Recommandé
Recommandé
Contenu connexe
En vedette
En vedette (20)
Similaire à Driving Smarter M&A in the Aftermarket
Similaire à Driving Smarter M&A in the Aftermarket (20)
Plus de marxgroupadvisors
Plus de marxgroupadvisors (7)
Dernier
Dernier (20)
Driving Smarter M&A in the Aftermarket
- 1. 1 1 FEBRUARY 4, 2016 Driving Smarter Mergers & Acquisitions © 2016 Marx Group Advisors, LLC 1
- 2. 2 2 Driving Smarter Mergers & Acquisitions © 2016 Marx Group Advisors, LLC PRESENTERS: Devin Hart President 2 Tom Marx CEO
- 3. 3 3 © 2016 Marx Group Advisors, LLC 3 How You Can Benefit from Aftermarket Consolidation Part 1: Market Dynamics CAWA MEMBERS
- 4. 4 4 © 2016 Marx Group Advisors, LLC 4 Consolidation • Larger companies acquire smaller companies using affordable capital to grow o Economies of scale – Provides goods/services relatively more efficient and at lower cost o Consolidators will continue to acquire for two main reasons – Furthers their competitive advantage – More transactions = better processes = lessens cost of acquisition Source: Brad Mewes, Sep 2015 Consolidation will continue because it is a virtuous cycle MARKET DYNAMICS
- 5. 5 5 © 2016 Marx Group Advisors, LLC 5 MARKET DYNAMICS Four Stages of Consolidation • Stage 1: Fragmentation o Acquisitions are often “one off” in nature and tend to be opportunistic • Stage 2: Acquisitions o Frequent and rapid at this stage -- scalability becomes key! • Stage 3: Expansion o Less frequent but more focused -- core competency with the process • Stage 4: Maturity o Acquisitions trickle to a standstill Source: Brad Mewes, Sep 2015
- 6. 6 6 © 2016 Marx Group Advisors, LLC 6 Aftermarket now at high level of consolidation and this results in a changing competitive landscape • Creating opportunity and risk for your business MARKET DYNAMICSMARKET DYNAMICS
- 7. 7 7 © 2016 Marx Group Advisors, LLC 7 MARKET DYNAMICS What’s driving the strong M&A activity level? • Supply vs Demand • Strong revenues across value chain • Inexpensive Cost of Capital More recently • Smaller M&A transactions have become more attractive - Acquirers seek to strengthen infrastructure positions within key aftermarket segments • Low gas prices add to activity levels -- positive effect on discretionary spending - Increase in miles driven = more automotive maintenance
- 8. 8 8 © 2016 Marx Group Advisors, LLC 8 Supply Side • Number of service, repair, and maintenance facilities across the US has decreased by 9% over 10 yr. period • Jobber store averaging 0.4% decline year over year for past 10 yr. period o Only 1/3 of stores are in the west – Stores count declining at a faster rate in the west (0.5%) • Continued consolidation at all levels within supply chain o The pool of highly valued acquisition targets diminish with each M&A transaction completed Source: Lang Report MARKET DYNAMICS
- 9. 9 9 © 2016 Marx Group Advisors, LLC 9 MARKET DYNAMICS Demand Side • Structural shift in favor of DIFM segment • Industry financials solid and improving • Inexpensive cost of capital • Increased competition from offshore companies interested in US aftermarket presence o China example
- 10. 10 10 © 2016 Marx Group Advisors, LLC 10 Example of Offshore Company Activities MARKET DYNAMICS
- 11. 11 11 © 2016 Marx Group Advisors, LLC 11 Demand Producing Macro Factors MARKET DYNAMICS Number of Vehicles in Operation Average Age of Vehicles Driven Miles Driven Per Vehicle Overall State of the Economy
- 12. 12 12 © 2016 Marx Group Advisors, LLC 12 Financials Improving Source: SRR research MARKET DYNAMICS
- 13. 13 13 © 2016 Marx Group Advisors, LLC 13 What is all the activity doing to sales price multiples? (Industry Wide) MARKET DYNAMICS
- 14. 14 14 © 2016 Marx Group Advisors, LLC 14 What is all the activity doing to sales price multiples? (Mid – Large Cap) Source: Capital IQ MARKET DYNAMICS
- 15. 15 15 © 2016 Marx Group Advisors, LLC 15 MARKET DYNAMICS What multiples are we seeing now for Small Cap? • Wholesale/Retail distribution companies o 5 to 9X (typical) • Suppliers/Manufacturers o 4 to 7X (typical) • Multiples depend on many factors o Financial vs Strategic buyers o Company Performance and Trends o Attributes Unique to the Business o Deal Terms and Financing
- 16. 16 16 © 2016 Marx Group Advisors, LLC 16 Overall Aftermarket Assessment Prices up… “ITS GOOD TO BE A SELLER” Abundant low cost capital… “ITS GOOD TO BE A BUYER” 2015 to reach the Highest level of M&A activity ever! Source: PwC MARKET DYNAMICS
- 17. 17 17 © 2016 Marx Group Advisors, LLC 17 How You Can Benefit from Aftermarket Consolidation Part 2: Making it Personal CAWA MEMBERS
- 18. 18 18 © 2016 Marx Group Advisors, LLC 18 What type of businesses are buying and selling? MARKET DYNAMICS
- 19. 19 19 © 2016 Marx Group Advisors, LLC 19 What type of business owners are most actively selling? MARKET DYNAMICS
- 20. 20 20 © 2016 Marx Group Advisors, LLC 20 What type buyers are most active? MARKET ACTIVITY
- 21. 21 21 © 2016 Marx Group Advisors, LLC 21 BUYER Join the bandwagon! • Interest rates at 3-5% • Pervasive ‘Grow or Fail’ mentality • Generational shift
- 22. 22 22 © 2016 Marx Group Advisors, LLC 22 BUYER • Private Equity (PE) buyers have deep pockets and must expand faster than economy to satisfy Return on Investment (ROI) demands from their equity partners Source: Federal Reserve Bank of Chicago
- 23. 23 23 © 2016 Marx Group Advisors, LLC 23 BUYER • Low unemployment (5%) adds pressure to inorganic growth • Wages and benefit costs increase at a slow pace Source: Federal Reserve Bank of Chicago
- 24. 24 24 © 2016 Marx Group Advisors, LLC 24 BUYER • Low inflation supports acquisitive strategies – real growth is fundamental to valuation Source: Federal Reserve Bank of Chicago
- 25. 25 25 © 2016 Marx Group Advisors, LLC 25 SELLER Cash out! • It’s a Sellers market • Boom expected to continue into 2017 • “As good as its going to get”
- 26. 26 26 © 2016 Marx Group Advisors, LLC 26 SELLER • Unique value proposition • Instill and follow best practices -- Efficiency • 12-15% adjusted EBITDA (you must ‘bite the bullet’) • PE firms (financial buyers) threshold size o $1M EBITDA small firms (= $7M - $10M revenue) o $5M EBITDA medium firms (= $35M - $50M revenue) o $10M EBITDA larger firms (= $70M - $100M revenue) • Higher EBITDA with documented growth = Higher valuations What increases multiples—and therefore sale price?
