SEMA 2011 Marx Group Advisors "Acquiring or Selling: Preparing your Business to Achieve Maximum Value"

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Whether you are a seller looking to retire or divest an unprofitable or poorly integrated business, or a buyer that realizes the value of growth through acquisition versus through organic growth, the goal is the same - to position your company for maximum perceived value. This seminar covers the entire gamut of your business from financials, communications, storefront, IT, and IP. In fact, every facet of your business can have some bearing on its perceived worth.

Text of SEMA 2011 Marx Group Advisors "Acquiring or Selling: Preparing your Business to Achieve Maximum...

  • 1. The Art ofPRESENTERS:Buying &TOM MARXCEO AND CO-FOUNDERSelling anPAUL COOPERSTEINAftermarket PRESIDENT & CO-FOUNDERBusiness

2. Marx Group AdvisorsMergers & Acquisitions Advisors with over 25 years of experience in the Automotive, Performance, Specialty, Heavy Duty, and Commercial Aftermarket Consulting Brokerage: Equity and debtservicesBuy-Sell-Mergefinancing 2011 Marx Group Advisors 2 3. Marx Group Advisors TOM MARX PAUL COOPERSTEIN Business growth & Venture capitalist & marketing focusinvestment banker Business lawyer & 25+ years industry mediation specialist experience DAVE BARBEAUCHRISTINE LEMAy Parts distributor & Business development aftermarket executive manager Industry management International specialistconsultant 9 Associates in key regions: Houston, Detroit, New York, Boston, Chicago, Northern California, Southern California, Florida, Phoenix3 2011 Marx Group Advisors 4. MORE THAN JUST MEMBERS4 2011 Marx Group Advisors 5. 1. Current state of the M&ATODAY WElandscapeWILL 2. Factors for consideringselling or buyingCOVER: 3. Deal structures 4. Typical steps in the buy/sellprocess 5. Valuation methods 6. Perceptions of value buyer& seller 7. Why hire an intermediary?5 2011 Marx Group Advisors 6. Understand Your Short,Mid and Long Term Goals6 2011 Marx Group Advisors 7. 70% of all small and midsizedbusinesses dont sell after they are put on the market7 2011 Marx Group Advisors 8. M&A activity increasedCurrent starting Q4 2010State of Transactions are beinghampered by low valuations,the tight fisted banks andcautious buyersM&A As competition forLandscape acquisitions increases, priceswill rise We live in times of greatuncertainty8 2011 Marx Group Advisors 9. Sellers9 2011 Marx Group Advisors 10. When Do You are tired of the hassles You want to do something You Know else in life Nostalgia It aint like it It Is Time used to be to Sell? You arent sleeping at night You dont want to talk withyour spouse or even yourdog!10 2011 Marx Group Advisors 11. What Do Keep making profit Maintain adequate You Need inventory, fill rates andmargins To Do Retain key people During the Keep customers happy Sales Process11 2011 Marx Group Advisors 12. What Up to date balance sheet Accurate inventory Financial Recasted P&L Documents Accurate EBITDA Do You Need to Prepare12 2011 Marx Group Advisors 13. Buyers13 2011 Marx Group Advisors 14. Why Buy?Take out a competitor Take out low price leader Organic growth isnt enough Expand into regions ormarkets that allow you togrow your business14 2011 Marx Group Advisors 15. Preparing Have strategic plan in place Identify focused target for theprofile Have proof of financing lined Purchase up Have experiencedmanagement team available15 2011 Marx Group Advisors 16. General Frameworks16 2011 Marx Group Advisors 17. Typical Deal StructuresJoint MergersVenturesAcquisitions & Mgmt.DivestituresBuy-Out17 2011 Marx Group Advisors 18. What Are The Typical Steps In Buying/Selling Process: STEPS IN BUYING:STEPS IN SELLING: Evaluation of Transactional Pre-Deal PreparationAssumptions/MarketplaceAssessment Confidentiality Agreements Financing/Equity Partners Create Offering Memorandum Target Selection Identify Buyers Confidentiality Agreements Letter of Intent Letter of Intent Due Diligence Due Diligence Definitive Agreement Definitive Agreement Close Close and Integration Post-Close Execution18 2011 Marx Group Advisors 19. Why Hire an Intermediary or aSuccession Planning ExpertI dont do my own dental work. Having someone else find buyers or sellers and negotiate the deal reduces emotions and usually results in higher sell price Focus on what you do best: running your business19 2011 Marx Group Advisors 20. Reducing Full