Accelerating Growth and Avoiding “Surprises”

1. Accelerating Growth and Avoiding “Surprises” Ron Rhodes

2. The #1 challenge facing companies today is the slow growth of their core products Ron Rhodes

3. The #2 challenge is profitability Ron Rhodes

4. Are you satisfied with your current growth rate? Are your profits growing at a faster rate than your sales? Ron Rhodes

5. There is a way to increase the number and quality of your new growth opportunities And it is a proven, repeatable business building process that is guaranteed to deliver results Ron Rhodes

6. Executing and Managing Growth • Sell more units & services • Raise prices • Introduce new products • Reduce costs • Acquire external opportunities Ron Rhodes

7. External Opportunities • Company acquisitions • Product acquisitions • In-out licensing of products and technology • Joint ventures, alliances and partnerships • Distribution agreements Ron Rhodes

8. Are you following a “reactive” rather than a “proactive” business development strategy? Ron Rhodes

9. “Reactive” Strategy You sit back and wait for outside deal makers to present over-priced and questionable business fit proposals while they are showing them to your competitors at the same time. Ron Rhodes

10. “Proactive” Strategy You use a proven program to uncover and pursue product and company acquisitions, in-out licensing of technology, joint ventures, alliances and partnerships before your competition finds out about them. Ron Rhodes

11. Strategic Acquisition Objectives • Build value – higher profits and cash flow • Use strategic acquisitions as an integral part of your growth strategy • Strengthen your management team • Expand customer relationships • Provide more products and services • Increase the number of your customers Ron Rhodes

12. Strategic Acquisition Questions • Does the new opportunity fit with your long-term strategic objectives? • After the closing, how will the business function operationally and will there be near-term operational synergies? • Are the key managers people you can work with? Ron Rhodes

13. Strategic Acquisition Process Plan + Uncover + Due Diligence + Integrate Ron Rhodes

14. Plan and prepare to increase your number of good opportunities • Uncover opportunities before the become “for sale” • Avoid “surprises” with a management due diligence • Integrate to strengthen management team Ron Rhodes

15. Plan and Prepare to Increase Your Number of Good Opportunities • Plan your business realistically going forward • Develop focused criteria for each component of growth • Establish external opportunity contribution goals Ron Rhodes

16. Uncover Opportunities Before They Become “for sale” • Identify target companies of interest in your market universe • Search and uncover company intelligence • Prioritize potential opportunities by fit • Making initial contacts before your competition with networking + direct marketing Ron Rhodes

17. Avoid “surprises” with a Management Due Diligence • Holding preliminary discussions - establishing relationships • Determining business and people fit • Conducting management due diligence Ron Rhodes

18. Why a management due diligence? • Eliminate surprises • Reduce risk • Building relationships and team • Identifying the Hidden Assets and Liabilities • Understanding where the potential acquisition best fits operationally • Need to balance the financial and legal aspects of acquisitions with operational, people and business considerations Ron Rhodes

19. What is it? • Conducting a “through investigation” • Asking & re-asking questions • Digging up facts • Dealing with people as well as financial and legal issues • Understanding the real picture of the business you are acquiring including the Hidden Assets & Liabilities • Looking past “what people say’ • Determining “what they think” Ron Rhodes

20. Management team Organization culture, politics, competency & skills Information flow, know how & databases Market Position Distribution channels Customer Relationships Brand Image Alliances & partnerships Patents & trademarks What Hidden Assets & Liabilities do not appear on traditional financial statements? Ron Rhodes

21. Questions to keep in mind • You can’t get the right answer if you are asking the wrong question • The wrong person asking the right question will not get you the right answer Ron Rhodes

22. Integrate to Strengthen Your Management Team • Identify key management • Determine if they want to work with you and if they will fit into your culture • Move quickly to integrate to get all of your employees back focused on business building Ron Rhodes

23. Merger Success • When do you know if an acquisition has been a success? • Probably not until three years after the closing • Most of your merger integration issues will have been dealt with • You will know which of the acquired people you can count on • You will understand how much growth you can get out of the acquired products Ron Rhodes

24. Key M&A points • It is not the “art of the deal” that determines your success with acquisitions but how well you manage the new business going forward Ron Rhodes

25. Key M&A points • People are more important than numbers and products in buying businesses Ron Rhodes

26. Key M&A Points • Strategic acquisitions where the buyer understands the business and can bring value-added benefits represent the best opportunities Ron Rhodes

27. Key M&A points • The price you pay is not as important as how long it will take you to double the acquired company’s sales Ron Rhodes

28. Key M&A Point • Don’t expect the acquired company’s key executives to work harder for you after the closing especially when they receive a large payout from the transaction Ron Rhodes

29. Key M&A Point • Initiate synergies early and at one time so your workforce can re-focus on achieving the strategic leverage and accelerating growth Ron Rhodes

30. Key M&A Points • “Mergers of equals” like joint ventures only work if one CEO takes leadership for the strategic, operational and cultural integration Ron Rhodes

31. Why Do Mergers Fail? Ron Rhodes

32. Reasons for merger failure • Inadequate management due diligence • Lack of a compelling strategic plan and rationale • Unrealistic expectations of possible synergies • Paying too much for the new business • Not recognizing different agendas and cultures • Poor communication to employees • Failure to move quickly to integrate the company • Top management agenda out of line with stockholder interests Ron Rhodes

33. Strategic Acquisition Process Plan + Uncover + Due Diligence + Integrate will Accelerate Growth and Eliminate “surprises” Ron Rhodes

34. Ron Rhodes. . .40 Years of Strategic Business Building • Due Diligence Group. . .strategic business development consulting • ATTLAS Directory. . .created and built licensing and technology transfer print and online information service • Revlon Health Care. . .as VP Planning took $60 mil co. to $1.5 bil with 50 strategic acquisitions • ITT. . .Business Analyst for conglomerate that added $4+ bil in diversified acquisitions