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Whether the sale of your business is a recapitalization, a management buy-in or buy-out, or a family transfer, there are key considerations that should be discussed and understood before any company is brought to market. In this hour-long webinar on June 17th, James Darnell, a Partner with KLH Capital will discuss: - The importance of understanding the goals and objectives of all the stakeholders involved in the deal - Key value drivers relating to customers, competition, suppliers, financials, and the industry market - The various investment merits and key diligence items for businesses, specifically highlighting the manufacturing, distribution, and service industries
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Value Drivers & Business Models
Axial Webinar Series
June, 2014
Highly Confidential 2
30 Year Track Record
Tampa, FL
130+ Transactions
Management Led
Transactions Small Business
FocusPartnership Approach
Private Capital Base
Licensed SBIC
Established Firm Focused On Small Businesses
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Understanding Your Deal
Articulating Key Value Drivers
Business Model Nuances
Agenda
Understanding Your Deal
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Understanding Your Deal Is the First Step
Owners harvest value built in the company
Major liquidity event
Retain meaningful ownership stake
RecapitalizationManagement
Buy-out/in
Managers purchase the company from owners
Secure meaningful ownership stake
Family Transfer
Facilitate the exit of inactive family
Estate planning issues
Family dynamics / confidentiality
Maintain operational control of the business
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Stakeholders Goals & Objectives Determine Direction
• Who owns the company?
• Who runs the company?
• Who wants to sell and who wants to stick around?
• Why is the company for sale?
• Where is the company heading?
Goals & Objectives
Key Questions To Answer
Key Value Drivers
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Articulate Key Value Drivers
Key Value
Drivers
Customers
Industry & End Markets
SuppliersCompetition
Mgt & Financials
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Value Driver Spotlight: Customers
• How does the company make money?
• Who are its customers?
• Is there customer concentration?
• What does the sales force look like?
• How difficult is it for customers to leave?
Customers
Key Questions To Answer
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Value Driver Spotlight: Industry & End Markets
• How discretionary are the purchases to the customer?
• How big is the market?
• Is it growing or shrinking?
• How cyclical is the business?
• How regulated is the industry?
Industry & End
Markets
Key Questions To Answer
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Value Driver Spotlight: Suppliers
• Who are its suppliers?
• Is there any supplier concentration?
• How easy would it be to switch suppliers?
• Can the suppliers sell directly to the end user?
Suppliers
Key Questions To Answer
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Value Driver Spotlight: Competition
• How special are its products/services?
• Are there any reasonable alternatives?
• Why do customers buy from them?
• How easy is it for new competitors to spring up?
Competition
Key Questions To Answer
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Value Driver Spotlight: Mgt & Financials
• Who are the key people in the organization?– Responsibilities– Backgrounds– Goals & Objectives
• How organized are the numbers?
• What type of accounting software/MIS does it use?
Mgt & Financials
Key Questions To Answer
Business Model Nuances
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• Offerings that drive regular servicing/visits
• Sticky relationships with customers
• Unique offerings & competition
• Customers dependent on service
Investment Merits
• Access, recruit and retain labor
• Balance backlog against capital expenditure needs
• Build infrastructure to manage larger territories
• Develop new customer markets
Key Diligence Items
Service Based Businesses
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• Established, long-term customers
• Integration with stakeholders
• Exclusive territory rights
• Proprietary sourcing relationships
Investment Merits
• Develop new geographic markets
• Add service-based revenue streams
• Real estate and/or capacity issues
• MIS and inventory management systems
Key Diligence Items
Distribution Based Businesses
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• Proprietary products
• Resistant to overseas production/outsourcing
• Non-discretionary components
• Maintenance and repair related
Investment Merits
• Capital budgeting process
• Lean manufacturing techniques
• Create and protect intellectual property
• Open new end markets
Key Diligence Items
Manufacturing Based Businesses
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Contact Information
James B. DarnellPartner
601 Bayshore Blvd, Ste 850
Tampa, FL 33606
813.222.0160
Highly Confidential
www.klhcapital.com
