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Transcript of 1 Mergers & Acquisitions Mike Dudek, Zygoquest (610) 873-6555 [email protected] One-stop shop –...
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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
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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
I. Sell & Buy-sideI. Sell & Buy-side
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
I. Sell & Buy-sideI. Sell & Buy-side
What can go wrong?What can go wrong?
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
I. Sell & Buy-sideI. Sell & Buy-side
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
What can go wrong?What can go wrong?
For SellerFor Seller
15
I. Sell & Buy-sideI. Sell & Buy-side
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<hree-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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Balance Sheet QualityBalance Sheet Quality
• 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?
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Balance Sheet QualityBalance Sheet Quality
• 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
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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
A B C’s - Financial, A B C’s - Financial, Operational & Legal Operational & Legal
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
A B C’s - Financial, A B C’s - Financial, Operational & Legal Operational & Legal
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
33
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
3535
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<otal 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)
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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
[email protected]@zygoquest.com
““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
IV. Industry issues & IV. Industry issues & trendstrends
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
IV. Industry issues & IV. Industry issues & trendstrends
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
IV. Industry issues & IV. Industry issues & trendstrends
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
IV. Industry issues & IV. Industry issues & trendstrends
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
IV. Industry issues & IV. Industry issues & trendstrends
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
IV. Industry issues & IV. Industry issues & trendstrends
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
IV. Industry issues & IV. Industry issues & trendstrends
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
IV. Industry issues & IV. Industry issues & trendstrends
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
IV. Industry issues & IV. Industry issues & trendstrends
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
IV. Industry issues & IV. Industry issues & trendstrends
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
[email protected]@zygoquest.com
““Deal ExpertsDeal Experts””
59