1 mergers & acquisitions mike dudek, zygoquest (610) 873-6555 [email protected] one-stop shop...

Mergers & AcquisitionsMergers & Acquisitions

Mike Dudek, ZygoquestMike Dudek, Zygoquest(610) 873-6555(610) 873-6555

[email protected]@zygoquest.com

One-stop shop – M&A advisory & legal One-stop shop – M&A advisory & legal servicesservices

““Deal ExpertsDeal Experts””2

Buying or Selling a BusinessBuying or Selling a Business

How to effectively How to effectively

buy or sell a buy or sell a business!business!

Timing the market!Timing the market!3

Types of AcquisitionsTypes of Acquisitions

StrategicStrategic CoreCore

FinancialFinancial ContiguousContiguous

4

Buying or Selling a BusinessBuying or Selling a Business

Value of internal growthValue of internal growth

Value of external growthValue of external growth

All about - Value All about - Value Creation!Creation!

&&

Effectively managing your businessEffectively managing your business

5

Buying or Selling a Buying or Selling a BusinessBusiness

RisksRisks&&

RewardsRewards““How much risk are you willing to take?”How much risk are you willing to take?”

Must follow a process to be Must follow a process to be successful!successful! 6

Discussion TopicsDiscussion Topics

I.I. Buy-side/sell-side processBuy-side/sell-side process

II.II. Financial, ops & legal Financial, ops & legal issuesissues

III.III.Analysis & valuationAnalysis & valuation

IV.IV.Industry issues & trendsIndustry issues & trendsMike Dudek – “consummated over 400 transactions”Mike Dudek – “consummated over 400 transactions”

7

8

1 Establishing overall strategy

2 Devising strategy, planning & timing

3 Determine investment & impact on valuation

4 Identifying , screening and contacting prospects

5 Executing mutual non-disclosure agreement

6 Exchanging information & undergoing pre-acquisition review

7 Meeting & negotiating

8 Negotiating, drafting & executing letter-of-intent

9 Buyer & seller due diligence

10 Contracts - purchase and sale agreement and ancillary agreements

11 Reviewing, negotiating & re-drafting contracts

12 Closing transaction

13 Assimilation after closing – need a point person & team

Buy-Side & Sell-Side Process

What can go wrong?What can go wrong?

OpportunitiesOpportunities

But, what can go wrong?But, what can go wrong?

9

Need to anticipate what can go wrong!

I. Sell & Buy-sideI. Sell & Buy-sideWhat can go wrong?What can go wrong?

For BuyerFor Buyer

Designated point person - accountable?Designated point person - accountable?

Responsibilities & plan - clearly defined?Responsibilities & plan - clearly defined?

DD results - assessed by management?DD results - assessed by management?

Representatives from key disciplines - due Representatives from key disciplines - due diligence?diligence?

Manager to run operation involved in purchase?Manager to run operation involved in purchase?

Conduct thorough due diligence!Conduct thorough due diligence! 10

I. Sell & Buy-sideI. Sell & Buy-side

What can go wrong?What can go wrong?Stakeholder issuesStakeholder issues

OwnersOwnersManagementManagementEmployeesEmployees

Key sales, service & admin personnelKey sales, service & admin personnel

CustomersCustomersVendorsVendors

Identify opportunities, strengths, weaknesses & threats!Identify opportunities, strengths, weaknesses & threats!11


What can go wrong?What can go wrong?Performance issuesPerformance issues

RevenueRevenueMarginsMarginsCostsCostsExpensesExpensesProfitProfitCash flowCash flow

Focus on the 80/20 rule!Focus on the 80/20 rule! 12



Assimilation issuesAssimilation issuesITITSystems, processes & proceduresSystems, processes & proceduresHR issuesHR issues

Employee compEmployee compBenefitsBenefits

Facilities – moves & changesFacilities – moves & changes

Do you plan to upset the apple-cart?Do you plan to upset the apple-cart?13


What can go wrong?What can go wrong?Post-closing issuesPost-closing issues

DisputesDisputesExpensive, time-consuming, distractionExpensive, time-consuming, distraction

