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Exit Strategies Group Advises Excelsior in Sale to Ryerson

/in , /by Al Statz

Exit Strategies Group, Inc. is pleased to announce that it recently served as the exclusive M&A advisor to the owners of metal fabrication and machining company Excelsior Inc. on their successful sale to Ryerson (NYSE: RYI). Deal terms were not disclosed.

Founded in 1996, Excelsior is a California-based metal fabrication and machining company specializing in large-scale materials, assemblies and industrial millwright services. The company serves a diverse set of manufacturing clients in industries ranging from food processing to renewable energy, EV, oil & gas, agriculture and medical equipment. They have over 80,000 SF of operations in California’s Central Valley and Silicon Valley.

Ryerson is a leading value-added processor and distributor of industrial metals, with operations in the United States, Canada, Mexico, and China. Founded in 1842, Ryerson has around 4,000 employees in approximately 100 locations.

“Exit Strategies is delighted to have partnered with Excelsior owners Ray Roush and Heins Pedersen. Our process generated strong interest from both strategic and financial buyers, and Ryerson ultimately provided the best combination of economic terms and cultural fit” said Al Statz, President of Exit Strategies Group. “This deal illustrates Exit Strategies’ continued commitment to providing strategic valuation and M&A advisory services to U.S. manufacturing and industrial service companies.”

About Exit Strategies Group

Exit Strategies Group (ESG) is a leading provider of strategic merger and acquisition advice/execution and business valuation services. Founded in 2002, with offices in San Francisco Bay Area, Sacramento and Portland, ESG represents private companies on the sell-side and works with private equity, public and private companies and family offices on the buy-side. Its industry expertise spans all areas of advanced manufacturing, automation, business services, and food and beverage. Since inception, ESG has advised on well over 100 M&A transactions.

Al Statz is the founder and president of Exit Strategies Group. To discuss a potential business sale, merger or acquisition, confidentially, Al can be reached at 707-781-8580 or alstatz@exitstrategiesgroup.com.

Exit Strategies Group Announces the Sale of Catalyst UX

/in , /by Roy Martinez

September 30, 2022 (Silicon Valley, CA)

Exit Strategies Group advised Catalyst UX, a leading provider of User Experience design and development, on its recent sale to Unosquare.

Headquartered in Portland, Oregon with offices in the USA, Mexico, and the UK, Unosquare builds custom software – and the required engineering teams – for cancer diagnostics technology, healthcare, fintech, and high-tech companies. Unosquare uses a proven model to provide fully Agile software engineering teams, BI, staff augmentation, cloud migration consulting, application development, QA/test solutions, and application support programs with more than 1,000 successful projects completed. Unosquare has been one of the 100 fastest growing private companies in Oregon three years in a row and was most recently on the Inc. 5000 list of fastest growing companies in the USA for 2015 and 2016.

“It was a pleasure working with Paul Giurata, the CEO of Catalyst on this transaction. We are excited about integrating Catalyst with Unosquare and appreciate the opportunity to play a part in bringing them together”, said Roy Martinez. “We think Catalyst and Unosquare are a great fit.

Roy Martinez is a business intermediary at Exit Strategies Group. To confidentially discuss a potential business sale, merger or acquisition, Roy can be reached at 707-781-8583 or jroymartinez@exitstrategiesgroup.com.

Why 75% of Small Businesses Won’t Sell

/in , /by Al Statz

Tom West is considered by many to be the founder of modern-day business brokerage. A few years back, he calculated the percent of small businesses on the market that actually sell. For small businesses, those with sales of $10 million or less, he figured fewer than 25% actually transition to a new owner.

That failure rate is shocking, and all too accurate. A lot of factors drive down the 25% success rate, but here are five I that I often hear about:

For Sale By Owner

You don’t know what you don’t know. Selling your business is not the time to learn on the job, as you only get one chance to do this right. There are too many opportunities to make mistakes and hurt the value of your business.

Expectations Too High

One owner decided his company was worth $100,000 for every year he worked, or $2.5 million. In reality, it was worth under $1 million.

A reputable advisor won’t take on an engagement if they don’t believe they can meet a seller’s goals. But some business brokers are happy to tie up a seller and let their business linger on the market — hoping the seller will lower their expectations.

Inflexible Deal Structure

Most small business sellers don’t receive all cash at close. These deals often require some seller financing support, like equity roll-over, a seller note, or an earn out. If you’re inflexible on terms, your chances of transferring ownership decline.

Seller Burnout

After retirement, burnout is the leading reason that owner-operators sell. They’re already out of energy when they put their business up for sale. Often, revenues slide and the business loses value (or closes its doors) before a buyer is found. Owners who are self aware enough to recognize the signs of burnout are ahead of the game.

Wrong Advisors

Too often business owners want their usual attorney to represent them in a business sale. But because this person has little or no M&A experience, they tend to get ultraconservative.