- 27. 27 27 © 2016 Marx Group Advisors, LLC 27 SELLER • Perform better than industry standards • Key managers and succession plan – so the business can thrive without you • Clean up facility and obsolete inventory • Have the right inventory -- stop giving away the sale • High performing field sales and counter people • Invest in technology, especially accounting and CRM • Survey for customer satisfaction and make improvements Prepare your business for sale
- 28. 28 28 © 2016 Marx Group Advisors, LLC 28 MUST FIND WAYS TO GROW ORGANICALLY • Training: sales, customer service, product – and train your DIFM customers • Expand front of counter and merchandise – DIFM and DIY incremental sales will follow – up to 10%+ • eCommerce – or give it away to Amazon, EBay Motors and others • Improve web presence, SEO (Search Engine Optimization) • Marketing: Build community awareness with sponsorships, associations, scholarships and interns Prepare your business for sale
- 29. 29 29 © 2016 Marx Group Advisors, LLC 29 COMBINATION Divest and Reinvest! • Organic and non-organic growth together
- 30. 30 30 © 2016 Marx Group Advisors, LLC 30 COMBINATION • Annual growth can reach 8-10% or even greater • Keep 10-25% equity and get repaid for your life’s work • Larger companies produce higher EBITDA and multiples • Attract high performing team members (Millennials!!) Organic + Inorganic = winning formula
- 31. 31 31 © 2016 Marx Group Advisors, LLC 31 GET THE SUPPORT YOU NEED • Determine market valuation and design steps needed to improve • Understand market dynamics • Learn where your business lags or exceeds standards • Often allow 2-3 years • Avoid ‘for sale by owner’ strategy The right moves to make
- 32. 32 32 © 2016 Marx Group Advisors, LLC 32 THE M&A JOURNEY – IT’S A PROCESS
- 33. 33 33 © 2016 Marx Group Advisors, LLC 33 BUY-SIDE PROCESS Determine Target Profile 1 Leverage Networks2 Maintain Confidentiality3 Deliver Candidates4Provide Due Diligence 5Finalize Transaction6
- 34. 34 34 © 2016 Marx Group Advisors, LLC 34 SELL-SIDE PROCESS Valuation/ Due Diligence 1 Offering Package2 Seek Qualified Buyers3 Maintain Confidentiality4Negotiations Finalize Transaction6 5
- 35. 35 35 © 2016 Marx Group Advisors, LLC 35 Helping companies thrive in consolidating markets AFTERMARKET EXPERTS AUTOMOTIVE PERFORMANCESPECIALTY PRODUCTS MOTORSPORTS COMMERCIAL VEHICLES & HEAVY DUTY
- 36. 36 36 © 2016 Marx Group Advisors, LLC 36 San Rafael, CA - Headquarters • CHIP CARLSON: DETROIT and MEXICO – President of Cima International, former General Director of Corteco de Mexico • DENISE RONDINI: CHICAGO – President of Rondini Communications, a company specializing in researching and writing about the medium- and heavy duty industry • HOWARD KESTEN: NEW YORK – Executive Recruiter • JON DEHNE: MINNEAPOLIS – Consultant; former SVP Market Availability at Advance Auto Parts, Managing Director Automotive Parts Platform at Solera Holdings Inc. • LOU MERZ: FLORIDA/ILLINOIS – Former President of Borg Warner, VP at Delphi P&SS, former Chairman of AAIA, President of Automotive Sales Council • JOHN NODSON: FLORIDA – MGA VP of Research; former Director of Marketing at Standard Motor Products • RICK ROLLINS: FLORIDA – Former Chairman of SEMA; operates Rollins Performance Marketing and Filter Solutions Technologies ADVISORY BOARD
- 37. 37 37 © 2016 Marx Group Advisors, LLC 37 PROFESSIONAL NETWORK BUY SELL MERGE INTEGRATION PLANNING BUSINESS CONSULTING ADVISOR TO PE FIRMS RESEARCH DEAL ANALYSIS ACCOUNTING LEGAL SUCCESSION PLANNING EXECUTIVE RECRUITING MARKETING
- 38. 38 38 © 2016 Marx Group Advisors, LLC 38 EXPERIENCE. KNOWLEDGE. EXPERTISE. Driving Smarter Mergers & Acquisitions © 2015 Marx Group Advisors, LLC