14

I. Sell & Buy-side I. Sell & Buy-side ProcessesProcesses


For SellerFor Seller

15


What can go wrong?What can go wrong?Pre-closingPre-closing

Breach of trustBreach of trustWalk-away – after investing time & moneyWalk-away – after investing time & money

Post-closingPost-closingBreach of contractBreach of contractPost-closing claimsPost-closing claims

Pay now or pay later!Pay now or pay later! 16

II. Financial, II. Financial, Operational & Legal Operational & Legal

Deal IssuesDeal IssuesQuantitativeQuantitative

QualitativeQualitative

Analysis of facts & performanceAnalysis of facts & performance

Predictions, judgments & Predictions, judgments & opinionsopinions

17

A. Financial IssuesA. Financial IssuesHow about some due diligence!How about some due diligence!

Cite 3 real-world examples – not theoriesCite 3 real-world examples – not theories

Financial statement reliabilityFinancial statement reliabilityInfo availability for key aspects of businessInfo availability for key aspects of businessRevenue – mix issues & how beans are countedRevenue – mix issues & how beans are countedProfit margin trends, consistency, & volatilityProfit margin trends, consistency, & volatilityManagement add-backs & qualityManagement add-backs & qualityBalance sheet quality & excess assets or Balance sheet quality & excess assets or liabilitiesliabilitiesEarnings qualityEarnings quality

““Why employ an M&A expert”Why employ an M&A expert”18

Three-Year Functional P&LThree-Year Functional P&L

1919

Total sales2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014

Sales $1,000 $1,200 $1,440 $3,500 $4,550 $5,915 $4,500 $5,750 $7,355 $3,150 $4,095 $5,324 $350 $455 $592rev mix 22% 21% 20% 78% 79% 80% 100% 100% 100% 90% 90% 90% 10% 10% 10%

growth 20% 20% 30% 30% 28% 28% 30% 30% 30% 30%

Cost of sales $800 $995 $1,192 $2,100 $2,830 $3,649 $2,900 $3,825 $4,841 $1,890 $2,547 $3,284 $210 $283 $365% of rev 80% 83% 83% 60% 62% 62% 64% 67% 66% 60% 62% 62% 60% 62% 62%

Gross margin $200 $205 $248 $1,400 $1,720 $2,266 $1,600 $1,925 $2,514 $1,260 $1,548 $2,039 $140 $172 $227% of rev 20% 17% 17% 40% 38% 38% 36% 33% 34% 40% 38% 38% 40% 38% 38%

Direct expenses $110 $132 $158 $165 $150 $163 $275 $282 $321 $149 $135 $147 $17 $15 $16% of rev 11% 11% 11% 5% 3% 3% 6% 5% 4% 5% 3% 3% 5% 3% 3%

% of gm 55% 64% 64% 12% 9% 7% 17% 15% 13% 12% 9% 7% 12% 9% 7%

Operating contribution $90 $73 $90 $1,235 $1,570 $2,103 $1,325 $1,643 $2,193 $1,112 $1,413 $1,893 $124 $157 $210% of rev 9% 6% 6% 35% 35% 36% 29% 29% 30% 35% 35% 36% 35% 35% 36%

Admin expense $810 $978 $1,177% of rev 18.0% 17.0% 16.0%

% of gm 50.6% 50.8% 46.8%

Operating income $515 $666 $1,016% of rev 11.4% 11.6% 13.8%

Interest exp(inc) $40 $50 $60

Pretax income $475 $616 $956% of rev 10.6% 10.7% 13.0%

EBITDA $515 $666 $1,016% of rev 11.4% 11.6% 13.8%

Three -Year Functional P&L($000's)

Product sales Services Recurring services Project revenue

2020

Current assetsAccounts receivable – DSO (w/o Leasing)Inventory – turns – 80/20 reportOther current assets – value?

