Exit Strategies helps ProtoFab Expand its Prototyping Capabilities in the Northern California Machining Services Market

/in , /by Al Statz

Exit Strategies recently advised on the merger of two closely-held Northern California precision machining companies.

Founded in 1996 by Grant Kerr, GMAN Precision LLC is a full-service precision machine shop specializing in complex machined parts and services for R&D, prototyping, and preliminary production work. Its markets include aerospace & defense, biotech, electronics, energy, food processing equipment, medical device, and others. ProtoFab, Inc., based in Petaluma, California, is an ISO9001:2008 certified Northern California manufacturer of precision-machined components for low and high volume production. Major industries served by Protofab are medical, automotive, commercial and test and measurement.

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Operationally, adding G-Man’s superb R&D prototyping expertise to Protofab’s world-class production capabilities will deliver even greater value to customers.  The move will give customers single-point machining services for the entire life cycle of their products; from initial R&D, through product launch, production and end-of-life. Culturally the companies share a strong commitment to quality and continuous improvement, and to their clients’ success. This is a smart combination that, combined with disciplined execution of a well thought out integration plan, will accelerate the combined entity’s growth in the Northern California market. Exit Strategies is pleased to have advised on this strategic merger. Terms of the deal will not be disclosed.

This transaction is another example of Exit Strategies’ M&A experience in the California manufacturing sector. We have appraised, sold and merged numerous contract manufacturers representing a broad swath of manufacturing disciplines and vertical markets. If you own a food, wood products, electronics, machining, fabrication, molding, finishing, or manufacturing services business of any kind, and you are looking to sell, merge or acquire a company, we are interested in hearing from you.

Contact ESGI’s president Al Statz at 707-781-8580 or alstatz@exitstrategiesgroup.com.

Exit Strategies Advises IRR San Francisco-Sacramento on its Sale to BBG

/in /by Al Statz

Exit Strategies, a California based mergers and acquisitions (M&A) brokerage and business valuation firm, recently advised the owners of Integra Realty Resources of San Francisco and Sacramento on the sale of their Northern California commercial real estate valuation company to BBG, Inc.

BBG ranks among the largest real estate valuation and assessment firms in the United States. With this acquisition, BBG will have 22 offices across the U.S. and a workforce of 262 employees.

of San Francisco and Sacramento

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Terms of the acquisition will not be disclosed.

This sale is another example of Exit Strategies’ M&A brokerage experience and valuation expertise in the business-to-business services sector. Exit Strategies has appraised and brokered hundreds of service businesses including medical, professional, software as a service (SaaS), real estate, maintenance and repair, test and inspection, construction, and many other types of service businesses. If you own a service business of any kind, and are looking to sell, merge or acquire, we would be interested in hearing from you. Al Statz can be reached at 707-781-8580 or alstatz@exitstrategiesgroup.com.

Economic indicators help put the current U.S. economic climate in perspective.

/in , /by Louis Cionci

I have four common gauges of U.S. economic activity that deserve a few moments of your attention today: stock market, interest rates, inflation and unemployment. Let’s look at graphs of each of these measures for a visual perspective on the state of our economy.

Stock Market. The Wall Street Journal, Equities pg. B17, January 25, 2017 reported the DJIA rose 100 points amid expectations of increased government spending on infrastructure projects.  The DJIA crossed the 20,000 mark during trading on Wednesday, January 25.US-stock market

Interest Rates. The Federal Reserve raised the target range for its federal funds by 25 basis points rate to 0.5 percent to 0.75 percent, during its December 2016 meeting.US-interest-rate

Inflation. Inflation has been hovering below 2%, the Federal Reserve Open Market Committee has indicated a long-term goal for the inflation rate at 2%.US-inflation-cpi

Unemployment. The unemployment rate has been dropping slowly and steadily since it peaked during the Great Recession.US-unemployment-rate

Overall, the present U.S. economy looks good with rising stock valuations, low interest rates, low to moderate inflation, and declining unemployment. While we can’t predict what the future holds, we can look at recent history to get a perspective on current economic conditions. Thanks for your attention!

