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Mergers & Acquisitions What’s it all about?. Michael J. Kulmoski Jr., CPA CFO & CTO Lewis-Goetz & Company. Ways to Grow. Option #1: Grow through ABL (Asset Based Lending) Borrow against AR and Inventory; Limited. Option #2: Partner with Private Equity;

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mergers acquisitions what s it all about

Mergers & AcquisitionsWhat’s it all about?

Michael J. Kulmoski Jr., CPA

CFO & CTO

Lewis-Goetz & Company

ways to grow
Ways to Grow
  • Option #1:
    • Grow through ABL (Asset Based Lending)
    • Borrow against AR and Inventory;
    • Limited.
  • Option #2:
    • Partner with Private Equity;
    • Establish credit facilities with premiere lending institutions;
      • Cash Flow Lend
    • Mezzanine debt;
    • Expands options, but have covenant compliance.
choosing a pe partner
Choosing a PE Partner
  • Not all cash is the same shade of green;
  • Must pick the right partner:
    • Flexible;
    • Similarly minded (chemistry);
    • Extensive contacts;
    • Solid relationships with lenders;
    • Patient;
    • Advisor vs. operator.
deal flow process some milestone steps
Deal Flow Process – some milestone steps
  • LOI – be certain to leave flexibility
    • Valuation.
  • Due Diligence – will expand later
  • Synergies;
    • Can drive valuation;
    • Can also assist with Proforma financial;
      • Which will drive funding (bank) ability;
    • Be careful not to pay the seller for your hard work post closing.
  • Funding;
    • Lender Deck.
  • Integration plan – will expand later.
due diligence process
Due Diligence Process
  • The DD team;
  • Standardize information request listings:
    • Financial;
    • Legal.
  • Quick assessment of financials:
    • This should be swift and as early in the process as possible;
    • Drives purchase price.
  • Further financial & legal DD will follow.
large deals vs small deals
Large Deals vs. Small Deals

Depends on your industry (fragmentation);

There is a minimum amount of work:

Financial;

Legal.

The size of target company drives the resources:

Limitations;

Advisors;

Information Availability.

integration plan options
Integration Plan Options
  • Option #1 - Simply acquire and allow to “conduct business as usual”
    • Resulting Valuation – not as high in consolidated company;
    • Ability to draw against credit facility limited
  • Option #2 - Acquire and Integrate
    • Resulting Valuation – increased in the consolidated company;
    • Greater ability to draw on credit facility (stronger EBITDA against which to draw) – cash flow lend.
integration plan
Integration Plan
  • Develop a detailed plan on the front end (get EITF 95-3 treatment);
  • Works best with a dedicated integration team (resources);
  • Forthright Communication:
    • Employees:
    • Customers;
    • Vendors;
    • Partners;
    • Everyone.
  • Create a FAQ sheet(s).
integration plan continued
Integration Plan, Continued
  • Need to remain visible to acquired entity;
  • Detailed schedules & timeline:
    • IT (ERP System, Accounting, email, etc.);
    • Administrative functions (AP, AR, etc.);
    • Processes;
    • Policies.
final thoughts
Final Thoughts
  • Question:
    • 2 + 2 = ??
  • Hint:
    • It can be greater than 4!
  • Answer:
    • It is all up to you and your approach