Current liabilitiesAccounts payables– DPOAccrued Expenses – cut-offs?Deferred revenue – pre-funding???Other current liabilities

Balance Sheet QualityBalance Sheet Quality

“When buyers compute valuation, they may not be overly concerned whether purchase price consideration is paid to owners or to third parties such as creditors. However, companies with excess liabilities and debt are generally discounted” , assures Mike Dudek of Zygoquest.

Long-term assetsPP&E – who has depreciation list?Other current assets – value?

Long-term liabilitiesDeferred revenue – pre-funding???Debt – impact on price!!!

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Balance Sheet QualityBalance Sheet Quality• CashCash

• Bank accounts reconciled?Bank accounts reconciled?• Cash receipts & disbursements – control systemCash receipts & disbursements – control system• Separation of dutiesSeparation of duties• Check-signersCheck-signers• Non-cash creditsNon-cash credits• Expense management – opportunityExpense management – opportunity

• Accounts receivableAccounts receivable• ReconciliationReconciliation• DSODSO• DSO w/o leasingDSO w/o leasing• Aging – by bucketAging – by bucket• Credits on accounts –unapplied; old; duplicateCredits on accounts –unapplied; old; duplicate• Credits & re-billingsCredits & re-billings• Exception reporting Exception reporting – what accounts s/b identified– what accounts s/b identified

Accountsunder control& reconciled?

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• InventoryInventory• ReconciliationReconciliation• Physical inventoryPhysical inventory• ValuationValuation• ObsolescenceObsolescence• Inventory turns & cash flowInventory turns & cash flow• 80/20 rule80/20 rule

• Prepaid & other assetsPrepaid & other assets – value?– value?

• Fixed assetsFixed assets• Depreciation scheduleDepreciation schedule• Interim accountingInterim accounting

Asset value?Equity value?

Quality of earnings?

2323


• LiabilitiesLiabilities• Accounts payable (DPO) – timely paid?Accounts payable (DPO) – timely paid?• Accrued liabilities – how about cut-offsAccrued liabilities – how about cut-offs• Deferred revenue Deferred revenue – trend; pre-funding?– trend; pre-funding?• Line of credit – purchase price reduction?Line of credit – purchase price reduction?• Floor planning – purchase price reduction?Floor planning – purchase price reduction?• Long-term debt – purchase price reduction?Long-term debt – purchase price reduction?

““Easy to assess what you see. Difficult to assess what you can’t”Easy to assess what you see. Difficult to assess what you can’t”

Ratio of assets to liabilities? Effect of debt on purchase price?

B. Operational IssuesB. Operational IssuesMust understand the businessMust understand the business

Assess management & employeesAssess management & employees Meet management, employees, tour facilitiesMeet management, employees, tour facilities Ask questions about roles & responsibilitiesAsk questions about roles & responsibilities

Assess functional areas – sales, service, ops, Assess functional areas – sales, service, ops, production, adminproduction, admin

Talk to the functional people involvedTalk to the functional people involved Review management information, systems controls & Review management information, systems controls &

processesprocesses

Assess markets, customers, products & service Assess markets, customers, products & service offeringsofferings

Same steps as aboveSame steps as above Review transactions – large & randomReview transactions – large & random Consider talking to customersConsider talking to customers 24

C. Legal IssuesC. Legal Issues

Due diligenceDue diligence Contract reviewContract review Organization documentsOrganization documents Risk assessment – various stepsRisk assessment – various steps

Deal structureDeal structure Mitigation of riskMitigation of risk Tax implicationsTax implications

Purchase agreement & ancillary agreementsPurchase agreement & ancillary agreements Reps & warrantiesReps & warranties IndemnificationIndemnification Survival periodsSurvival periods

25

A B C’s - Financial, A B C’s - Financial, Operational & Legal Operational & Legal

IssuesIssuesSynthesis of IssuesSynthesis of Issues

All about assessing performance, All about assessing performance, opportunities, opportunities,

strengths, weaknesses & risksstrengths, weaknesses & risks

Includes a review of history & Includes a review of history &

predictions about the future!predictions about the future!

26


IssuesIssuesRecapRecap

What do you need to do to assess a What do you need to do to assess a business – whether your intend to sell or business – whether your intend to sell or

buy?buy?

