of the cash used to acquire the asset, then a buyer will be able to achieve positive leverage on the investment/acquisition.

Of course, it is important to make intelligent projections about future performance and to forecast the NOI on the buyer’s investment. Intelligent preparation employs this method of analysis to compare multiple acquisitions and determine which may have the best future value by increasing price, reducing expenses, etc.

Cash-On-Cash Rates

Cash-on-cash-rates are a simple way of looking at an investment. During the first year, NOI is calculated and then divided by the initial cash invested. A very simple example is an asset where you put 10 percent down; dividing the NOI from the asset by the 10% is a quick method of looking at the performance of the investment.
In investing, the cash-on-cash return is the ratio of annual net operating income compared to the total amount of cash invested, expressed as a percentage.

Cash-On-Cash Return = Annual Net Operating Income ÷ Total Cash Invested

It is often used to evaluate the cash flow from income-producing assets and is generally considered a quick napkin test to determine if the asset qualifies for further review and analysis. Cash-on-Cash analyses are used by investors looking for assets where cash flow is king, however, some use it to determine if an asset is underpriced, indicating instant equity in an asset.
Suppose an investor purchases a $1,200,000 business with a $300,000 down payment. Each month, the net cash flow (gross income  less expenses) is $5,000. Over the course of a year, the before-tax income would be $5,000 × 12 = $60,000, so the cash-on-cash return would be
$60,000 ÷ $300,000 = 0.20 = 20%

Internal Rate of Return

Another interesting metric is to determine the Internal Rate of Return (IRR), a projection of the expected rate of growth for an investment used in capital budgeting to measure and compare the profitability of investments. All other things being equal, the investment with the highest IRR would be the one to choose.

This IRR is the percentage earned on each dollar invested for each year it is invested (how can we avoid using “invested” twice?) plus the estimated sales profits. Because the calculation is complex you reach the IRR by calculating the cash invested in the initial year, then the NOI of each future year plus the anticipated/actual sales proceeds after the sale. By completing a five year cash flow model, adjusting it for changes in income and expenses and then determining a future sales price based on anticipated CAP rates, a buyer or seller can use the IRR calculation to predict how the investment may perform.

A smart buyer or seller looks at all the calculations

The measure of success for a merger or acquisition is often the result of the amount and quality of planning that is executed beforehand. Sophisticated buyers will run the numbers through formulas like those described above. Marx Group Advisors always performs these analyses for its buyer and seller and merger clients. In this way, we and our clients are able to look at an established and tested standard of what the market place will bear.

It is not enough to just complete the deal according to financial goals that are set without reference to standard rates of return.  A well-designed merger and acquisition strategy will identify why the deal is a profitable undertaking and help position it to be positive for all involved. Asking for help early in this complex process may be the smartest move your company can make.

Develop Your Acquisition Strategy

Develop Your Acquisition Strategy

Probably the most important step to develop your acquisition strategy is to create an Intelligent Strategy so that you are prepared for success. This means you’ve done your homework and background preparations, so when an opportunity arises, you’re ready to quickly and confidently respond. The steps include:


Business and financial statements are in order

Don’t make your move before getting financial statements in order and procuring tentative agreements with your bank and or equity partner. Keep tax returns and financial statements current and understand the impact the acquisition will have on cash flow.

If you’re even considering an acquisition, proceed as if purchasing real property: get pre-approved credit. The acquirer will know you’re serious, you’ll save time, and you can often negotiate a better deal, especially when offering “all cash,” or having financing already in hand.

Future think – understand today’s and tomorrow’s trends

If you’re not a market/product visionary, acquisitions can become a financial debacle. For example, imagine the success you would have experienced by predicting the explosive growth of performance products for light trucks starting 10-12 years Conversely, if you had not foreseen this market’s decline in the past 18 months, an acquisition in that sector could be putting your core business in jeopardy.


If merging or acquiring, be very clear on the risks and rewards

While there are many types of acquisitions, your initial decision is whether to seek a merger or acquisition. The strategies are profoundly different.

In a typical merger, you’re often creating a partnership and maintaining your brand. This does not necessarily mean a “merger of equals.” You may become a minority owner in the new enterprise. The current owner’s role may entitle them to decision-making power and some level of authority in the new entity.

In a typical acquisition, one company is acquiring the assets of the other company and the future of its owner is yours to negotiate. Often the owner stays for a period of time as a consultant. In some cases, the owner may stay to manage a division or the company.

In either case, take a hard look at your nature and personality. Decide how willing you are to share or give up control. Then base your strategy accordingly.


Successes and Failures

We’ve observed successes and failures in mergers and acquisitions. The failures have always involved a poor strategy, or poorly executed integration after the acquisition has closed. As with most endeavors in life, success or failure hinges on being prepared and informed, and on your ability and willingness to be flexible and accept change.

By exercising Intelligent Strategy and using an experienced M&A consultant to guide you through the process, you will avoid many of the pitfalls that can occur during a merger or acquisition and maximize your effectiveness, profitability and success.

Is Buying Your Competitor a Good Idea or Bad?

