This post was contributed by Capstone Senior Vice President Wes Teague:

Lockheed Martin (LM), one of the country’s largest government contractors, recently announced its intention to sell or spin off one of its oldest and profitable units, the Enterprise Integration Group.  The EIG,  a unit of LM for 42 years and with revenues of over $1.3B (out of LM’s $45.2B overall revenues) would no longer fit in LM’s long-term strategic plan, due to potential conflicts-of-interest with other, larger units of the parent organization that were significantly more important to the future of LM.

The decision to shed a long-standing, profitable unit or division or product is a hard one to make, especially in uncertain economic times.  With a proper strategic plan in place that maps out the organization’s longer-term growth plans, the decision can be made objectively, based on clear criteria and priorities that help remove the emotionalism of losing a “favorite child”.  Facilitated (to remove emotions) planning sessions can help companies make these decisions that at first glance seem counter-intuitive.  Intuition has its place, but a strong, well-thought out plan is usually a better bet for long-term success.

Technorati Tags: Acquisition Strategy, acquisitions, Capstone, divestiture, Enterprise Integration Group, External Growth, Lockheed Martin, M&A, M&A News, mergers, Mergers and Acquisitions, wes teague

“The First Date”: Contacting Owners and Successful First Meetings
CPE Credit Awarded
Thursday, July, 29 2010; 11:00 AM ET

Hosted by David Braun, Capstone CEO

David Braun, CEO of Washington, DC- based external growth consulting firm Capstone, is hosting a webinar with Capstone Project Manager Gretchen Johnson.

Having identified the target companies you would like to consider acquiring, you are ready to make contact with the owners. The first connection is decisive. Handled correctly, it can initiate a positive relationship that may eventually lead to union. But if you botch it, that one phone call can terminate the opportunity to buy.

This webinar will show you how to approach owners of “not-for-sale” companies armed with the right information and strategy to get your foot in the door and get that critical first meeting. You will also learn about how to approach that meeting - the “first date” in what could be a successful (and lucrative) relationship for all involved.  You will be able to keep owners saying “Yes!” until you say “No!”

After completing this course, you will be able to:
•    Explain what typically motivates owners to consider the sale of their business
•    Describe effective contact strategies for getting and keeping owners on the phone
•    Detail how to use your previous market and prospect research to gain credibility with an owner
•    Outline steps to take for a successful first face-to-face visit with an owner
•    Develop a persuasive first meeting presentation to highlight the strategic fit between your company and the prospect
David and Gretchen will speak for approximately 50 minutes followed by a question-and-answer session.

Date:  Thursday, July 29, 2010
Time: 11:00 AM ET/ 10:00 AM CT/ 9:00 AM MT/ 8:00 AM PT

No Prerequisites or Advanced Preparation needed!

To register, click here:  https://www2.gotomeeting.com/register/558113314

Registration Fee: $79

IMPORTANT PAYMENT INFORMATION:  Once you register, we will send you a request for payment via PayPal (may take up to 24 hours).  Once payment is confirmed, your registration will be approved and you will receive the log-in information for the webinar.

CPE Credits – 1 CPE credit in Business Management and Organization will be given for those attending this webinar
Program Level:  Basic
Delivery Method: Group Internet-Based

Please feel free to forward this information on to anyone who might be interested in corporate growth strategies.

Refund policy: Requests for refunds must be received in writing by 1:00 PM ET Wednesday, July 28 and the money will be refunded in full within 5 business days.  After 1:00 PM ET on Wednesday, July 28 a credit will be given for a future webinar.  In the event of a cancellation, you will be given the option of of a full refund or applying your fee to a future webinar.

For questions or concerns, please contact Matt Craft at 703-854-1910 or mcraft@capstonestrategic.com

Capstone Strategic, Inc. is registered with the National Association of State Boards of Accountancy as a sponsor of continuing professional education of the National Registry of CPE Sponsors.  State boards of accountancy have final authority on the acceptance of individual courses for CPE credit.  Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 4th Ave N, Suite 700, Nashville, TN, 37219-2417. Website: www.nasba.org

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, CPE, David Braun, External Growth, first meetings, Gretchen Johnson, mergers, Mergers and Acquisitions, owner contacts, owners, webinar

Private equity fundraising from 82 closed funds totaled only $41 Billion in the second quarter - the lowest level since 2003, according to the Private Equity Professional Digest. This is important news for strategic buyers because it continues to demonstrate that financial buyers will remain limited in their M&A activity - but that the clock is still ticking to take advantage of this environment

PE funds will have to do smaller deals or take less equity in order to make the most of their funds.  On the other hand, strategic investors with cash will have the upper hand and should be able to close more transactions – if they are willing to take action.

If a strategic firm will not make investments in their industry in this market, I question their resolve for the industry and also would ask the executives why their wouldn’t use their strong balance sheet in this depressed market?  With tongue firmly in cheek — are you waiting for prices to go up before buying?!

