outsourced corporate development services for the middle market
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PowerPoint presentation on Corporate Development Services programTRANSCRIPT
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Intelligence, Diligence, Integrity 1
Corporate Development Services
for the Middle Market
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Intelligence, Diligence, Integrity 2
Corporate Development Program
• Focus– Middle market size
businesses– North America– B to B – Manufacturing &
Distribution, Services
• Client Profile– Small/Mid Cap Corporations
and privately held companies
– International companies looking to expand in NA
– Divisional business units
Corporate Development
Acquisition Divestiture
Fit & Value
Pre-determined Value
Marketing Value
Transaction
Strategic Assessment
Due Diligence
Research
Candidate
Development
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Intelligence, Diligence, Integrity 3
Value Proposition
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Intelligence, Diligence, Integrity 4
Acquisition
Many acquisitions become emotional rather than strategic buys. We help keep things in perspective…– Analyze strategic
position and alternatives– Market Intelligence– Research and develop
candidate list– Solicit candidates– Facilitate due diligence
Process– Coordinate purchase
agreement process
Corporate Development
Acquisition Divestiture
Fit & Value
Pre-determined Value
Marketing Value
Transaction
Strategic Assessment
Due Diligence
Research
Candidate
Development
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Intelligence, Diligence, Integrity 5
Strategic Assessment
• Strategic position – Market Attractiveness– Competitive position– Vertical and horizontal
synergy opportunities
• Analytical tools– 4- Block Benchmarking– SWOT Analysis– Channel To Market
Metrics – ROI Modeling
Product OfferingNarrow Broad
Mar
ket
Gro
wth
Low
Hig
h
Future Value
Synergy ValueShare Value
Niche Value
Strength Opportunities
Weakness Threats
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Intelligence, Diligence, Integrity 6
Research & Candidate Development
• Rate each potential acquisition candidate using a ten question quantifiable technique.
• Determine the availability of the acquisition candidate, (including valuation)
• Networking avenues to candidates
• Introductory communications
• Targeted mailing campaign
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Intelligence, Diligence, Integrity 7
The Deal
Getting to the deal stage can take 18+ months. Success is dependent upon– Emphasis on strategic
value vs. opportunistic price
– Effective due diligence is critical • Team selection• Project management• Synergy & market value
validation
– Negotiations• Reps & warranties• Transition services• Management retention
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Intelligence, Diligence, Integrity 8
Divestiture
Businesses need to prune in order to grow. We provide the “sheers” or processes needed to maximize results– Testing Fit & Value– Pre-determined Value– Marketing Value– Transition Value
Corporate Development
Acquisition Divestiture
Fit & Value
Pre-determined Value
Marketing Value
Transaction
Strategic Assessment
Due Diligence
Research
Candidate
Development
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“Most Companies wait too long to divest. They
should sell off businesses long before
they become a burden.”
McKinsey Quarterly- Divesting Proactively
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“Corporations that take a disciplined
approach to divestiture not only
sharpen their strategic focus on their core but also
create nearly twice as much value for shareholders “
How the Best Divest -Harvard Business Review
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Intelligence, Diligence, Integrity 11
Defining a Divest-Business
• Business unit within a larger division or
group. – Sales : $10 to $100
million– 10 to 250 employees
• No strategic value to the parent company
• Under-resourced and over-burdened with corporate mandates and initiatives
• Little attention given to
business’ markets
Corporate
Division A Division B Division C
Core Business
D-Business
Core Business
D-Business
Core Business
D-Business
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Intelligence, Diligence, Integrity 12
Test For Fit and Value
• Fit– Keeping them isn’t
essential to positioning your company for long-term growth and profitability
• Value– They’d be worth
more in any other company’s portfolio than in yours
Long-term fundamentals are
sound
Grow unit’s intrinsic value
by 15%+
Revenues meet
corporate threshold
Textron Three Tests of Value
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Intelligence, Diligence, Integrity 13
Valuing The Business For the Middle Market
• Focus on key value drivers
• Value considerations– Organization strength– Corporate dependence– Asset utilization– Market position– Customer Mix – Liabilities
• Take a buyers perspective
• Pre-determined Value (PDV) minimizes valuation debate going forward in the process.
Strategic
Synergy
Performance*3-5X
*4-6X
*5-7X
Financial
Com
petitor
Market
Expansion
* EBITDA Multiple
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Intelligence, Diligence, Integrity 14
Marketing Value To The Middle Market
• Prepare business documents for Offering Letters & Brochures
• Develop profile of ideal buyer
• Outline desired terms and conditions
• Data gathering process– Data Room
Documents– Legal review– Reps & warranties
FinancialPerformance
OrganizationBusiness Dynamics
Assets&
Liabilities
Pre-determined Value
Marketing Package
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Intelligence, Diligence, Integrity 15
Buyer Screening Process
• BizMartSM
– Eight thousand Buyers
• Marketing & Research – Mailings – 400 thousand Contacts– Utilize Outside databases– Buyer criteria updates– Industry surveys
• Operation Standards– Contract Forms – Confidentiality Agreements– Offering Brochures & Letters– Buyer screening methods
Operating Companies,
70%
Private Equity, 30%
Private Investors,
10%
BizMartSM Buyer Mix
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Intelligence, Diligence, Integrity 16
Commission Program
• Commission– Sold within 12 months
• Value up to $10 million : 4.5%
• Value over $10 million: 1.0%
– Sold after 12 months• Value up to $10
million: 3.0%• Value over $10
million: 1.0%– Minimum $200 thousand
• Retainer fee – Based on scope - TBD– Applied towards
commission at closing
Effective Commission Rate
0.75%
1.25%
1.75%
2.25%
2.75%
3.25%
3.75%
4.25%
4.75%
Transaction ValueC
omm
issi
on %
Sold after 12 months Sold w ithin 12 months
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Intelligence, Diligence, Integrity 17
Who is Chapman Associates?
• Served middle market clients since 1954.
• Represent companies worth between $3 million and $100 million.
• Over 2,300 successful transactions to our credit.
• Team averaging over 25+ years of experience - CPAs’, Attorneys, Corporate Executives, Entrepreneurs
Offices Nationwide