We wrote this article for auto and heavy duty distributors, jobbers and retailers – however the basic principles are in intact:

1. Expand Your Geographic Market One of the biggest recent consolidations was the purchase of CSK by O’Reilly Auto Parts. O’Reilly added stores in Western markets and grew into a nationwide chain in months that otherwise would have required years of organic and new store growth. And they were able to leverage the asset to pay for this rapid acquisition.

2. Take Out a Competitor One compelling reason to buy a competitor is to eliminate price pressures, especially if the competitor is the low-price leader. With the competitor gone, customers have one fewer location to shop, and your opportunity to market branded and private label products increases. Eliminating a competitor may also reduce the market’s advertising clutter.

3. Increase Market Share and Reduce Costs for More Profits Most businesses organically grow revenues by perhaps 3-5% annually and market share 1-2% annually. Contrast that with a 30% annual revenue growth and 10% annual increase in market share that could be realized by buying a competitor. You also gain leverage for better prices and terms with suppliers due to your larger purchasing power. Increased margins then improve cash flow, allowing you to complete additional acquisitions.

4. Secure Valuable Supplier Contracts A competitor may have valuable, exclusive supplier relationships, including direct imports and direct from US-based suppliers. These contracts, spread across the larger footprint achieved through acquisitions, may generate substantial revenue at higher margins.

5. Gain Coveted Locations Securing ideal locations – a high-traffic corner location or one that is in the middle of an industrial or auto/truck repair district – may not happen unless you buy it and convert it to your brand. Run the financials to ensure this is smart use of your human and financial capital.

We recommend you develop an “Intelligent Strategy” about how to best grow your business. Consider all the pros and cons of acquiring a competitor. Acquisition cost and value is more than just dollars invested. It’s also long term strategic positioning as well as your own exit strategy.

Valuation is More Than Just a Formula

The LOI is optimally made after preliminary information has been gathered and intensive analysis and projections have been completed. Determining the offer price is the most difficult aspect of preparing an LOI.

So how do you determine the initial offer price (IOP)?

As a starting point it is essential to recast financial statements to determine what the finances of the business look like without extraordinary expense and income events. Once that is done you can determine a true EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) figure. A comprehensive valuation will then determine valuation from the perspective of several different financial valuation formulas and then average those results (or if appropriate weight them) to determine a value of the business.

From our perspective, once this valuation process is complete the real work begins. The offering price, whether from the buyer or seller, is seldom what the formulas provide. Rather the offering price should always BEGIN with this number and then be adjusted by a variety of considerations. To think that you can determine the true value of a business with a formula puts you in a position to end up with a poor valuation assumption.

We are reminded of the cliché: “An ounce of planning is worth a pound of gold.” To make an intelligent determination of an IOP, it is essential to invest the time and resources on the front end to identify and evaluate the intangible elements that can affect the true value of the business.

This is best accomplished by hiring experts to assist you. For example, we have represented sellers who have through our efforts discovered alternative strategies, such as deciding to reject offers to sell their business in favor of a strategy that involves selling an interest to a key stakeholder. By building in future incentives for that stakeholder, the seller is able to leverage this newly hired executive’s expertise until the market rebounds and multiples increase. It is an essential advantage to build a team to serve you that understands the variety of possibilities that can influence the value of the business.

Distinguishing Value

The most essential step to assure success in the valuation process is paying attention to what we call the “discovery process.” The assumptions that you rely on, the scenarios that you think through and the strategies that you choose to implement in the discovery process are the foundation of your success. The result of faulty thinking may be a failed transaction, and often at an incredible cost of time, energy, money and lost opportunity. There are two intelligent processes that can lead you to success:

Engaging in intelligent strategic conversations among a variety of your constituencies, including your financial and legal advisors, board of directors, industry leaders, top management staff and even your family, is important to the overall process of discovering optimal short and long term concerns that can be taken into account to determine the value of a business.

Well designed scenario planning and mind mapping for the consideration of multiple and alternative “what if” strategies to determine the potential profitability of varying strategies.

The IOP may well be different from the value that you place on the company. The value of a particular company depends on that company’s ability to realize future results, which of course are greatly impacted by the strategic opportunities that its managers identify and then choose to engage in.

The value may include the following and is usually based on a strategic plan for the business after the transaction is complete:

  • Development of a new product line or supplier relationships
  • Development of new marketing initiatives
  • Development of new distribution channels
  • Decreased operating costs
  • Removing a competitor that is a low price leader
  • Rollup with related companies

The value is also influenced by intangible assets such as:

  • Quality and loyalty of clientele
  • Competency of key management
  • Operating systems
  • Technology systems
  • Physical locations and their value
  • Proprietary rights such as patents and trademarks, licenses, technology and or training
  • Industry trends
  • Stand-alone value of the target company
  • Acquisition premiums
  • Synergies resulting from the combined companies
  • Competitive environments
  • Seller’s objectives and the buyer’s objectives
  • History and nature of the business
  • Economic outlook
  • Market value of comparable companies
  • Debt and capability to repay debt

A thorough valuation recognizes that financial modeling is not an exact science. The professional appraisal is a base line to the commencement of the discovery process that unleashes all other relevant factors to determine an appropriate offering price and the value of the business at hand. It is in the discovery process that you can unleash all the other relevant factors to determine the value of the business at hand and then craft an appropriate IOP on your way to a successful transaction.

