Begin with the Knowns and Unknowns

The world feels like it’s turned on its head right now. People are anxious, with good right to be. There’s so much we can’t predict about the weeks and months ahead. When planning your response, begin with what you know and what you don’t know.

What we know:

We’re in a pandemic, and social distancing can flatten the curve, meaning slow the rate by which the illness spreads. And, at this point, we can probably say this pandemic will be linked to an economic recession.

Start by responding to what we know. If you’re a business owner or in another position of influence, this begins with supporting social distancing efforts and following guidance from the CDC. For many, this means finding creative ways to keep your employees engaged and working so you can keep paying them for as long as possible.

Whether you’re shoring up remote work operations, or innovating your business model, remember your employees are anxious. Many of them are trying to balance work and childcare. Others are alone and will be feeling the isolation more keenly.

Now is the time to practice compassionate leadership. You can’t really know how much this situation is affecting each employee – who has vulnerable family members, who is most economically at-risk, and who has underlying mental health issues that will make this situation more difficult to bear.

Prioritize social connection as part of your workday. Plan virtual coffee meetings or happy hours via conference call. Managers, make it a point to check in on employees. Find out how people are doing, and not just in terms of work and technology. Ask how they’re feeling. Find out how the separation from the office is affecting them and what else is raising their anxiety.

Communicate. Rumors fly in uncertain times. Give your employees clear, reliable information. If you don’t know what your plan is yet, it’s okay to say that. Employees need to hear from you, and even those “we’re still considering our options” messages can head off misinformation.

What we don’t know:

The unknowns are many. We don’t know how long this situation will last. We don’t know the depth of the economic impact. So how do we respond in uncertain times?

Madison, Wisconsin based futurist Rebecca Ryan recommends scenario planning. Map out your worst fears, your highest aspirations, and your reasonable expectations (what feels most plausible over the next 18 months).

Do this together with your leadership team. Part of the value, as Ryan explains it, is stating your assumptions to the group. Which possibilities are you putting in the plausible zone, rather than the best- and worst-case scenario boxes?

Any scenario is possible, so spend time on each. Try to imagine how your business will respond to each possible future. A few weeks or months from now, you will have more information and can revisit your scenarios again.

If you tend toward pessimism, this kind of scenario planning may help lift you up out of fear by forcing you to imagine positive outcomes. That slight lift, that shift in perspective, can be extremely beneficial in times of stress.

But more than that, scenario planning helps you make thoughtful decisions in uncertain times – times when informed decisions aren’t always possible.

 

COVID-19 Exit Planning Insight: Keep a Journal

Al StatzThere’s no shortage of information out there right now on how company owners and CEO’s are responding to COVID-19. [By now, leaders have taken steps to survive and fight another day. Most now understand what business will look like for them until restrictions are lifted, and they’re formulating plans to thrive again post-pandemic.] With few companies going to market during this crisis, our insights will focus on exit planning, acquisition opportunities and non-elective sales for a while.

Today we have a simple but powerful suggestion for owners who wish to sell in the next three to four years: Keep a COVID-19 Journal.

Why a COVID-19 Journal

When you sell a business, the buyer’s financial diligence usually focuses on the past three years. Like it or not, what happens during this COVID-19 disruption will generate lots of pointed questions. It’s unavoidable. Your M&A advisor / investment banker will help you tell your unique story, but you’ll need to have the supporting facts and data.

Keeping a COVID-19 journal means tracking and documenting key events, management decisions and business performance data, in real time, during this crisis. Key events and decisions are those that will have a substantial impact on current or future business performance or risk. Decisions should be well documented, including timing, rationale and expected results.

The more data and details you have the better your story can be told. Don’t try to remember it all. Some of this data may not be captured in or stored by your ERP system. For example, you may need to be manually recording weekly RFPs, quoting activity and order backlog.