27


IssuesIssuesRecap to assess a business, one needs:Recap to assess a business, one needs:

InformationInformation Financial & operationalFinancial & operational

The right information!The right information!Key transactions, people, issues, contractsKey transactions, people, issues, contractsKey trends, ratios, anomalies & variancesKey trends, ratios, anomalies & variances

28

III. Analysis & ValuationIII. Analysis & Valuation

Every owner isEvery owner is

interested in valuation - Why?interested in valuation - Why?

It affects the size of the It affects the size of the stack!stack!

29

A. Key Valuation AttributesA. Key Valuation Attributes& examples& examples

1.1.Valuation FactorsValuation Factors

2.2.Impact of revenue mixImpact of revenue mix

3.3.Impact of growthImpact of growth

4.4.Purchase prices & multiplesPurchase prices & multiples

Nothing more valuable than growth – but fraught with risk!Nothing more valuable than growth – but fraught with risk!

If it was easy, everybody would do it!If it was easy, everybody would do it!30

1. Valuation Factors1. Valuation Factors

Quantitative & QualitativeQuantitative & Qualitative

Analysis of facts & Analysis of facts & performanceperformance

Predictions, judgments & Predictions, judgments & opinionsopinions

31

Valuation FactorsValuation FactorsQuantitative factors - examplesQuantitative factors - examples

Revenue, profit margins, earnings, cash flow & Revenue, profit margins, earnings, cash flow & growthgrowth

Management add-backsManagement add-backsBudgets & forecastsBudgets & forecastsContracts, projects, annuities, large & unusualContracts, projects, annuities, large & unusualBalance sheet – equity & debt – excess assets or Balance sheet – equity & debt – excess assets or

liabilitiesliabilitiesQuality of earnings & balance sheetQuality of earnings & balance sheet

Industry specific factorsIndustry specific factorsRevenue mix & functional profitability assessmentsRevenue mix & functional profitability assessmentsAccounts receivable; inventory; deferred revenueAccounts receivable; inventory; deferred revenue

““Assess revenue mix & margins of product & servicesAssess revenue mix & margins of product & services””32

Valuation FactorsValuation Factors

Qualitative factors – to name a fewQualitative factors – to name a few

IndustryIndustryManagementManagement Employee team Employee team

Customer baseCustomer baseMarketMarket Products linesProducts lines Customer Customer

offeringsofferingsSystems, processes & controlsSystems, processes & controls Utilization of Utilization of

ITITManagement informationManagement informationFacilities & work environmentFacilities & work environment

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3434

Financial Performance, Objectives & RecordsRevenueProfitCashGrowth

Customer OfferingsProductsServicesFinancing

Organizational StructureSalesMarketingOperations & ProductionAdministration

Third PartiesLawyersAuditorsBankersGovernment

CUSTOMERS

OWNERS

MANAGEMENTSUPPLIERS

CREDITORS EMPLOYEES

Zygoquest Group - STAKEHOLDER ASSESSMENT

Enhance the value of your company by:FOCUSING ON STAKEHOLDERS

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Zygoquest – Value ScorecardZygoquest – Value ScorecardH M L H M L

Financial Measurements Stakeholder MeasurementsP&L Employees

1 Total financial performance M 25 Management team quality H2 Cash flow H 26 Employee quality M3 Profit H4 Gross margin H Suppliers5 Revenue growth L 27 Quality of primary suppliers M6 Revenue mix M 28 Adequate diversity L

Balance Sheet Customers7 Overall asset quality M 29 Quality M8 Accounts receivable quality H 30 Sufficient diversity M9 DSO H 31 Market opportunity M

10 Inventory quality M11 Inventory turns M Major Value Adds12 Fixed asset quality L 32 Excess owner compensation L13 Accounts payable - DPO L 33 Outstanding profit/cash flow M