Exit Strategies Grows Up!

/in /by Al Statz

ArC15YTime flies when you’re having fun selling and appraising businesses.

2017 marks our 15th anniversary. I founded the firm in January 2002, in the wake of 9/11, coming off a 15-year management career in the industrial automation technology industry. Relying on my corporate merger and acquisition experience, financial training, and a passion for strategic deal-making; the founding was a classic case of spotting an under-served market and filling the needs in a better way.

In the early years, we were primarily a business brokerage; helping private business owners evaluate their options, sell right and retire well. We grew slowly and steadily until 2008 when the great depression pummeled the M&A brokerage industry and we added business valuation services for non-M&A uses (tax filings, buy-sell transactions, management buyouts, dispute resolution, etc.).  In 2010 we incorporated as Exit Strategies Group, Inc. (ESGI), and the following year we opened an office in Roseville. We opened in Orange County in 2014 and in San Jose in 2016.

Today ESGI is fortunate to have a team of 12 accomplished professionals, including 6 accredited business appraisers, committed to providing the very best M&A brokerage, business valuation and exit planning services to owners of $1-50 million revenue companies throughout California and beyond.

We thank those entrepreneurs and professional advisors who put their faith in us in those early days, and the hundreds who have relied on us since. Without you, ESGI would have nothing to celebrate.  We find it extremely gratifying to help clients achieve successful business sales, mergers, acquisitions, estate plans, corporate restructurings, buy-sell agreements, management buyouts, buy-ins, stock ownership plans, and retirements.

Please join us in celebrating 15 years of service!  And join us as we continue to serve, grow, adapt and have fun in the years ahead.

Al Statz, Founder & President, Exit Strategies Group, Inc.

U.S. Manufacturing Gears Up

/in /by Al Statz

Here is some good news to start your year.

The Institute for Supply Management announced yesterday that its PMI national manufacturing index came in at 54.7 for December 2016, which is up from 53.2 in November and is the highest monthly reading of 2016. (Any reading over 50 signals growth.) This latest Manufacturing ISM® Report On Business® shows new orders, production and employment growing, inventories contracting, and supplier deliveries slowing.

The PMI is based on data compiled from purchasing and supply executives nationwide, on a monthly basis. It’s a measure of what and how much manufacturing companies are buying now so that they can produce from those supplies in the near future. The PMI is not a measurement of actual manufacturing activity or output, but is considered a solid short-term leading indicator of performance.

The ISM report also points out that the overall U.S. economy grew for the 91st consecutive month in December. Let the good times roll!

Click here to view the full report.

Exit Strategies Group, Inc. pays close attention to performance trends in the manufacturing and supply chain sectors of the California and U.S. economy. If you’re in need of business valuation, succession planning or M&A brokerage services for your manufacturing or wholesale distribution business, give Al Statz a call for a confidential consultation at 707-781-8580.

Rising Interest Rates and Investment

/in , , /by Exit Strategies

Since July, the benchmark interest rate, the US 10-year treasury bond, has risen from 1.35% to over 2.55%. That’s a very big move in a short-period. Post-election day the rising rate trend accelerated. We saw a similar spike in 2013, only to see rates retreat. Is it different this time?

Valuation Building Block

Markets seem to believe that current rates are sustainable and can keep rising given the lower tax and infrastructure spending pronouncements coming from the new president elect. Interest rates are building blocks in asset pricing. Generally, when rates change business, individuals, and investors will re-examine their assets and shift them around to reflect their risk and return preferences. The expectations for changes in asset prices can take on near-term speculative fever: “Wait, I need to buy before it gets more expensive!” or “Wait, I need to sell before this thing tanks!”

Stability vs return; fear vs. greed (the two emotions that drive market prices). What return can you expect on your investments – be they stocks, bonds, real estate, or a business? It’s seldom a simple calculation. If predicting financial markets were only about numbers, math professors wouldn’t need to profess!