Examples of Key Events and Decisions:

Financial/Liquidity

  • draw-down on the credit line
  • renegotiated bank covenants or asset-base
  • cancelled all company credit cards
  • sold surplus assets to generate cash
  • other key cash preservation actions taken
  • government subsidies received and how accounted for

Customers

  • change in key customer payment terms or collections
  • major order cancellations
  • downstream verticals shut down and aided by crisis
  • customer loss or gain due to or during the crisis
  • impact on orders, sales and accounts receivable

Marketing & Sales

  • implementation of new remote/online sales strategies
  • implementation of new marketing initiatives
  • RFP inquiries and quoting activity

Suppliers

  • renegotiated payment terms
  • changed payment practices
  • notified that critical components unavailable
  • major order cancellations
  • major supply chain interruptions and changes
  • renegotiated lease or mortgage payments
  • impact on accounts payable

Employees

  • salary reductions, job-sharing, furloughs and layoffs (and severance paid)
  • major staff redeployments
  • organizational restructuring
  • new hires/rehires – impact on payroll

Products & Services

  • diversified (new product line or service) to generate sales
  • decision to stop replenishing certain inventory (to preserve cash)
  • major resource shifts
  • suspension of a product development initiative

Strategic/Operations

  • shifts in target markets, products, services or customers
  • major re-positioning or change in business model
  • permanent operational changes made
  • a new strategic alliance
  • acquisition of a distressed competitor

Action Steps

Start your journal today and cover historical events as best you can. Assign someone to take detailed minutes of weekly or daily executive team meetings and compile KPI’s. Schedule time each day to summarize key events, decisions and performance metrics.

One of my clients finds writing this journal to be “therapeutic, amid the chaos”. And he’s looking forward to telling his unique COVID-19 story to prospective acquirers (and their lenders).

As a result of this surprise economic crisis, acquirers may be adding “Evaluate the potential impact of future unpredictable business disruptions” to their acquisition due diligence check lists. We’ll soon find out.


If you are wondering what information to include in your COVID-19 Journal, Exit Strategies Group’s M&A advisors and valuation experts can provide invaluable insights. Don’t hesitate to call if we can help you prepare your journal, make a strategic acquisition, or prepare for a post-pandemic exit.

Previous COVID-19 M&A Updates:

COVID-19 M&A Update: Survival Mode

As of 4/6/2020

The fact is, no one knows when this public health crisis will be resolved or when commerce will return to normal.

The fact is, most businesses are struggling. They have scaled back or stopped operating. Leaders have taken quick decisive action to stem losses and preserve cash. They are taking advantage of government assistance. Luckier ones are less affected; some are thriving. Indeed, these are unprecedented times.

Affected company leaders are taking stock.

Business owners and management teams are taking care of their employees first, as they should, and reaching out (by email, phone and video conferencing) and staying close to customers and suppliers. They are remaining calm, intentionally limiting their media intake. They are monitoring KPI’s and dashboards more frequently than ever – hourly or daily instead of weekly or monthly. They are getting a handle on what business is going to be like until restrictions are lifted.

And they are looking ahead.

They are formulating strategies to strengthen their market position and thrive when we come out the other end of this. They are revising their quarterly and annual business plans and executing on those plans. Many are working on systems, marketing, policies and procedures, and picking up some of those “B” projects that fell by the wayside.

Exit Strategies Group is here for you. Please don’t hesitate to call us if we can help you navigate this crisis, or just to touch base.

All the best to you, your families and your companies,
The Team at Exit Strategies Group

Exit Strategies Group Joins Cornerstone International Alliance

Exit Strategies is pleased to announce that we have combined resources with some of the best independent M&A firms to deliver more value to lower middle market business owner clients.

Cornerstone International Alliance (CIA) is a global alliance of independent M&A firms. Formed in early 2019, it is the world’s only such alliance focused exclusively on the lower middle market. Member firms are selected for their extremely high integrity, extraordinary ethics and extensive mergers and acquisitions experience.

Alliance members share industry expertise, regional knowledge, transaction experience, contacts, resources and best practices. This exclusive partnership will allow Exit Strategies to provide company owners, strategic buyers, private equity firms and trusted advisors with more resources and more expertise in a wider range of industries. It will help us assemble the best possible team for every client engagement.

To learn more about CIA, visit www.cornerstoneia.com or give Al Statz a call at 707-781-8580.

