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Mergers & Acquisitions What’s it all about?

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?

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  1. Mergers & AcquisitionsWhat’s it all about? Michael J. Kulmoski Jr., CPA CFO & CTO Lewis-Goetz & Company

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. 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).

  9. 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.

  10. Final Thoughts • Question: • 2 + 2 = ?? • Hint: • It can be greater than 4! • Answer: • It is all up to you and your approach

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