34 Substantial revenue growth MPeople Productivity 35 Owned facility L

14 Sales rep H 36 Leasing company L15 Service tech M 37 IT capability M16 Administration M 38 Exclusivity features L

39 Major Market Place MFinancial Records 40 Market Share Leader L

17 Organized M 41 Non-capital intensive L18 Adequacy of controls M19 Mgmt exception reports L Value Deflators20 Info management M 42 Poor financial records M

43 Questionable Assets MOperational Elements 44 Substantial Debt L21 Facility H 45 Substantial competition L22 Operations clean/organized M 46 Loss trend L23 Process efficiency M 47 Excessive litigation M24 Recurring revenue M 48 Strong Competition L

2. Impact of 2. Impact of Revenue Revenue MixMix

3 scenarios of financial statements3 scenarios of financial statements

Same growthSame growth

Same marginsSame margins

Same operating expense ratioSame operating expense ratio

Only difference – mix of revenueOnly difference – mix of revenue

60/4060/40 – – 50/5050/50 – – 40/6040/60 mix mix36

3737

60/40 Mix – Financial Highlights

FULL YEAR COPIER COMPANYEarnings Statement December 31,

2010 2011 2012

Sales $10,000 $12,000 $14,400Cost of Sales 5,480 6,576 7,891Gross Profit 4,520 5,424 6,509 Percent of sales 45.2% 45.2% 45.2%

Operating Expenses 3,840 4,608 5,530 Percent of sales 38.4% 38.4% 38.4% Percent of Gross Profit 85.0% 85.0% 85.0%

Operating Income $680 $816 $979 Percent of sales 6.8% 6.8% 6.8%

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60/40 Mix – 3-Year Functional P&LTotal Equipment Sales Total Supplies Sales Total Service Sales Totals2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012

Sales $6,000 $7,200 $8,640 $1,600 $1,920 $2,304 $2,400 $2,880 $3,456 $10,000 $12,000 $14,400rev mix 60% 60% 60% 16% 16% 16% 24% 24% 24% 100% 100% 100%

growth 20% 20% 20% 20% 20% 20% 20% 20%

Cost of sales $3,960 $4,752 $5,702 $1,040 $1,248 $1,498 $480 $576 $691 $5,480 $6,576 $7,891% of rev 66% 66% 66% 65% 65% 65% 20% 20% 20% 55% 55% 55%

Gross margin $2,040 $2,448 $2,938 $560 $672 $806 $1,920 $2,304 $2,765 $4,520 $5,424 $6,509% of rev 34% 34% 34% 35% 35% 35% 80% 80% 80% 45% 45% 45%

Direct expenses $1,500 $1,800 $2,160 $840 $1,008 $1,210 $2,340 $2,808 $3,370% of rev 25% 25% 25% 35% 35% 35% 23% 23% 23%

% of gm 74% 74% 74% 44% 44% 44% 52% 52% 52%

Operating contribution $540 $648 $778 $560 $672 $806 $1,080 $1,296 $1,555 $2,180 $2,616 $3,139% of rev 9% 9% 9% 35% 35% 35% 45% 45% 45% 22% 22% 22%

Administrative expense $1,500 $1,800 $2,160% of rev 15.0% 15.0% 15.0%

% of gm 33.2% 33.2% 33.2%

Operating income $680 $816 $979% of rev 6.8% 6.8% 6.8%

Interest exp(inc) $0 $0 $0

Pretax income $680 $816 $979% of rev 6.8% 6.8% 6.8%

EBITDA $680 $816 $979% of rev 6.8% 6.8% 6.8%

$'s in (000's)

3939

60/40 Mix – Example Valuation Calculation

Purchase Price

Balance Sheet Adjustment

Net Proceeds from Sale

4 X EBITDA $3,917 ($157) $3,760

4.5 X EBITDA $4,406 ($157) $4,250

5 X EBITDA $4,896 ($157) $4,739

5.5 X EBITDA $5,386 ($157) $5,229

4 X EBIT $3,917 ($157) $3,760

4.5 X EBIT $4,406 ($157) $4,2505 X EBIT $4,896 ($157) $4,7395.5 X EBIT $5,386 ($157) $5,229

Multiple of Trailing 12 month EBITDA

Multiple of Trailing 12 month Operating Income

Valuation SummaryValuation SummaryImpact of Impact of RevenueRevenue Mix Mix @ 5x @ 5x

