M&A: From LOI to Close
CPE Credit Awarded
Thursday, March 11, 2010; 1:00 PM ET

David Braun is hosting a webinar with Capstone Senior Vice President Wes Teague.

Building on the success of our last webinar on Contemporary Legal Issues in M&A, Capstone is presenting a new program that will lead you through one of the most challenging, yet exciting parts of any deal:  The journey from Letter of Intent to Close.

This webinar will provide insight that any professional involved in M&A will want to know.

After completing this course, you will be able to:
•    Explain the structure of an Letter of Intent and how to make it beneficial to your situation
•    Describe how to manage the Due Diligence process from both the viewpoint of the Buyer and Seller
•    Utilize strategies to negotiate an agreement that is beneficial to both sides
•    Identify how valuation is affected during the Due Diligence and Closing process
•    Recognize what is expected at Closing
•    Begin to execute your Integration game plan
David and Wes will speak for 50 minutes followed by a question and answer session.

No Prerequisites or Advanced Preparation needed!

To register, click here: https://www2.gotomeeting.com/register/875225514

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.

Mark you calendar for our upcoming webinars for CPE Credit:
•    Thursday, April 8, 2010 1 PM ET:  “Finding Opportunity for Growth” - 1 credit in Business Management and Organization
•    Thursday, May 6, 2010 1 PM ET: “Identifying the Right Markets for Expansion” - 1 credit in Business Management and Organization
•    Friday, June 5, 2010 1 PM ET: “How to Find Top-Notch Companies” - 1 credit in Business Management and Organization
For questions or concerns, please contact Matt Craft at 703-854-1910 or mcraft@capstonestrategic.com

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

Refund policy: Requests for refunds must be received in writing by 1:00 PM ET Wednesday, March 10.  After 1:00PM Wednesday March 10, a credit will be given for a future webinar.  In the event of a cancellation, you will be given the option of a full refund or applying your fee to a future webinar.

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, David Braun, due diligence, External Growth, Indication of Interest, Integration, Letter of Intent, LOI, mergers, Mergers and Acquisitions, webinar, wes teague

Banks are still not lending much these days and last year  had their sharpest decline in lending in 67 years.  A friend who is a Vice President at a major US bank recently told me: “We have lots of money to lend, just no one that we want to lend it to.”   So how are cash-poor companies with good growth potential going to grow?

The simple truth is that many won’t.  But for others there are several options:

• Go slow
• Bring on new equity partners
• Align with better credit worthy people (think co-signing here)
• Get trade credit from larger suppliers
• Talk to your credit union or community bank (especially those without a lot of mortgage loans)
• Keep talking to your bank.

One CEO told me he met with 32 banks before he got one to believe in him and his business plan.  From the banks’ perspective they are still working through a mountain of bad real estate loans and the commercial credit crunch is just starting to emerge.  So what will banks do about all these commercial notes?  I think their options are limited.  If they call the note the owner may go into foreclosure and fire sale the property.  It seems to me this creates a FASB 157 issue for banks and would require them to re-value their balance sheet which just exacerbates the problem.

I predict we’ll see banks extend credit and hope for better days ahead to refinance, syndicate or sell off these commercial loans.   The bigger opportunity here may be for a new breed of commercial capital to fund growing companies – perhaps a bank, mezzanine lender, private equity investor and venture capitalist all blended together to create an organization that actually lends money to companies.  We don’t seem to have many of these nowadays.  I’m thinking I should do research on Banca Monte dei Paschi di Siena S.p.A., located in Siena, Italy.  It was founded in 1472 it is the oldest surviving bank in the world.  Surely they have been through this before.

Technorati Tags: Acquisition Strategy, acquisitions, Banca Monte dei Paschi di Siena, banking, business acquisitions, Capstone, credit, David Braun, External Growth, FASB 157, loans, M&A, M&A News, mergers, Mergers and Acquisitions

More and more I am seeing creative deal structuring in today’s M&A market.  This comes as little surprise.  The credit markets remain quiet; companies are not growing their way out of financial stress and smaller firms often finding themselves squeezed by larger companies who offer more products and better terms.

So what is a small to midsized business CEO to do?  One suggestion us to align yourself with companies where you do not share the same customer (no need to fight over scraps) and find companies that add value to your offering and aggregate the products and service for your customers.  In some cases we are advising our clients take minority positions in critical companies. In others, we advise acquiring a majority position and in others we are structuring subcontracting agreements.  There is no silver bullet, but the key is to have some weapons on your side that can differentiate you - particularly from your fretful competitors who are paralyzed.  Keep in mind I think you are going to have a lot more buying competition in 12 to 16 months.  Time is becoming of the essence.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, David Braun, deal structure, External Growth, M&A, m-and-a, mergers, Mergers and Acquisitions, minority investment

On this blog previously, David discussed some of the issues surrounding the AOL-Time Warner merger.  Given that the ten year anniversary of the merger was recently marked, I wanted to re-visit the ill-fated deal to explore it a little more in-depth.