Since the election, US equity markets have climbed and bonds prices have sunk. Bonds reaction to rising rates is predictable. Bonds are “fixed-income” meaning its coupon rate remains the same regardless how interest rates move; however, when rates rise bonds lose market value because newly issued bonds have higher coupon rates, hence more value to you.

Will the Trump rally continue its ascent? Investors will eventually begin the stability vs. return tug of war. The Federal Reserve announced its intention to raise rates three times in 2017. This may or may not materialize. However, if bond yields do rise, many will trade bond stability over higher, more volatile equity returns which could create less demand and lower prices for equity – both public and private.

Is the “New Normal” Fading?

The “new normal” camp sprang from the 2008-09 crisis. Proponents argued that an aging U.S. population and high debt levels would bring on a Japanese style deflationary environment; and that technology and automation would depress middle-class wages and reinforce lower price trends. In fact, wages have stagnated for over 10 years and rates have stayed historically low. The long-term average on the 10-year treasury bond is 5%; even with the rapid rate rise since July, we are still at half the long-term average.

On the other hand, lower prices spur consumption; and wages have started to show some improvement. Add some fiscal stimulus, a deregulatory minded White House, and government spending: Boom – Keynesian animal spirits will prevail!

However, a few wild cards worth considering: will political rhetoric be matched with real action that might incite a trade war? Will lower taxes and government spending on infrastructure spur growth without impacting the U.S deficit? Will financial reform of Dodd-Frank create the same mess that brought us to Dodd-Frank?

These type considerations will impact our domestic economy and the business environment. Low rates have helped prop up equity valuations, made real estate more affordable, and allowed businesses to lower their capital costs. Rising rates may create a headwind.

Risk of Return

Indeed, rate increases mean the cost of capital is going up. We business appraisers use the “build-up method” which begins with the US Treasury rate and “builds up” a required rate of return based upon various risk factors. If the rise in rates is accompanied by higher growth in revenue and profit, valuations can remain high. However, if rates climb, growth stagnates, or inflation eats into profits, it most likely will have a downward push on business value (both public and private markets).

Exit Strategies Sells Aldetec, Inc. to Private Equity Backed Strategic Buyer

/in , /by Jim Leonhard

Sacramento, California – Exit Strategies is pleased to announce the acquisition of microwave electronics manufacturer Aldetec, Inc. by U.S. Technologies, a portfolio company of Cornerstone Capital Holdings.

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Aldetec, Inc. designs and manufactures integrated microwave assemblies and RF amplifiers for the commercial, military and space flight industry sectors. US Technologies (UST), of Fair Lawn, New Jersey, provides quality electronics design, manufacturing, engineering, testing, repair and refurbishment services, from complete finished units down to the component level. Cornerstone Capital Holdings, which owns UST, is a private investment firm that seeks to acquire niche manufacturing and industrial service companies with enterprise value ranging from $5 to $50 million.

Exit Strategies (ESGI) represented the sellers on an exclusive basis in this transaction. In the course of our sale engagement, we prepared a business valuation, composed the offering memorandum, marketed the company confidentially, negotiated on behalf of our client, managed the sale process and advised the sellers throughout the transaction. Deal terms are of course confidential.

For further information or for advice and representation in the sale, merger or acquisition of a company, contact Al Statz at 707-781-8580 or alstatz@exitstrategiesgroup.com.

About Exit Strategies

Exit Strategies Group, Inc. is a respected lower middle-market mergers and acquisitions advisory and business valuation firm based in California. ESGI brings M&A experience, proven processes and meticulous attention to detail to help private business owners sell, merge and acquire companies, as well as partner with private equity groups to grow and maximize value in an eventual exit. Our advisors have more than 100 years of combined experience in business merger and acquisition transactions in a variety of industries including sophisticated electronics manufacturing.