EBITDAEBITDA

40

Mix Value Dif % DIF60/40 $4,739,00050/50 7,047,000 $2,308,000 49% Versus 60/4040/60 9,355,000 4,616,000 97% Versus 60/40

3. Impact of 3. Impact of GrowthGrowth

4141

4242

5 16 2810 33 6115 52 10120 73 14925 95 20530 120 27140 174 43850 238 659

Are you kidding me? Are you kidding me?

Of course not! #’s do not lie.

Impact of GrowthImpact of Growth

4343

Initial Investment $1.00

Growth Rate 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Year 1 $1.05 $1.10 $1.15 $1.20 $1.25 $1.30 $1.35 $1.40 $1.45 $1.50Year 2 $1.10 $1.21 $1.32 $1.44 $1.56 $1.69 $1.82 $1.96 $2.10 $2.25Year 3 $1.16 $1.33 $1.52 $1.73 $1.95 $2.20 $2.46 $2.74 $3.05 $3.38Year 4 $1.22 $1.46 $1.75 $2.07 $2.44 $2.86 $3.32 $3.84 $4.42 $5.06Year 5 $1.28 $1.61 $2.01 $2.49 $3.05 $3.71 $4.48 $5.38 $6.41 $7.59Year 6 $1.34 $1.77 $2.31 $2.99 $3.81 $4.83 $6.05 $7.53 $9.29 $11.39Year 7 $1.41 $1.95 $2.66 $3.58 $4.77 $6.27 $8.17 $10.54 $13.48 $17.09

Growth Model

$0.00$2.00$4.00$6.00$8.00

$10.00$12.00$14.00$16.00$18.00

1 2 3 4 5 6 7

Va

lue

Year

Growth Model

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

4. Purchase prices & 4. Purchase prices & multiplesmultiples

Multiples & purchase pricesMultiples & purchase prices ROI of buyerROI of buyer Risk to buyerRisk to buyer

Range of multiplesRange of multiples Historical rangeHistorical range Current rangeCurrent range

Multiple buyers?Multiple buyers?

Buyer profiles & interestsBuyer profiles & interests

Deal terms - impact on multiplesDeal terms - impact on multiples Deal structureDeal structure

44

M&A – Buy-sideM&A – Buy-side

Investing in your futureInvesting in your future

““Where can you realize such ROI’s”Where can you realize such ROI’s”45

Michael Dudek, Owner Michael Dudek, Owner (Philadelphia)(Philadelphia)

(610) 873-6555(610) [email protected]@zygoquest.com

Rich Wisniewski, Vice-President Rich Wisniewski, Vice-President (Phoenix)(Phoenix)

(602) 885-7945(602) 885-7945


““Deal ExpertsDeal Experts””

46

IV. Industry issues & IV. Industry issues & trendstrends

1.1. Industry trends & developmentsIndustry trends & developments

2.2. Market & customer trendsMarket & customer trends

3.3. CompetitionCompetition

4.4. VendorsVendors

5.5. Dealer trends – challenges; Dealer trends – challenges; opportunitiesopportunities

6.6. Technology – MPS, managed servicesTechnology – MPS, managed services

7.7. M&A trendsM&A trends

““Change: causes some to fear & fail! And opportunity & success for Change: causes some to fear & fail! And opportunity & success for others!others!

47


Industry trendsIndustry trends Paper to paperless trendPaper to paperless trend

Copy & print volume trendsCopy & print volume trends

Machine pricing trend – sell more Machine pricing trend – sell more for lessfor less

Disposable equipmentDisposable equipment

After-market pricing trendsAfter-market pricing trends

48


Industry trends (cont’d)Industry trends (cont’d)

Color growthColor growth Supply price exceeds service?Supply price exceeds service?