Exit Strategies Advises Olympus Controls on Sale to Applied

PORTLAND, OR (August 22, 2019) — Exit Strategies Group, Inc. is pleased to announce that Olympus Controls Corp. has been acquired by Applied Industrial Technologies.  We represented Olympus and its shareholders as their exclusive M&A advisor.

Established in 1998, Olympus Controls is a leading distributor of world-class machine automation products focused on assemblies and engineered solutions. Olympus specializes in motion control, robotics, machine vision, sensor and IIOT technologies, and is one of the largest and fastest-growing automation technology centers in the U.S., with 80 skilled employees serving 12 Western states from 5 office locations.

Clients look to Olympus Controls for advanced technologies as well as sophisticated application support, electromechanical assembly, custom system design and integration, and software development. Olympus automates machines in many industries including life sciences, pharmaceutical and biotech, semiconductor, electronics and display, food and beverage, warehousing and third-party logistics, cloud services (data centers), packaging, machining/forming/3D printing, aerospace and others.

Applied Industrial Technologies (NYSE: AIT) is a leading value-added distributor of power transmission products, engineered fluid power components and systems, flow control solutions and other industrial products, with revenue exceeding $3 billion. The acquisition of Olympus serves to establish an automation technology platform.

Scott Hendrickson, Olympus founder and CEO, noted “The synergy and strategic fit between Applied Industrial Technologies and Olympus Controls was way too strong to overlook. We can instantly leverage our shared client relationships and unique Engineered Solutions business models to make an immediate and impactful dent in the machine automation market. Our team has always had a high degree of respect for Applied’s dominance in the fluid power space and Olympus Controls brings an exciting opportunity for them to strengthen and expand their technology offering in motion control, machine vision, robotics and industrial networking.”

“Engaging Exit Strategies to help us navigate the sale process was a great decision. Al Statz and his team brought a wealth of M&A experience, and provided outstanding advice, service and value from start to finish.” Mr. Hendrickson added.

Exit Strategies is honored to have helped Olympus shareholders and management achieve this outcome. We congratulate both companies and look forward to seeing them innovate and grow in the years ahead.

We see interest in industrial automation and robotics acquisitions, recapitalizations and mergers remaining strong for some time as the industry grows and consolidates. Trends driving growth in automation include the need to improve productivity and quality in the face of scarce skilled labor and rising labor costs, increased use of electronics and internet connectivity in all types of products, continued miniaturization of electronics, rapidly-changing consumer tastes, new warehouse and data center applications, and recent advances in enabling technologies such as vision, 3D sensing and AI. Rising occupancy costs and regulatory requirements are also contributing factors. U.S. Companies have to invest more in automation in order to compete on the global stage, or they risk extinction.

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Exit Strategies is a California-based M&A advisor and business valuation firm serving lower middle market U.S. companies in several industries including automation and robotics distribution, system integration and manufacturing.  For further information about Exit Strategies’ services, contact Al Statz at 707-781-8580.  Terms of the Olympus-AIT deal will not be disclosed.

Roundup of Recent Sale Transactions

Sitting down and writing quality articles on business valuation, exit planning, mergers and acquisition strategy has taken a back seat this year, thanks to a strong M&A market. In this post I will recap many of the transactions for which Exit Strategies (ESGI) provided sell-side advisory services during the first half of 2019.

I haven’t included deals that we were asked not to announce. Nor have I included the internal buy-sell transactions, management buyouts and generational transfers for which ESGI provided an independent business valuation. As always, deal terms are not disclosed to respect the privacy of our clients.

Sale of Eldercare Services to Home Care Assistance

Eldercare Services is one of the San Francisco Bay Area’s top professional eldercare management and home care services providers. The baby boomer owners of ES were looking to turn their business investment into cash (i.e. “liquify” their investment), maximize value and retire. Home Care Assistance is a leading provider of home care for seniors in 150 regions throughout the United States, Canada, Puerto Rico and Australia. (service, health care)

Sale of DC Precision to Tecan Group

DC Precision, established in 1999, manufactures high precision plastic valve assemblies for life science OEMs and metal products for Silicon Valley high-tech manufacturers. Our client was ready to pursue other business interests. Tecan Group is a Swiss manufacturer of automated workflow equipment for pharmaceutical and biotechnology companies, university research departments and diagnostic laboratories. (contract manufacturing, CNC machining, proprietary technology, turn-key assembly)