E-commerce Business SocksRock.com Sold to Strategic Buyer

/in /by Al Statz

San Francisco, CA – Exit Strategies is pleased to report the sale of E-commerce company SocksRock LLC to a strategic buyer.

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SocksRock, LLC established in 2008, is an e-commerce business selling customized athletic gear to sports teams and to corporations for identity programs. It has a track record of revenue growth, a website with intuitive product configuration and dynamic imaging capability, and superb customer satisfaction. SZ Ventures is a Texas-based aggregator and operator of e-commerce businesses. Its acquisition of SocksRock added to their athletic merchandise offering and complemented the seasonality of their other business units.

Exit Strategies (ESGI) represented the seller on an exclusive basis. We prepared the offering memorandum, marketed the company confidentially, introduced the parties, negotiated the deal, and advised the seller throughout the transaction.

Exit Strategies provides merger and acquisition brokerage and business valuation services to entrepreneurs and corporate owners across a broad range of industries. With four California offices and ten experienced M&A advisors, we work with companies with revenues in the $1-50 million revenue range. ESGI’s Internet Market Leader specializes in representing providers of Internet services, SaaS software, mobile apps, ecommerce sites and related solutions. for further information contact Al Statz 707-781-8580.

Exit Strategies Advises Redwood Reporting on its Sale to Litigation Services

/in /by Al Statz

Exit Strategies, a leading California based mergers and acquisitions brokerage and business valuation firm, recently advised the owners of Redwood Reporting & Videoconferencing, LLC on the sale of their company to Litigation Services, LLC. Transaction price and terms are private.

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Redwood Reporting, with 13 seasoned court reporters and 4 support staff at the time of the sale, has provided professional court reporting services since 1987, and offers exceptionally strong experience with large construction defect litigation projects.

Litigation Services, LLC, founded in 1999, provides document processing, court reporting, legal video, trial services, complex case management, and ESI collection, processing, and production services. Litigation Services does business throughout the U.S. and internationally. The company is headquartered in Las Vegas, Nevada and has offices in 7 states, from California to Florida.

For more information visit https://www.litigationservices.com/news/litigation-services-now-offering-service-santa-rosa/

This sale is another example of Exit Strategies’ M&A deal making experience and valuation expertise in the California business services sector. Exit Strategies has appraised and brokered hundreds of service businesses including medical, professional, software as a service (SaaS), real estate, maintenance and repair, test and inspection, and many other types of services. If you own a service business of any kind, we would be interested in hearing from you.

Recent Trends in the M&A Market

/in , , /by Jim Leonhard

Pepperdine University, of Malibu, California, in conjunction with the International Business Brokers Association and M&A Source, publishes a quarterly Market Pulse Survey of business brokers that provides useful information concerning the market for Main Street ($0-$2M sales price) and lower middle market ($2-$50M sales price) businesses.

Highlights from their most recent report for Q1 2016, include:

  • 50% of all business sell
  • Retirement is still the prime motivating factor for sellers followed by burnout.
  • The strongest growth for new sellers is in the $2M-$5M segment
  • Although the magnitude had declined somewhat, the lower middle market it is still a Sellers’ market.
  • Main Street multiples of SDE have remained relatively stable between 2 and 3x over the past 7 quarters
  • Multiples of EBITDA in the lower middle market have also remained fairly stable at 4x for $2M-$5M sales, but have risen for the $5M-$50 sales to 5.5x in the current quarter.
  • The average Main Street business sold for about 92% of asking price, while lower middle market companies sold for around 94% of the advisors’ and sellers’ expected price.
  • First-time buyers accounted for 43% of <$500K transactions while Private Equity Groups comprise 43% of buyers of $5M-50M businesses
  • It takes an average of 9 months to close a lower middle market deal.

To view the latest Market Pulse report or to discuss a current need in the area of business sales and acquisitions, please contact Jim Leonhard, CVA MBA at 916-800-2716 or jhleonhard@exitstrategiesgroup.com.