What You Need to Know When Thinking about a Buy Side M&A Transaction

“You miss 100 percent of the shots you don’t take” is a great quote from perhaps the greatest hockey player ever to lace up a pair of skates, Wayne Gretzky. It’s such a wonderful quote because it transcends sports and can be applied to most facets of life, especially business.

Gretzky’s statement is particularly appropriate when considering the best approach to grow a business through acquisition; you can’t successfully close acquisitions with opportunities you don’t try to win. Ensuring you have a shot at each potential opportunity allows a business to realize and aggressively execute on its most potentially lucrative and accretive targets.

[To read more of Joseph Husband’s thought leadership click here]

The question then is: How do you maximize acquisition opportunities and value for your shareholders? We’ve spoken with several business owners over the years who felt they could wait patiently for the right opportunities to be presented to them, akin to being fed an easy tap-in at the goal line. We’ve found that the best approach to drive successful acquisition strategies involves a proactive effort to uncover and approach these potential targets. To do this successfully, we recommend engaging an advisor who can provide a strategic vision, exhaustive research, and disciplined pursuit.

A WELL-DEFINED GAME PLAN IS PARAMOUNT

One of the keys to successfully growing your business through acquisitions is defining the vision and criteria before building a comprehensive funnel of potential targets to approach. Thinking backward strategically from where you are today to your eventual exit, and defining the criteria and characteristics of businesses that achieve your vision, maximizes the probability of success.

With the right advisor, plan, and strategy, you can greatly increase the likelihood of getting a deal across the finish line and scoring a huge win for your business and its shareholders.

We help our clients accomplish this by leveraging our industry-expert bankers to provide insight on the buy side so that our clients benefit from real-time market intelligence. By sharing the value drivers and themes potential acquirers and investors focus on, we guide our buy-side strategies to be impactful from a value-creation standpoint, spending time on only the most accretive targets. A recent client, Advice Media, capitalized on our insight and ability to originate creative financing solutions to begin aggressively acquiring companies in the very fragmented professional services digital-agency space, a category where we see rampant consolidation.

With a clearly defined vision for the future of a business, we can help articulate the characteristics of ideal target companies. There are several questions to ask before building a funnel of targets. These questions revolve around geography, size, capabilities or products, customers, channels, and outreach strategy. An example of this approach is Crestview-backed Congruex, a consolidator in the infrastructure-services industry. We recently advised HHS Construction, a leading infrastructure-services partner to major telecommunications and cable companies primarily in Southern California, on its sale to Congruex as HHS complemented Congruex’s customer base, service capabilities, and geographic focus.

THE POWER OF AN INTERMEDIARY ON YOUR TEAM

Our clients also engage us for searches to provide an intermediary between management teams to alleviate competitive tensions. Having a neutral third party lead the discussions often results in better outcomes than if the client’s management or ownership team were to reach out directly to one of their competitors.

Once we can clearly articulate the characteristics of ideal acquisition candidates and have a vision to share regarding how a target will fit with our client in the long term, we begin to “build the funnel” of acquisition candidates. This preparatory work enables us to define the most accretive targets and focus solely on the potential acquisition candidates that will drive the most value to shareholders. This is where a buy-side advisor is tasked with playing offense and unearthing every stone to source quality opportunities for clients. During our funnel-building efforts for Protective Industrial Products (PIP), an Audax Private Equity portfolio company, we reviewed every single company and brand offered by the largest domestic distributors of personal protective equipment (PPE). Our previous experience in the PPE space advising M. L. Kishigo, a provider of high-visibility safety vests, on its sale to Bunzl gave us real-time market insight into which characteristics strategic acquirers in the industry were paying a premium for. Our process with PIP led us to review nearly 1,000 different PPE companies and brands, identifying numerous potential acquisition candidates. By taking a shot at and expressing our interest in so many different businesses, we ensured that our client was not going to miss an opportunity with an asset that helped fulfill their vision for PIP’s future. To date, our work with PIP has resulted in the successful completion of two significant transactions for the company, furthering their position as a leader in the PPE space.

GETTING THE DEAL ACROSS THE FINISH LINE

Once we have a clearly defined universe of acquisition targets, we begin to assess opportunities by reaching out and determining their openness to M&A discussions as well as qualifying their viability as an acquisition target. Just as a coach guides a team from the sidelines, we seek the counsel of our clients before hitting the ice to execute the game plan relentlessly.

[For more on Intrepid’s approach to Investment Banking click here]

The homework we do in the earlier part of the strategy allows us to be more effective at articulating the value that both parties can derive from a transaction. A clearly defined vision of how both businesses will benefit from a realization of the synergies they possess can often be the deciding factor in being selected as the acquirer of choice. With the right advisor, plan, and strategy, you can greatly increase the likelihood of getting a deal across the finish line and scoring a huge win for your business and its shareholders.

Investment banking services offered by Intrepid Investment Bankers LLC, a subsidiary of MUFG Union Bank. Member FINRA/SIPC.

1 Technavio Global Online Beauty and Personal Care Sales Compound Annual Growth Rate 2016 to 2020.
Sources: Euromonitor (eCommerce penetration); Pew Research; Marketplace Pulse; Instagram; Intrepid Proprietary Beauty & Personal Care Transaction Database; Persistence Market Research (expected natural personal care growth 2016 to 2024); Technavio: Global Online Beauty and Personal Care Market 2016 to 2020 Report.

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