AOL and Time Warner merged to create the “world’s first Internet-age media and communications company” for an all-stock combined value of $350 billion. The merger announcement stated that the new company “will be uniquely positioned to speed the development of the interactive medium and the growth of all its businesses. It will provide an important new broadband distribution platform for AOL’s interactive services and drive subscriber growth through cross-marketing with Time Warner’s pre-eminent brands”… which doesn’t include the laundry list of growth opportunities captured in the remainder of the announcement covering everything from music to telephony.

Instead of delivering on these ambitious promises, the merger imploded, translating into about $100B in lost shareholder value. The new company was plagued by many issues such as: short-term thinking, bad technology, bungled product development, and a risk-averse culture more prone to imitation than innovation. Most importantly the vision and passion the deal champions Jerry Levin and Steve Case established in 2000 were not effectively translated and executed by their people.

Yes, there were external pressures such as regulators and Wall street that increased merger difficulties – but I believe it all comes back to a clear vision that sets the strategic direction that the rest of the organization can understand and execute against. To that point – AOL’s original vision was “to build a global medium as central to people’s lives as the telephone or television… and even more valuable”. The company accomplished this vision prior to the merger. Eventually they replaced the statement in 2006: “to serve the world’s most engaged community”, which is nondescript and applicable to many businesses.

Recently, Jerry Levin, former CEO of AOL-Time Warner, and Steve Case, co-founder of AOL were on CNBC reflecting on the merger (see the video below). Levin apologized for the merger, “I presided over the worst deal of the century… I’m really very sorry about the pain and suffering and loss this has caused.” Levin and Case’s observations included:

• Leaders need to be compassionate and understanding of the significant tension due to a merger’s disruptive nature and cultural differences
• AOL TW was to be a ‘supermarket’ but instead was a ‘mall’
• Vision is nothing without execution in which people are key
• Too much focus on internal politics and wall street instead of customer needs

Technorati Tags: Acquisition Strategy, acquisitions, AOL, business acquisitions, Capstone, David Braun, External Growth, failed acquisitions, Gretchen Johnson, M&A, M&A News, m-and-a, mergers, Mergers and Acquisitions, Time Warner

The New York Stock Exchange ended 2009 up nearly 30% over 2008.  That makes a lot of individuals feel better about the economy because they “feel” wealthier.

Companies are no different.  With an up market we expect M&A activity to increase, generally as a laggard to the equities market.  Think about it:  a company’s stock price is up so they can use the stock as currency to buy other companies or as currency to obtain debt to acquire companies. Either way, we should  expect an uptick in 2010 M&A activity to follow the strong performance of the equities markets in 2009.

Warren Buffett commented on this topic recently when he skewered Kraft for its stock offer to Cadbury saying:

The share-issuance proposal, if enacted, will give Kraft a blank check allowing it to change its offer to Cadbury

Watch for more public companies to make acquisition announcements, especially after they report 2009 earnings.  This could be a good time to think about divesting!

Technorati Tags: Acquisition Strategy, acquisitions, berkshire hathaway, business acquisitions, Cadbury, Capstone, David Braun, divestiture, External Growth, Integration, Kraft, M&A, M&A News, mergers, Mergers and Acquisitions, warren buffett

Bloomberg recently reported that:

“Chief executive officers are so sure the economy will keep recovering they’re agreeing to prices that are 37 percent higher than the average since 2001, when Bloomberg started compiling data. While stocks in the S&P 500 are trading at the most expensive valuations in seven years compared with profits in the last 12 months, buyers are looking out to 2011, when analysts say earnings will have risen 52 percent.”

While I agree with the premise, I think the numbers can be a little misleading.  Specifically, which earnings are they taking the numbers from?  As we all know the past 12 months have been disastrous financial period for almost every business - except perhaps bankruptcy professionals and financial advisors.  If you took the multiples and based them on past averages or against projections for the next 24 months it is probably in line with past year’s valuation multiples.

The news here though, is that CEOs are back to buying, because they feel the future will be brighter than now.  I continue to believe that for the next 12-16 months it is a market for strategic buyers who have cash.  The credit markets are dormant and CEOs remain reluctant to use debt. So with the increase in the stock market and confidence that the markets have hit bottom and are now improving, many CEOs are getting back into the M&A market.  I predict that in late 2011 you will see a frothy M&A market - so sharpen your strategic focus and carefully evaluate your growth plans!

