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

Negotiations, whether between individuals, businesses or even countries are nothing more than a process in which concerned parties come to an agreement that serves everyone’s best interests. Instead of one dominating or imposing power over the other, the parties attempt to reach a consensus in which everyone is satisfied.

When preparing to negotiate you need to ask yourself three questions: Why am I negotiating? Who am I negotiating for (myself, my company, my family)? And how much is my ego involved?

These questions will help you establish the importance of the negotiation - what the outcome will affect.

After answering those first three questions, additional ways to assess the situation include:

• Set goals and limits – what are your walk away triggers? You must be able to walk away from the table.
• Win or lose – Make sure you have a plan to deal with the outcome; both near and long term benefits
• Are you prepared to lose/win? What did I lose/win, if anything? If you did lose/win, what will it affect?
  • Long-term, short-term benefits
  • What will happen to the relationship?
• Will your relationship with the other party be intact when the negotiation is over? If not, is that the outcome you want? Could this negotiation come haunt you in the future?
• How do you want to be remembered once the negotiation is complete?

Taking a brief minute to answer these issues will leave you better prepared once you sit down at the table.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, David Braun, External Growth, Gretchen Johnson, M&A, M&A News, Mergers and Acquisitions, negotiations

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

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

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