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In MDM’s recent webcast, The 2012 Wholesale Distribution M&A Update, available on DVD and on-demand, three panelists from different walks of the deal world talked about what is important to buyers when targeting companies for acquisition.
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The three speakers on the webcast were: Charley Hale, CFO, FCX Performance, a flow control products distributor; Jason Kliewer, director of Robert W. Baird & Co.'s distribution practice; and David O. Hawkins, investment team leader for CHS Capital. The three provided a balanced perspective on current trends and conditions in wholesale distribution M&A.
Ultimately, strategic and financial buyers are looking for different things in an investment. Strategic buyers – such as Grainger or Airgas – are looking for not just revenue and cost synergies, but also ways to grow: access to new customers, products or other opportunities to drive sales.
Financial buyers – private equity groups – are also looking at these factors, but many also are targeting a platform they can use to grow and then eventually use to sell the business either to another company or group or by taking the firm public.
A few criteria outlined by the speakers that were important both in sifting through acquisition candidates and in how they value acquisitions:
- Committed management team that remains post-closing
- Cultural fit
- Sticky customer relationships
- Strong vendor relationships
- The role of the distributor in the channel, especially if in a unique position to partner with customers and suppliers
- Leading position in market
- Brand recognition
- Ease of integration
- End-market dynamics
- Reputation for market leadership, local or regional
- Experienced and motivated human capital
- Culture of performance and accountability
- Institutionalized business practices
- Equity and credit market conditions