These advisors don’t want to risk. We’ve seen buyers walk from a deal because the seller’s attorney was unreasonable. Worse yet, on rare occasion, a seller’s attorney will purposely sabotage a deal in order to retain a client or avoid making a mistake that could trigger their errors and omissions insurance.

Honestly, there are probably a thousand reasons why deals don’t get done, but I’d be willing to bet that these five issues are at the heart of most deal failures.

For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.

Deal Killers: The I-Do-Everything Seller

/in , /by Al Statz

Some sellers come down with a dangerous case of “Look how great I am” when they meet potential buyers.  They say things like, “I did this. That was my idea. I’m in charge of that. Or, I’m the one driving growth.”

And if you have a valuable business that’s attracting buyers – you built something great! But…

When it comes time to sell your business, you should be the least important part of the equation. Unless you’re sticking around well after the sale, your knowledge and experience means very little to a buyer. In fact, the less important you are to the future success of your business, the better.

What does matter? The quality of the management team and the employee leaders you leave behind.

For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.

Exit Strategies Group Advises on Successful Sale of Walker Industrial

/in , /by Al Statz

Exit Strategies Group, Inc. is pleased to announce that it recently served as exclusive M&A advisor to the owners of Walker Industrial in their successful sale to Graybar. Deal terms were not disclosed.

Founded in Newtown, Connecticut in 1977, Walker Industrial is a value-added distributor of industrial automation products in New England and online. Founder Jack Ryan says this of his experience working with Exit Strategies Group, “Their understanding of our industry and our business was second to none. Their process attracted the best strategic buyers for our company. … This led to multiple rounds of bidding and resulted in having three finalists to choose from at very attractive valuations.”

Al Statz, President of Exit Strategies Group said, “I feel honored to play a part in every client’s story but working with Jack was extra gratifying because we’ve known each other since early in my career when I was running an automation manufacturing company. Jack’s exceptional life and legacy is an inspiration, and I look forward to seeing what he does in full retirement mode. Getting to watch clients explore new passions after a successful sale or recapitalization of their life’s work is one of the reasons I love the M&A profession.”

Graybar is a leading distributor of electrical, communications and data networking products and provider of related supply chain management and logistics services.

About Exit Strategies Group

Exit Strategies is a leading provider of strategic merger and acquisition advice/execution and business valuation services. Founded in 2002, with offices in San Francisco CA and Portland OR, the firm has advised on well over 100 M&A transactions. Exit Strategies represents closely-held and family-owned companies and helps them optimize results in a strategic sale or recapitalization. Its industry expertise spans all areas of industrial automation products and services and advanced manufacturing. For more information visit www.exitstrategiesgroup.com.

Al Statz is the founder and president of Exit Strategies Group. To discuss a potential business sale, merger or acquisition, confidentially, Al can be reached at 707-781-8580 or alstatz@exitstrategiesgroup.com.

Why boomer business owners should watch M&A cycles

/in , , /by Al Statz

Approximately 20% of private business owners are over the age of 65. Another 30% are between the ages of 55 and 64, according to estimates from the Census Bureau Annual Business Survey.

If we’re going by age trends alone, that suggests roughly half of America’s businesses will transition ownership in the next five to 10 years. This will be the largest transfer of wealth the nation has ever seen in such a short period of time.

Right now we’re in a strong seller’s market. Despite the economic uncertainty, rising interest rates and world turmoil, mergers and acquisitions has not cooled down much. It’s economics 101, supply and demand, and there are just more buyers than sellers on the market.

Between private equity and corporate balance sheets, there is more than $8.5 trillion in “dry powder” waiting to be invested in corporate growth and acquisitions. That’s at least $6.84 trillion in cash and short-term investments on corporate balance sheets, and $1.8 trillion in uncommitted capital in private equity funds, according to reports from S&P Global.

Corporations have added 20% to their balance sheets since 2019, and private equity continues to up the ante with record fundraising year over year. All that cash drives up demand and increases value for business sellers.

At some point, though, supply and demand could flip. Right now, experts estimate 10,000 baby boomers are retiring daily. By some estimates, roughly 15% of them own businesses. That’s 1500 additional businesses looking for new ownership every day – and only a small fraction of those will get passed along to a second generation.

By the tail end of this cycle, we could end up in a buyers’ market with more boomers selling their businesses than buying.  Business owners who get ahead of the trend will be in the best position to take advantage of positive market conditions.

Take these steps to increase your chances of a successful sale:

Plan:

It’s tough to maximize value when you’re burned out, so aim to sell while you’re still energized by the business. The average sale takes nine months to a year, not including post-sale transition time.

Instead of planning your retirement around a certain age, you can often reap greater rewards by timing a sale around your business value. Get a regular valuation so you know what your business is worth in the current market.

