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

This post was submitted by Capstone Managing Director John Dearing:

When you meet with a target company OWNER, make sure you capture your thoughts immediately thereafter.

There are several reasons this is important:

1. You will (if properly prepared) undoubtedly gain valuable insights into the inner workings of the company
2. This data should be utilized to evaluate whether or not your company remains interested in pursuing the opportunity
3. M&A is not a one person process - this data should be shared with others for their analysis and thoughts
4. If you have an acquisition plan and strategic rationale established, you (or your team) need to test whether or not this company, market, technology still fits given the new information
5. The data will be used during due diligence, negotiations and integration (business terms can also be developed from these summaries as well)

Something as simple as notes, can increase your likelihood of not only appropriate resource allocation, but also increase your likelihood for success in the world of M&A.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, External Growth, John Dearing, M&A, meeting notes, mergers, Mergers and Acquisitions

“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

When is enough planning, enough?

As strategic buyers, our clients are constantly seeking additional data on acquisition prospects.  This is not a bad perspective, but it does become an issue when they don’t have the ideal data set for evaluation purposes established at the beginning of the process – to compare candidates to each other and to the criteria.

Another known fact - The more people who get involved in the deal, the more questions get asked.  The more questions, the more frustration develops on the seller’s side.  So if people on your team will be evaluating a Target, have them provide input on the attractiveness criteria at the BEGINNING of the process whenever possible.  With privately-held, not-for-sale owners, you need to keep deal momentum.  You need to keep the selling owner saying “YES” – not, “Why didn’t you ask me for that information the first time you submitted a list of inquires?”

To do that, you need to Plan for YES and Plan for M&A Success.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, External Growth, John Dearing, M&A, mergers, Mergers and Acquisitions, plan for yes, planning

John Dearing, Managing Director of Washington, DC- based external growth consulting firm Capstone, is hosting a webinar with Capstone Analyst Bob Kwaja.

You’ve formulated your acquisition strategy.  You’ve assembled your growth team. You’ve researched and selected the top markets for growth.  Now, let Capstone show you how to find the best acquisition targets in those markets.

The next step in Capstone’s unique market-driven process, acquisition prospect research and selection doesn’t have to be a haphazard ordeal.  This webinar will show you how to approach the search for the right company systematically and efficiently using effective research methods. You will be able to take the emotion out of the process to objectively determine which prospects to approach.

After completing this course, you will be able to:
•    Define the Ideal Prospect for your acquisition strategy
•    Explain Prospect Criteria (including revenue growth and size, management team, culture and services) and how to use them to evaluate a prospect
•    Describe effective Secondary and Primary Market Research techniques to maximize your research resources
•    Explain the Triangulation Technique for prospect research to get the most relevant information to make decisions
•    Begin to develop Specific Tools to objectively compare and contrast prospects

John and Bob will speak for approximately 50 minutes followed by a question-and-answer session.

Date:  Thursday, June 24, 2010
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/597914154

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, June 23 and the money will be refunded in full within 5 business days.  After 1:00 PM ET on Wednesday, June 23 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, Capstone’s Marketing Coordinator, 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, Bob Kwaja, business acquisitions, Capstone, John Dearing, M&A, mergers, Mergers and Acquisitions, prospects, webinar

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

Two separate clients asked me for a Letter of Intent (LOI) sample within 48 hours.  Other typical questions include:  “What should an LOI contain (or not include)?” and “Why use an Memorandum of Understanding or a Term Sheet versus an LOI?”

Capstone looks at an LOI (and all of its derivatives) as a “marketing” document.  Especially in the not-for-sale M&A space, the LOI needs to “stand on its own merits”.  Meaning, the owner/audience and the direct influencers, need to be able to quickly understand three things:
•    Why you are interested in their specific company (e.g., talent, customers, markets, technology, etc.)?
•    What is your “vision” for the combined entity (e.g., joint benefits, why stronger together, etc.)?
•    What you are offering (beyond simply a price)?

To increase your likelihood of success, include components in your LOIs that clearly outline how you are addressing the owner’s needs, wants, and desires.  The owner ‘Hot Buttons’ as we refer to them. If you address them, letting the owners know you heard what they said while positioning your LOI as a stand-alone marketing tool, you will get more YES answers and “sales”.

Technorati Tags: Acquisition Strategy, acquisitions, Capstone, External Growth, John Dearing, Letter of Intent, LOI, M&A, mergers, Mergers and Acquisitions, MOU, Term Sheet

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

Capstone Webinar: Discovering the Right Markets for Growth

David Braun, CEO of Washington, DC- based external growth consulting firm Capstone, is hosting a webinar with Capstone Senior Analyst Matt Craft.

There is a unique opportunity in the next 12-15 months to grow your business through M&A.  However, before you start to go after acquisition prospects, you need to make sure you are looking in the right markets.

David and Matt will discuss Capstone’s unique market-driven process, which centers around future demand:  What will your customers want in 5, 10 or even 15 years?  Anticipating this demand is a key to future success.

In order to determine what that demand will be requires research.  The webinar will delve into where to begin with research and how to use limited resources to get the critical information you need to make a decision.

There will also be insights on how important research into market trends is to ensuring you are targeting the best companies to acquire.

After completing this course, you will be able to:
•    Define the Market-Driven Process and why it makes sense for your company
•    Explain Market Criteria (including market growth and size, competitive dynamics and barriers to entry) and how to use  criteria them to evaluate a market or segment
•    Describe effective Secondary and Primary Market Research techniques to maximize your research resources
•    Explain the Triangulation Technique for market research to get the most relevant information to make decisions
•    Begin to develop Specific Tools to objectively compare and contrast markets

David and Matt will speak for approximately 50 minutes followed by a question-and-answer session.

Date:  Thursday, May 20, 2010
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/859711747

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, May 19 and the money will be refunded in full within 5 business days.  After 1:00 PM ET on Wednesday, May 19, 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, Capstone’s Marketing Coordinator, 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, David Braun, External Growth, M&A, market research, Matt Craft, mergers, Mergers and Acquisitions, webinar