PricingPricing CommoditizationCommoditization Impact of remanufacturingImpact of remanufacturing

49


Technological developmentsTechnological developments

Internet continues to impact industryInternet continues to impact industry

Technology for customersTechnology for customers Mobile computing, MPS, managed services, Mobile computing, MPS, managed services,

cloud computing, software solutionscloud computing, software solutions

Technology for dealersTechnology for dealers Managed Services; remote diagnostics; etc.Managed Services; remote diagnostics; etc.

Operational advancements for dealersOperational advancements for dealers Direct shipments, auto-price increases, other?Direct shipments, auto-price increases, other?

50


CompetitionCompetition

Competition on all frontsCompetition on all fronts

Vendor directsVendor directs

VAR’s, Big Boxes, internet playersVAR’s, Big Boxes, internet players

Major account pricing impactMajor account pricing impact

Major account support – vendor conflictsMajor account support – vendor conflicts

51


Vendor TrendsVendor Trends VendorsVendors

Future consolidation?Future consolidation? Direct branches – more selective expansionDirect branches – more selective expansion Shift to technology, services & softwareShift to technology, services & software

Big BoxesBig Boxes Trouble; double-troubleTrouble; double-trouble Be alert for future changes & initiativesBe alert for future changes & initiatives

52


Dealer TrendsDealer TrendsThe strong survive – “get in or get out”The strong survive – “get in or get out”

Large dealersLarge dealers Investing, diversifying & growingInvesting, diversifying & growing

Medium dealersMedium dealersSome going one way; some the other!Some going one way; some the other!

Making necessary investments in growth?Making necessary investments in growth?

53


Dealer Trends (cont’d)Dealer Trends (cont’d)

Small dealers – increasing risks & Small dealers – increasing risks & challengeschallenges

Hiring & retaining productive personnelHiring & retaining productive personnel

Keeping pace with technological advancements Keeping pace with technological advancements

Investing or milking?Investing or milking?

Limited growth opportunitiesLimited growth opportunities

!! 54


M&A TrendsM&A Trends

VendorsVendors Remain protective of own dealersRemain protective of own dealers Selective acquisitions of competitive dealersSelective acquisitions of competitive dealers Shift to technology, services & software Shift to technology, services & software

acquisitionsacquisitions

Big BoxesBig Boxes Need to acquire services capabilities to Need to acquire services capabilities to

mitigate product commoditizationmitigate product commoditization!!

55


M&A Trends (cont’d)M&A Trends (cont’d)

Mega-dealersMega-dealers Where have you gone?Where have you gone?

Major impact on acquisition activity!Major impact on acquisition activity!

Large dealersLarge dealers Actively acquiringActively acquiring May encounter vendor competition on May encounter vendor competition on

certain dealscertain deals

56


M&A TrendsM&A Trends (cont’d)(cont’d)

Medium dealersMedium dealers Actively acquiring small dealersActively acquiring small dealers Seeking managed servicesSeeking managed services

Small dealersSmall dealers Lots of selling activityLots of selling activity Expect trend to continueExpect trend to continue

!! 57

Example To Do’s - Example To Do’s - MustsMusts

Understand your businessUnderstand your business Be strong on the numbersBe strong on the numbers Offer servicesOffer services Bundle services with supplies & equipmentBundle services with supplies & equipment LeasingLeasing Create annuity of contractual recurring Create annuity of contractual recurring

revenue revenue Efficient & effective systems – investEfficient & effective systems – invest Employ & deploy technologyEmploy & deploy technology Internet marketing & sales – hook Internet marketing & sales – hook

customerscustomers Reduce inventory - drop ship?Reduce inventory - drop ship? 58

Michael Dudek, Owner Michael Dudek, Owner (Philadelphia)(Philadelphia)

(610) 873-6555(610) [email protected]@zygoquest.com

Rich Wisniewski, Vice-President Rich Wisniewski, Vice-President (Phoenix)(Phoenix)

(602) 885-7945(602) 885-7945


““Deal ExpertsDeal Experts””

59

1 mergers & acquisitions mike dudek, zygoquest (610) 873-6555 [email protected] one-stop shop...

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