Sale of Precision Asphere to II-VI Optical Systems

Precision Asphere produces aspherical optical components (lenses and mirrors) using proprietary surface-forming technology. The majority owner wanted to retire. II-VI Optical Systems develops and produces highly engineered materials and material systems for medical, defense, aerospace and military clients.  (manufacturing, technology)

Sale of Axis of New England and New York to Motion Industries

Read the ESGI announcement here.  Our clients were looking to take advantage of industry consolidation and maximize value through a competitive M&A sale process. (distribution, manufacturing, robotics, technology, service, system integration)

Sale of DZINE Living to Haworth

DZINE is an interior design services and contemporary European furnishings retailer in San Francisco. Our clients were looking to align with a major industry player that would help DZINE to expand its footprint. Haworth is a global company that designs and sells furniture, furniture systems, architectural products, textiles, wall surfaces, and ergonomic and technology tools for workspaces, education and health care. (retail, service)

Sale of You & Me Children’s Center to an Industry Investor

Founded in 1981, You & Me Children’s Center is a local preschool committed to providing a nurturing, safe and educational environment for children. The owner wanted to retire, liquefy her investment and see her legacy survive. The buyer is an experienced preschool operator. (service, education)

Sale of Home Tutoring Plus to a Private Investor

Home Tutoring Plus is a tutoring company serving schools and home school families throughout much of Northern California. Professional tutors provide individualized lessons, in-home and online. Our client engaged us to locate a buyer that would preserve her legacy while maximizing her investment so she could pursue new interests in retirement. (service, education)

Sale of Redwood Building Maintenance Company to Silicon Valley Building Services

Founded in 1965, Redwood Building Maintenance is a full service janitorial and building maintenance company serving the North San Francisco Bay Area. The family owners were ready to retire.  Silicon Valley Building Services primarily serves the south and east Bay Area and this gave them an opportunity to expand. (B2B services, contract maintenance)

Sale of Banner Enterprises to Valley Comfort

Banner Enterprises and Valley Comfort Heating and Air are both full service commercial HVAC companies serving the Bay Area. Our client was looking to sell his business and building in order to retire and reinvest. (construction, services, real estate)

Sale of Communique Interpreting to DCARA

Since 1994, Communique Interpreting has provided in-person sign language interpreting services from Monterey to the Oregon border, in medical, employment, education, legal, performing art and social services settings. Our client wanted to sell her business and building and retire. DCARA, a 501(c)3 charitable organization, provides interpreting, advocacy and employment services for hearing impaired children, adults and families in Northern California. (services, non-profit, commercial real estate)

Sale of a Dietary Supplements Producer to a Strategic Buyer

A producer of herbal supplements sold through U.S. medical practitioners. The owner engaged us to find a strategic partner that could scale the company and allow him to reduce his involvement in operations and transition to retirement. (health care, manufacturing)

Market Observations

Two themes jump out at me: most acquirers were strategic and most sellers were looking to retire. Indeed, we’re seeing tremendous strategic acquisition activity in most industries. Most sellers are well positioned to maximize value through a structured auction (competitive bid) process run by a professional M&A brokerage firm like ours. As long as baby boomers continue to age out, Exit Strategies will be here to facilitate their retirements.

Action Items

If you are considering exiting your company for any reason, call or Email us to discuss your goals and circumstances, and how you can leverage Exit Strategies’ process, resources and experience to improve your results. If you are waiting for market conditions to improve, stop waiting and start the process!


Al Statz is founder and President of business valuation and M&A brokerage firm Exit Strategies Group, Inc., which has offices in California and Oregon. For further information or to discuss a valuation or M&A question or need, confidentially, you can reach Al at 707-781-8580 or alstatz@exitstrategiesgroup.com.

Joe Orlando Joins Exit Strategies; Portland Office Open

Exit Strategies Group, Inc. (ESGI) is pleased to announce that Joe Orlando, ASA, has joined us as Vice President of Valuation Services. Joe will perform the full range of business valuation services for our clients and provide technical leadership to our team of accredited valuation experts.