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, David Braun, External Growth, M&A, M&A News, private equity

Caterpillar announced it is acquiring Electro-Motive Diesel for $820 Million.  The company, which has revenues of about $1.8 billion is currently owned by two private equity firms who acquired it from General Motors in 2005 for around $200 million (read my other post about PE divesting before tax rates increase). Caterpillar already owns a railcar maintenance and repair business and this puts it into the manufacturing business (backward integration).

“This acquisition represents the latest step in our strategic plan to aggressively grow our presence in the global rail industry”  stated Doug Oberhelman, CEO-elect of Caterpillar.  They are betting on the US economy coming back with the demand for railcars to grow, as well as continued growth in emerging markets like India and China.  It seems to me Caterpillar is being market-driven and buying when the market it down (buy low/sell high).   Although GE is their major competitor in this space, I predict Caterpillar will do well with this investment.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, Caterpillar, David Braun, External Growth, GE, M&A, M&A News, mergers, Mergers and Acquisitions, private equity

Congress is close to taxing “carried-interest” income on fund managers at 30% in 2011 from the current 15% capital gains rate. The rate is likely to go to 33% in 2013.  Congress may exclude the first 25% of income from this higher tax rate (which doesn’t really make sense to me) but the real story is the opportunity this presents for strategic buyers.

First, private equity firms are now motivated to divest businesses in 2010 to preempt the higher taxes - look for companies they acquired pre-2006 or post 2008 as more likely candidates.  Second, I believe these fund managers will find a way to structure deals to avoid the higher taxes, for example using calls and puts. In the meantime this distraction will limit their deal making.  So once again strategic buyers have an advantage over financial buyers.

The long-term question is: how will this change impact investments in growing companies?  I don’t see how it helps.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, capital gains, Capstone, carried interest, Congress, David Braun, External Growth, M&A, M&A News, mergers, Mergers and Acquisitions, taxes

For nearly two years, Mergers & Acquisitions Daily has brought you a fresh perspective to the ever-changing world of M&A. As a veteran practitioner, I have fashioned a new approach to the challenges of external growth — a systematic process that has resulted in numerous successful deals across multiple industries.

In this blog I share my thoughts on topical M&A issues combined with insights from Buying Power, my forthcoming book on acquisition strategy. Our newsfeed from the markets adds daily currency to the site. Most important, I welcome your comments on my posts — so join the conversation and enjoy the blog!

To make a comment, click the TITLE of the post.

Technorati Tags: Acquisition Strategy, External Growth, Integration, m-and-a, Mergers and Acquisitions

Tuesday’s Wall Street Journal had an article about how poorly large private equity deals have performed.   No wonder.  What value do they bring to the company?  Stripping off and selling key assets, re- re-leveraging the balance sheet.   How does this financial engineering grow or improve a company?

Well, maybe some financial discipline is needed.  But I stand by my philosophy of Strategy First - why are you buying the company in the first place and what are you going to do with it?  Seems to me with all these poorly performing PE deals, it is time for strategic companies to step in, buy them back and grow them.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, David Braun, External Growth, M&A, M&A News, mergers, Mergers and Acquisitions, private equity

Nothing like today’s considerable drop in the market to remind everyone that the economy remains on shaky ground.  I stand by my past prediction that the market will not improve dramatically for another 12 months.

This turmoil does two things.  It makes sellers more fearful that the bottom could fall out again and it may be time to hitch their wagon to another team of horses.  It also adds fear to buyers who aren’t convinced they want to plunk down a bunch of dough when the market may not make it rise and bake into something meaningful.

So I contend we continue to have parity among buyers and sellers, but I also contend for those with strong stomachs and solid strategic plans, this could turn out to be a great time to be a bold buyer.  Remember the adage “buy low, sell high.”  The market is low for many buyers.  So do you really believe the saying  or it just sounds nice for other people?

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, David Braun, External Growth, M&A, M&A News, mergers, Mergers and Acquisitions, stock market

H-P is acquiring Palm for $1B and they say it is to position them further into the smartphone market which reportedly grew by over 60% last year.  H-P’s head of strategy, Shane Robison said “It’s an opportunity for us to get into a very big market”.   Understandable?  It is to me.  I’m not saying it’s a good strategy, but they have ONE reason for the acquisition and from my experience H-P is more likely to be successful because people get it.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, David Braun, H-P, M&A, M&A News, Mergers and Acquisitions, one reason, Palm

Although it almost dipped back below today, the Dow broke the 11,000 mark earlier this week.  This psychological barrier will impact the M&A market since there is a strong correlation between the equities market and M&A, with M&A lagging a bit.

I continue to expect an increase in deal making, with the biggest growth to be hitting in mid-2011.  Companies are now gearing up for deals which take some time to get into place, but with a strong stock market, burgeoning balance sheets, and historically low costs for debt, I see the market starting to brew.  I still maintain you should keep your seat belt on because I fully expected non-participants of the M&A market are going to be shocked at how their competitors radically change over the next 12-24 months.  Many companies will be left eating dust while others blaze a new growth path.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, capital markets, Capstone, David Braun, Dow, External Growth, M&A, M&A News, mergers, Mergers and Acquisitions, stock market