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.

aldetec_logo

Sold To:

ust_logo

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.

socksrocklogo

Sold To:

szventureslogo

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.

redwood-reporting-logo

Sold to

ls-logo

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. 

Indigo Piping Systems Sold to Strategic Acquirer

/in /by Al Statz

Exit Strategies is pleased to announce the strategic acquisition of California-based construction materials distribution company Indigo Piping Systems, by Dateline Exports, Inc. of Portland, Oregon.

Founded in 1990 in Berkeley, California, Indigo offers a range of American brands of piping, valves and mechanical products for water infrastructure, fire protection and mechanical construction projects around the world. Indigo offers a complete supply service from expert product selection assistance to accurate on-time delivery to the international job site or port of choice.indigologo

Dateline provides military contractors, private developers, government agencies and retail outlets with a wide range of construction materials, primarily to the Asia-Pacific region.datelinelogo

Exit Strategies advised the sellers in this successful strategic transaction. Terms are confidential.

For M&A advice and representation in the sale or merger of your company, do not hesitate to call Al Statz at 707-781-8580 for a confidential consultation.

 

About Exit Strategies

Exit Strategies Group, Inc. (ESGI) 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 M&A transactions across a variety of industries including wholesale distribution and related logistics, systems integration and value-added supply chain companies. For more information www.exitstrategiesgroup.com.

 

 

Exit Strategies Represents Axis Systems in Sale to H&P Technologies

/in , /by Al Statz

Exit Strategies serves as M&A advisor in industrial automation distributor merger-acquisition.

Exit Strategies, Group Inc. is pleased to announce that H&P Technologies and its wholly owned subsidiary Behco, Inc. (www.behco.com) has acquired Xanthus, Inc., doing business as Axis Systems (www.axis-systems.com ) of Auburn Hills, Michigan. Exit Strategies served as exclusive M&A advisor to Axis Systems for this transaction. LogoAxisSystems

Established in 1976 by Tim Kline, Axis Systems is a leading supplier of quality automation technology solutions to Michigan manufacturers, specializing in motion, safety, sensors and collaborative robotics. It has a reputation for selling technologically advanced products, having strong technical/product knowledge, engineering competitive solutions, and providing excellent after-sale commercial support. H&P Technologies and its Behco subsidiary is an automation technology distributor and integrator providing pneumatic, hydraulic and electro-mechanical solutions technologies.

In acquiring Axis Systems, H&P expects to be better positioned to add value and satisfy the changing needs of its customers in the future. With H&P’s integration and manufacturing capabilities, the combined company will be a stronger value-added partner for Axis Systems’ long-term suppliers and loyal customers. Tim Kline, founder and CEO of Axis said, “After owning and managing Axis for almost 30 years, I am pleased to be passing its legacy on to another Michigan-based, family owned and operated company.” Tim Kline will remain with the company for at least a year. Deal terms remain confidential.

Al Statz, President of Exit Strategies, who led the transaction, stated “We are proud to have represented Axis in the sale to H&P. Our team prepared an analysis of Axis’ operations, identified, interviewed and qualified multiple high probability buyer candidates, and presented three finalists for Axis to consider. Tim Kline said, “I could not have chosen a better advisor to help me exit than Al and Exit Strategies. They were exceptionally knowledgeable, organized and effective in lining up a great buyer, negotiating terms, and quarterbacking the entire sale/acquisition process. Al’s industrial automation industry knowledge benefited both Axis and H&P.”

About Exit Strategies

Exit Strategies Group, Inc. is a respected lower middle-market mergers and acquisitions advisory and business valuation firm based in California. The firm applies proven processes and meticulous attention to detail in helping business owners sell, merge and acquire companies, as well as partner with private equity groups to grow and maximize value in an eventual exit. Exit Strategies Group advisors have more than 100 years of combined experience in business M&A transactions across a variety of industries including industrial automation and robotics. For more information contact Al Statz, alstatz@exitstrategiesgroup.com or 707-781-8580.

Exit Strategies Group Adds Kevin Lam to its Team of Senior-Level M&A Advisors

/in /by Al Statz

Exit Strategies Group, Inc., a leading California-based business transaction advisory and valuation firm, today announced the appointment of Kevin-Quang Lam as a Senior M&A Advisor for the company. In this position, Mr. Lam will use his extensive merger and acquisition knowledge and first-hand business ownership experience to guide business owner clients through the entire transaction process.

Kevin has completed transactions in a variety of industries and has deep experience with electronics manufacturing and technology companies. He is an accomplished business intermediary who has handled deals ranging from under $1 million to over $20 million in enterprise value. His experience as an M&A advisor, corporate executive and entrepreneur aligns well with Exit Strategies Group’s approach of bringing a team of talented advisors with diverse expertise to every client engagement.

Earlier in his career, Kevin gained invaluable experience in manufacturing & technology sales, marketing and business development in management positions at Siemens, Marubeni, Tyco Electronics, Itochu and Acumen. As an entrepreneur, he has started, acquired, managed and successfully sold several businesses.

Kevin is a member of M&A Source (the world’s largest association of middle market intermediaries) and California Association of Business Brokers (CABB), and has a B.S. in Marketing.

Kevin will give clients a partner they can trust, and will help strengthen Exit Strategies Group’s growing reputation as a firm that combines large firm resources with close personal attention from senior-level advisors to achieve successful transactions for its clients. I am very pleased that he has joined our firm.

About Exit Strategies Group

Exit Strategies Group is a respected lower middle-market mergers and acquisitions advisory and business valuation firm with four offices in California. The firm applies proven processes and meticulous attention to detail in helping business owners develop and execute M&A strategy, sell and acquire companies, and partner with private equity groups to grow and maximize value in an eventual exit. Advisors at Exit Strategies Group have more than 100 years of combined experience in business M&A transactions across a variety of industries. For more information on the company, please contact Al Statz, alstatz@exitstrategiesgroup.com or phone 707-781-8580.