Over the past 15 years Joe has valued hundreds of early to late stage companies in various industries. Some of his focus areas have been technology (software, ecommerce and online content), wineries, craft beverages and sports. For the past 11 years Joe has led the business valuation practice for Frank, Rimerman + Co. LLP, a large Northern California public accounting firm focused on tax, financial reporting and stock option valuations. Joe’s earlier professional background includes technology investment banking, strategic planning for a public company and multiple entrepreneurial endeavors.

Joe is an Accredited Senior Appraiser (ASA). He has served as President, Vice President, Treasurer and Business Valuation Discipline Director for the American Society of Appraisers’ NorCal chapter, and he is a founding member of the Fair Value Forum. Joe has an MBA in Finance from Georgetown University and a BA in Economics from St. Lawrence University. He lives in Camas WA, across the Columbia River from Portland OR, with his wife and twin boys.

We’ve known Joe as a business valuation colleague and referral partner for years. Joe’s talents, wealth of valuation knowledge and leadership will enable ESGI to expand services to the Pacific Northwest, build our valuation services team, and continue our journey from good to great. With Joe on board, I will return my focus to M&A transaction engagements and supporting our team of seasoned M&A brokers.

Exit Strategies Group is a California-based merger and acquisition advisory and business valuation firm serving lower middle market companies in a variety of industries. We have four California offices and now a Portland, Oregon office. Al Statz is president and founder of ESGI. For further information contact Al at 707-781-8580.

Connect with Joe at jorlando@exitstrategiesgroup.com or 503-925-5510.

Get LinkedIn with Joe.

Exit Strategies Group Advises Axis on Sale to Motion Industries

BOSTON, MA (March 1, 2019) – Transaction advisory firm Exit Strategies Group served as exclusive M&A advisor to Axis of New England and New York on its successful sale to Motion Industries, Inc., a subsidiary of Genuine Parts Company (NYSE: GPC).

Axis, with facilities in Danvers Massachusetts and Rochester New York, is a leading provider of advanced industrial automation products and engineered systems, specializing in robotics, motion controls, machine vision, sensors and IIOT technologies. Axis, an authorized distributor for many premier automation brands, helps clients in many industries automate their products and processes. Value-added assembly and custom-engineered mixed-technology systems feature prominently in the company’s value proposition. Founded in 1994 by Todd Clark, Axis is the market leader in New England and New York, and one of the largest independent automation technology providers in the U.S.  Industries served by Axis include life sciences, pharmaceutical and biotech, medical, semiconductor, electronics, food and beverage, warehouse automation, packaging, machine tools, 3D printing and robotics.

Axis CEO Todd Clark said, “We’re pleased to be part of the Motion family. Their relationships, systems and financial resources will to allow us to expand our technical sales force and systems engineering and manufacturing capabilities more rapidly in the coming years. Selling to the right buyer was important to us. We are proud of the culture of excellence that we created at Axis and believe that Motion will allow us to continue that legacy and provide a great place for our employees to work and advance their careers.”

“Exit Strategies did a tremendous job guiding us through the process. Their automation industry knowledge, competitive bid process and creative deal making were essential in achieving a successful outcome”, Mr. Clark observed.

We are pleased to have advised Axis on the sale process and to have helped them achieve a great outcome. The acquisition by Motion represents a win for Axis’ shareholders, employees, customers and vendors. And Motion acquires one of the most respected and capable automation solution providers in the U.S.

We expect U.S. companies to continue to increase investments in automation and robotics to compete on the global stage and to improve productivity and profits. Trends driving industrial automation include the shortage of skilled labor and rising labor costs, increasing mass-personalization of consumer goods, growing internet connectivity, product miniaturization and the increased use of electronics in products, and the adoption of new enabling technologies such as AI. As a result, we expect the industrial automation technology mergers and acquisitions market to remain strong for a while.

About Motion Industries

Motion Industries, Inc., headquartered in Birmingham, Alabama, is an industrial distributor with annual sales of $4.9 billion. Its products include mechanical power transmission, electrical and industrial automation, hydraulics and pneumatics. It also provides systems design, fabrication and repair services. This is Motion’s third acquisition of an advanced automation solutions provider.