disclosure of all positivesand negatives the Stress Timely review and response Carefully think through allresponses so they arecomplete and accurate Have an intermediary do theheavy lifting20 2011 Marx Group Advisors 21. Cashing In Stay on in some fashion(if you choose) Does Not Employee Always Consultant Run the business for a Meandefined period of time Grow the business with Selling Outsomeone elsesinvestment Join acquirers team/helpthem build their business21 2011 Marx Group Advisors 22. Valuation22 2011 Marx Group Advisors 23. Buyer vs. seller The Value Sale to company Lies in themanagement Passing down to family Eye of The member Sale to privately or publicly Beholder held company Book value Industry standards,benchmarks, trends23 2011 Marx Group Advisors 24. Potential Factors That Increasethe ValueStrong revenue & profit growth = higher multiple Above average margins= higher multiple Strong buyer marketplace = higher multiple Valuable assets = higher value24 2011 Marx Group Advisors 25. Potential Long term debt High level of goodwill Factors that compared to assets and netincome Reduce the High percentage of aged Valuereceivables Dominance of a fewcustomers Lower operating marginthan that of buyers25 2011 Marx Group Advisors 26. Increase the Valueof Your Business26 2011 Marx Group Advisors 27. How to Increase the Value ofYour Business if You Are a Retailer Is your store front clean? Is your inventory current? Are your counter people customer centric and well- informed about products? Are uniforms, signs, trucks in good shape? Is branding consistent?27 2011 Marx Group Advisors 28. How to Increase the Value ofYour Business if You Are a Distributor Have you cleared dead inventory? Are the financials up to date and accurate? Are margins sufficient to generate profit? Do you have a niche that separates you from other distributors? Are counter people trained to develop relationship with customers? Are your IT systems updated so you can process orders online?28 2011 Marx Group Advisors 29. How to Increase the Value ofYour Business if You Are a Manufacturer Is the concentration of customers well-distributed (i.e. not top-heavy)? Did you get obsolete equipment off your books? Do your marketing programs truly state your value proposition Do you have competitive pricing? Do you continually introduce new and innovative products?29 2011 Marx Group Advisors 30. How to Increase the Value ofYour Business if You Are aRepair Shop Do your service advisors have excellent customer service skills? Are your technicians using the latest diagnostic equipment Are waiting rooms and bathrooms clean and inviting (to both men AND women)? Are repairs completed on time and on budget Are you able to green face your business?30 2011 Marx Group Advisors 31. Getting Paid31 2011 Marx Group Advisors 32. TYPICAL PAY OUT STRUCTURE Typically 50%+ paid at closing in cash, balancedebt/equity Earn-out based on multiples of earnings Earn-out based on revenues Additional payments over 2 5 years based on meetingprofit targets A kicker for revenue growth A hold-back if key customer is lost; key metric is missed;or if AR is uncollectible Seller financing32 2011 Marx Group Advisors 33. Getting Management Buyout ESOP Paid: Mezzanine/Equity Partner Other Deferred CompensationPayment Options for Owners33 2011 Marx Group Advisors 34. Deferred Company buys back stock resells to management Payment Payout over time 5 to 10 years Secured by life insurance in case something happens to principals Avoid bank borrowing hopefully, financed by company cash flow Includes sale to family members34 2011 Marx Group Advisors 35. What to LookIndustry knowledge For WhenM&A experience References Hiring aIntelligent strategy Broker or M&A Consultant35 2011 Marx Group Advisors 36. Summary Preparation = Increased ROI Buyers & Sellers need to understand each others perceptions Make sure you understand the basics Dont do this alone get the support of professionals WHO HAVE EXPERIENCE and KNOW YOUR INDUSTRY36 2011 Marx Group Advisors 37. THANK YOU If you would like a copy of this presentation or further information on buying or selling, please contact us below: TOM MARXPaul Cooperstein415.453.0844 ext. 106 617.328.7333 tmarx@marxgroupadvisors.com pcooperstein@marxgroupadvisors.com Marx Group Advisors are located nationwide: SANNEW BOSTON HOUSTONDETROIT FLORIDA PHOENIXRAFAELYORK www.marxgroupadvisors.com37 2011 Marx Group Advisors