Lifecycles of Mergers and Acquisitions – Are You Prepared?

There are five phases of a merger or acquisition that, if fully respected and developed, can make the difference between a successful transaction that works for all parties involved and lay the groundwork for seamless transition, or if ignored or under-executed can spell disaster.

1. Pre-Deal Preparation and Evaluation of Transactional Assumptions
2. Due Diligence
3. Pre-Close Planning
4. Post-Close Planning
5. Post-Close Execution

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Mapping the M&A Journey

This version is the synopsis of the article that is available FREE to our readers. Email Tom Marx at for access to a PDF of the entire article. We trust this helps you embark on this journey with greater confidence.

1. Mergers and acquisitions

2. Divestitures and asset sales

3. Joint ventures and alliances

4. Going public or private

Mergers and Acquisitions

Mergers and acquisitions are the most common forms of these transactions.Typically a merger is a combination of two companies in a stock exchange transaction, i.e. Company A sells all of its corporate stock to Company B in exchange for cash, stock or some combination of both.

An acquisition is the purchase of the stock or assets of the business. A merger and acquisition are not mutually exclusive. However a merger is typically thought of in the context of two companies that are of relatively equal size and an acquisition is thought of when a smaller target is purchased by a larger acquirer.

Quite a bit of research has taken place regarding the reasons why mergers and acquisitions succeed or fail. Profitability is obviously a factor in every analysis.

Some studies have argued that more profitable firms are more subject to takeover than less profitable companies while others have argued that profitability has less to do with the likelihood of becoming an acquisition target. Corporations that are relatively inefficient will be targets of acquisition for more experienced and intelligent acquirers, as well as acquirers that are looking to purchase companies at a highly discounted rate.

There are a number of factors why certain companies are acquired and others are not:

  • Some companies acquire companies that are more profitable than they are, some equally as profitable and some less profitable.
  • Some acquiring companies look for target companies that are inefficient and therefore offer the opportunity for significant improvements in efficiency and profitability.
  • Shifts in the capital markets are a significant factor to consider in this process, i.e., in periods of high interest rates or when capital accumulation is difficult.
  • Changes in tax laws like the Tax Reform Act of 1986 can facilitate or inhibit restructuring activity.

It should be noted that in today’s marketplace, cross-border mergers and acquisitions are occurring with more frequency because they often provide an opportunity to capitalize on internal advantages in foreign markets including financial, organizational and technological strengths.

Divestitures and Asset Sales

Typically divestitures and asset sales are seen as an approach to corporate restructuring that eliminates underperforming assets while capitalizing on the value of a stronger performing asset or simply exiting from a business to repay debt and, in either case, create value.

The divestiture process generally includes three approaches to selling the company: the negotiated sale, the controlled competitive sale and the auction. Each of these approaches has different competitive landscapes. Valuations of companies or assets in a divestiture need to undergo the same analysis as a valuation of the company in a merger or acquisition.

The most common transaction is the asset sale of a business. This has benefits over other forms of divestitures, most significantly the ability to negotiate with multiple parties in order to obtain maximum value.

As in all steps of the M&A process, tailoring the process to the unique needs of the client and an intelligent understanding of the marketplace insures a more intelligent chance of success.

Joint Ventures and Alliances

A joint venture is a relationship between two or more parties where an independent entity is created by the parties for a specific activity or undertaking. The independent entity is usually jointly owned by the parties and the parties each take an active role in contributing either intellectual property, capital, assets, marketing and sales or any combination of the above.

An alliance may not involve the creation of a new independent entity and may not involve any equity contributions by either party.

In a time when success in business requires forming relationships between competitors in ways that were unheard of years ago, alliances and joint ventures have become quite commonplace and it’s clear that profitability is often created in the formation and operation of joint ventures and alliances which can, in fact, surpass those found in mergers and acquisitions.

Going Public or Private Transactions

Occasionally we are asked about a going private or going public transaction. A going private transaction is the acquisition of the equity of a publicly traded corporation by an independent privately held entity.

In the context of the aftermarket it is usually in the form of a leveraged buyout in which a group of managers (usually with equity partners) acquires an existing business that is publicly owned or a division of the same.

We are also occasionally asked to consider the benefits of going public. Either the potential size of the existing company or a rollup of a number of companies with potential to show market rate returns provides an opportunity to consider the benefits of public ownership.


The underlying assumption in any of the categories or merger and acquisition is that there will be benefits that occur as a result of the transaction. Consolidations continue to recontextualize many industries and have significant impact on the entire supplier and customer chain in a vertical industry.

We believe that profitability has far less impact on the ultimate value of the transaction. Instead, strategic advantage becomes more key, whether it allows the elimination of a competitor, gains a valued customer or adds an important product line.