About Exit Strategies

Exit Strategies Group is a California-based merger and acquisition advisory and business valuation firm serving lower middle market companies in a variety of industries including automation and robotics distribution, system integration and manufacturing.  For further information about our investment banking and M&A advisor services contact Al Statz, 707-781-8580.  Terms of the Axis-Motion deal will not be disclosed.

Ken McCauley Joins Exit Strategies as Senior Valuation Analyst

Exit Strategies Group is pleased to announce that Ken McCauley, CPA, ABV, has joined us a Senior Business Appraiser in our North San Francisco Bay Area California office. Ken will provide a broad range of business valuation services for our clients. He has been appraising businesses since 2010, including wineries, medical and professional services, software, retail, restaurants, manufacturing, construction, and businesses in other sectors.

Prior to joining Exit Strategies, Ken was a partner in AL Nella & Company, LLP Certified Public Accountants in San Francisco California, where he specialized in financial reporting, business valuation services and cash flow analysis for small to medium sized companies. Ken and his partner sold the firm in 2018. Ken’s background includes financial audit experience with a national public accounting firm and multiple corporate finance positions.

Ken holds the Accredited in Business Valuation (ABV) credential and is a licensed CPA. He graduated from the University of Michigan with a BA in Accounting. He has served on the boards of several nonprofit organizations over the years and is currently active on the Stewardship Team at the Center for Spiritual Living.

We’ve known Ken for many years as a client and referral partner. He brings unique talents, knowledge and experience to the ESGI team, and he is great to work with. We are happy to have him help us meet the growing need for professional business valuation and succession planning services.

Contact Ken McCauley at kenm@exitstrategiesgroup.com or 707-823-8440.

Get LinkedIn with Ken.

Exit Strategies Advises on Management Buyout of Carpenter Crane Hoist

MARE ISLAND, California – Exit Strategies is pleased to have recently served as financial acquisition advisor in management’s carve-out of the Carpenter Crane Hoist division from The Carpenter Group (TCG). The buy-out (MBO) was led by executives Dane Oliver and Ben Jones with the support of an equity partner. The acquisition marks the beginning of an exciting era for Carpenter Crane Hoist (CCH) as management implements plans to expand offerings and operations to address the needs of a growing specialty crane market.

Since its forming in 1996 as the seventh division of The Carpenter Group, CCH has designed and produced overhead cranes for clean rooms and harsh environments. CCH uses proprietary components and materials and customizes every system to satisfy the unique application requirements of its clients. Electronic controls and custom holding fixtures are typical. CCH produces cranes to 25-ton capacity for up to class 10 clean room environments for top semiconductor companies and research facilities across the U.S. For more information see www.carpentercranehoist.com.

The Carpenter Group, with six locations, distributes rigging products to OEMs and end users throughout California and the West Coast in the construction and marine industries and other sectors. The carve-out of CCH made sense for TCG because the business unit was not core to its overall strategy.  See www.carpenterrigging.com for more information.

How Exit Strategies Helped

Management contacted us on the advice of their attorney to determine if a buyout was feasible and to help put the deal on track. Exit Strategies’ role consisted of sizing up the situation, advising management on process and strategy with respect to the proposed carve-out, analyzing historical financials and helping develop projections, valuation calculations, finding a lender to preapprove financing, pitching the spin-off to The Carpenter Group, and working with management’s attorney to negotiate a favorable letter of intent. Umpqua Bank supported the deal with senior term debt. Deal terms are confidential.

About Us

Exit Strategies Group is a California-based M&A brokerage and business valuation firm. Founded in 2002, we mostly serve sellers in lower middle-market  transactions, representing them from start to finish. Our seasoned brokers and advisors have over 100 years of combined deal making experience spanning many industries.  In this instance we are very pleased to have facilitated a successful management buyout and spin-off that benefited all stakeholders.

To find out how Exit Strategies can help you complete a successful business sale, spin-off, merger or acquisition, contact President Al Statz at 707-781-8580, alstatz@exitstrategiesgroup.com.