Multiples are down, debt is historically cheap, financial buyers are on the sidelines, the market is widely expected to improve so… (you know the phrase) if not now, when?

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

I am hosting a webinar tomorrow (December 17) with CPE credit being awarded!

We’ve heard from our audience that they want an opportunity to earn CPE credits by the end of the year, so we’ve developed a webinar on an in-demand topic: current legal topics in M&A.

Even if you are not a member of the bar, this webinar will provide insight that any professional involved in M&A will want to know.

After completing this course, you will be able to:
- Define a typical timeline for the M&A process
- Describe the key principles and purpose of a Letter of Intent and Term Sheet
- Define the key differences between a stock purchase, asset purchase and merger
- Explain the basic contents of  typical sections of an acquisition agreement, including sale and Purchase, Reps and Warranties, Indemnification, Closing and Post-Closing

I will speak for 50 minutes followed by a question and answer session.

Date: Thursday, December 17, 2009
Time: 1:00 PM ET/ Noon CT/ 11:00 AM MT/ 10:00 AM PT
No Prerequisites or Advanced Preparation needed!
To register, click here: https://www2.gotomeeting.com/register/325735746

Registration Fee: None

Once you register, you will receive information on how to listen to the webinar and view the slides.

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

CPE Credits – 1 CPE credit in Business Law will be given for those attending this webinarP

Program Level:  Basic
Delivery Method: Group Internet-Based
Refund policy: N/A
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

For questions or concerns, please contact Matt Craft at 202-776-0500 or mcraft@capstonestrategic.com

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, business law, Capstone, CPE, David Braun, External Growth, Integration, M&A, Mergers and Acquisitions, webinar

According to the Wall Street Journal,  November 2009 was the biggest month in over a year for deals involving consumer products and food and drinks firms, with $12.54 billion in acquisitions.  And it doesn’t look like this momentum will be stopped.  Kettle Chips, Just for Men and Grecian Formula hair-coloring products, Aqua Velva cologne, Brylcreem hair gel, Vagisil feminine products and Ambi Pur brand are all reported to be on the block.  It is interesting to me that such well known brand name companies would sell in a down market. I believe the consumer product industry continues to have seismic changes as younger people are less tied to brands, while at the same time distribution channels like Wal-Mart have strengthening power over their suppliers and continue to expand their private label products. I anticipate more product consolidation as companies like P&G have to remain relevant to their customers and maintain some economies of scale. Perhaps at the end we will have some consumer product companies “too big to fail.”

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, consolidation, David Braun, External Growth, M&A, M&A News, Mergers and Acquisitions, P & G

There is a trend afoot for firms to become more vertically integrated – controlling their supply sources, manufacturing, and distribution channels.  A few recent examples include Oracle acquiring Sun Microsystems to integrate hardware and software and H-P acquiring EDS to capture more consulting and professional services revenue, along with buying 3Com to capture more customers.  In the past, companies divested non-core assets and outsourced much of their work to create a more variable cost model. I think this current wave of vertical integration will be short-lived. It is primarily to capture revenue which companies desperately need.

What’s next, then? There is now an opportunity for companies to be creative with deal structuring and consider minority investments and strategic alliances.  Firms then have the advantage of having identified resources as partners, and can invest in and be privy to the expertise of a company, but are not saddled with having to run the businesses which are out of their expertise.

For example, I don’t see GM returning to being a fully integrated manufacturer like it was 50 years ago.  Rather than being a solid vertical line, you will see companies have dotted lines where they own key pieces and outsource others and have minority investments in some, majority investments in others and even strategic alliances.  The key will be for companies to decipher what pieces will be critical for them in 2020 and then figure out what the best deal structures are to maintain those key components.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, David Braun, External Growth, Hewlett Packarad, Integration, M&A, mergers, Mergers and Acquisitions, Oracle, Sun Microsystems, vertical integration

The next time you visit your local (i.e. NOT Starbucks) coffee shop, pay attention to whether they touting that they are exclusively brewing a particular brand of coffee. If they are, there is an increasing likelihood that it is Illy, a premium Italian coffee brand.  Instead of opening dozens of new coffee houses, or acquiring local chains, Illy has decided to take on Starbucks by signing exclusive deals with independent coffee houses - first in Italy and over the past year throughout the United States.  This joint venture provides a differentiator for the cafe and creates a larger pipeline for Illy to compete against Starbucks.

As we wrote nearly a year ago, external growth is about more than just mergers and acquisitions.  We encourage our clients to look at all options and let demand in the marketplace tell them which way to go.

Technorati Tags: acquisitions, Capstone, David Braun, External Growth, Illy, joint venture, M&A, M&A News, Mergers and Acquisitions, Starbucks