If age is still your primary deciding factor, begin planning several years in advance. With enough time, your advisors can provide leadership, cash flow and tax positioning strategies that will help you net the most out of a sale.

Prepare emotionally:

Don’t underestimate the emotional impact of selling your business. Leaving an ownership role is hard, especially if you’ve built your business from the ground up.

Many baby boomers struggle to step away when the time comes. Decide how you will define the next chapter in your life. It’s important to have something you’re “retiring to” instead of just something you are “retiring from.”

Seek advice from mentors and peers who have made a similar transition. Talk through what it means to give up your identity as a business owner. For many, it’s easier to make that transition if they already have other strong plans and commitments.

Make selling part of your succession plan:

Don’t have next generation leaders ready to take over the business? Leadership team not prepared to buy you out? Consider how selling your business can play a role in your succession plan.

When selling to private equity, for example, you can often arrange for family members or other key managers to receive an ownership stake in the business. This can be a great way to set your next generation leadership up for success, with strong connections and financial backing behind them.

These arrangements can protect you both financially and emotionally – without the specter of money and debt hanging between you and your family.

Consider staying on after a sale:

Sellers can often negotiate a full-time or part-time advisory role and phase into retirement. Employment contracts can make your business more attractive (and more valuable) to private equity buyers who need experienced leaders in place to maintain operations while they fuel new growth.

The long-predicted seller tsunami is coming. Business was strong before the pandemic, but the crisis put everyone in a short-term holding pattern. With recession fears ahead, people are taking this opportunity to go out on a high note – while they still can.

For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.

M&A Advisor Tip: Niche companies can bring top dollar

/in , /by Al Statz

It’s often better to be #1 or #2 in a smaller/narrower market than a minor player in a larger/broader market.

By targeting and dominating a distinct segment of a market, you help ensure that potential customers think of you first (brand recognition) and continually choose you, again and again. Dominant players usually have lower cost of customer acquisition, first call/last look with customers, and other advantages that drive profit margins up and accelerate growth.

Niche businesses with high profit margins are generally more valuable than businesses with lower profit margins – even if they have same total profit. Higher margins means more cash flow to pay debt service or reinvest in future growth. Low margins, on the other hand, can mean less operational wiggle room and increased risk. 

For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.

Exit Strategies Group Initiates the Acquisition of Ibex Engineering by Motion Solutions

/in , /by Al Statz

Exit Strategies Group has advised Motion Solutions, a leading provider of custom engineered positioning systems and a portfolio company of Frontenac, on the recent acquisition of Ibex Engineering.

Based in Newbury Park, CA, Ibex Engineering is a manufacturer of precision linear and rotary positioning systems for original equipment manufacturers.  The partnership will give Motion Solutions even greater access to the ultra-precision end of the market and bring advanced automated manufacturing capabilities, and give Ibex more resources to serve higher volume clients.

“It was a pleasure working with the leadership of Motion Solutions and Frontenac on this transaction. We are excited to see the combined team’s future success unfold and are thankful to have played a part in bringing them together!”, said Al Statz, President & CEO of Exit Strategies Group.

Motion Solutions, based in Aliso Viejo, CA, provides custom, application-specific engineered systems to OEMs and industrial customers in the medical, life sciences, semiconductor, robotics, and industrial automation sectors. They provide a complete selection of services, including electro-mechanical design, prototype and volume manufacturing, and engineering expertise.

Frontenac is a Chicago-based private equity firm focused on investing in lower middle market buyout transactions in the consumer, industrial, and services industries. Frontenac works in partnership with established operating leaders, through an executive-centric approach called CEO1ST, which seeks to identify, acquire, and build market-leading companies through transformational acquisitions and operational excellence. Over the last 50+ years, Frontenac has worked with over 275 owners of mid-sized businesses as they address complex transition issues of liquidity, management enhancement, and growth planning.

Al Statz is the founder and president of Exit Strategies Group. To discuss a potential business sale, merger or acquisition, confidentially, Al can be reached at 707-781-8580 or alstatz@exitstrategiesgroup.com.

M&A Advisor Tip: F-reorganization

/in , /by Al Statz

Deal structure can have a big impact on your after-tax proceeds. The right structure can help you retain more of the sale price. For example, an F-reorg is a tax efficient method that allows you (the seller) to rollover equity into the buyer’s new entity without paying taxes on the rollover amount.

Without using an F-reorg, you might sell 100% of the company and get taxed on that full amount (ouch!) before reinvesting some of your proceeds in the buyer’s new business.

For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.

Market Pulse – Q4 2021

/in , /by Al Statz

Financing Deals in 2021

Presented by IBBA & M&A Source

Deal financing has not changed significantly since before the pandemic. On average, sellers continue to receive 80% or more of total consideration as cash at close. (Cash at close includes senior debt and buyer equity.) Seller financing accounts for 15% or less of most deals.

For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.