A Trusted M&A Advisor
Western Reserve Partners, a division of Citizens Capital Markets, provides highly customized financial advisory solutions to leading middle market companies across a focused set of industries. Clients within our industrial, business services, consumer, healthcare, technology and real estate verticals benefit from our tailored approach to mergers and acquisitions, capital raising, financial restructuring, financial opinions and other valuation services. Our Managing Directors average nearly 30 years of experience and have collectively executed more than 600 transactions during their careers.
As a part of Citizens Financial Group, Western Reserve is able to leverage the strength of one of the oldest and largest financial institutions in the United States. Through Citizens, our team is able to accelerate the delivery of valuable ideas and execution capabilities beyond what a traditional M&A advisory firm can do.
We produce Market Insights, a video series dedicated to providing business owners and key decision-makers with unique insights from leading subject matter experts. Our latest installation focuses on M&A and provides answers to the critical questions that businesses are contemplating as they consider M&A in 2018.
Managing Partner and CEO
Ohio President, Citizens Bank
Managing Director & President
Services & Financial Opinions Practices
Our M&A Outlook 2019 presents the results and key findings of a survey we conducted with over 600 c-suite executives to find out their M&A plans for 2019. Respondents expressed confidence that the robust M&A activity of recent years will continue, supported by expectations of higher deal volume, increased solicitations and record prices. Yet, we also saw unmistakable signs of uncertainty and even apprehension about the future.
Explore strategies and best practices for managing successful M&A initiatives by downloading these 2-page white papers covering topics of interest to both buyers and sellers.
When “no” is forgotten as an option in the heat of M&A negotiations, a deal unlikely to drive better results can become an unfortunate reality. Learn when “no” is a powerful alternative for buyers and sellers focused on long-term value creation.
“No” is a positive force in negotiating a successful M&A transaction. Without it, either a seller or buyer can be locked into a deal that fails to meet objectives for either or both parties. In the heat of negotiations, deal myopia can set in. Getting to “yes” can somehow become the end goal, and walking away is a forgotten option. Yet M&A success will be defined by what happens after the papers are signed – it’s about whether acquirers perform better than they would have without the transaction, and how this performance translates into greater value for owners and shareholders. Without the possibility of “no,” a transaction that might not fulfill those objectives can still happen.
So when is “no” the right answer? Financial and economic conditions can shift during a negotiation and create material changes that prompt walk away by either buyer or seller. Sudden supply chain disruptions or fast-moving competitive actions can result in seller revenue shortfalls that may make an imminent transaction unattractive.
For a buyer, discovery or price escalation – and sometimes both – can reveal good reasons to terminate negotiations:
For a seller, triggers for walking away start with the sell-side version of the buyer’s two issues:
In the face of these situations, why wouldn’t a deal team say no? Rational buyers and sellers clearly seek a deal that will result in greater value for both parties. An effective process should create a fact-based analysis to ensure accurate assessment of potential, a sound forecast of growth opportunities and clear articulation of strategies required. Yet deals can take on emotional momentum that overwhelms reasoned decision-making. Be alert to these conditions which can cloud decision-making:
The real power of “no” in driving long-term M&A success is in the discipline it represents. Before undertaking an M&A process, buyers and sellers should have well-defined strategies that outline the rationale for the transaction, realistic financial objectives, and a systematic set of alternatives that will enable long-term success when they get to “yes.”
Mergers and acquisitions continue to be one of the primary tactics for achieving corporate growth in the current economic environment. Surprisingly, though, many of the transactions buyers and sellers initiate never actually close. Gain insight into 5 common deal-killers.
Mergers and acquisitions continue to be one of the primary tactics for achieving corporate growth in the current economic environment. Surprisingly, though, many of the transactions buyers and sellers initiate never actually close. Our experience shows that M&A deals often break down due to 5 common pitfalls. Buyers and sellers who take steps to anticipate and address these can dramatically improve the potential for the deal’s success.
An M&A deal might look fully baked when the parties sign the letter of intent (LOI). However, dealmakers need to understand that there is still a long way to go after the “handshake”, including delivering the required authorizations. This generally means board approval and can include shareholder consent. Failure to do so will doom a deal before it gets off the ground.
To avoid this, senior management from both parties should ensure directors are on board with the transaction prior to executing the LOI, and be able to confidently predict the support of shareholders, if required for closing. Otherwise, the parties could incur significant costs and diversion of resources, only to find out they cannot close the M&A deal.
Due diligence to ensure complete, verified financial disclosure is a critical factor in maintaining trust and avoiding unpleasant surprises for buyers and sellers alike.
Quality of Earnings audits confirm financial accuracy and can help validate forecasted performance. These are how parties can maintain clarity and transparency regarding key business drivers, including revenue, receivables, inventory, recurring sales and expenses, growth in revenue relative to growth in earnings, and other factors that could directly impact valuations. These audits also reveal any off-balance sheet or contingent liabilities that could impact the company. Any inconsistencies or red flags could dampen a buyer’s enthusiasm to move forward.
Less than full disclosure – “what else were we not told” – could force dreaded renegotiation, a major cause of frustrating delays and toxic outcomes. Nothing is more aggravating for parties than an unexpected revelation that could – and probably should – have been discovered if proper due diligence had been done. Credibility and trust can be easily destroyed in the wasted time and effort it takes to redraft terms previously agreed upon.
Every deal brings different challenges, but a lack of M&A experience and thorough understanding of market practices can lead to greater frustration and deal fatigue on both sides.
To avoid going it alone, parties should consider engaging key players to comprise their deal team, including:
In addition, involving key line managers early in discussions enables the business to set more accurate and realistic performance, staffing and financial benchmarks.
While most M&A transactions are inherently complex – think acquirer equity, purchase-price adjustments, earnouts and contingent rights – there are strategies that experienced M&A transaction professionals can use to maneuver these complexities.
To ensure parties can and will live up to their agreements, it is important to:
Anticipate Required Regulatory Filings
Process and timing breakdowns – perhaps the most unfortunate of all potential pitfalls – could in many cases be avoided with more careful planning upfront.
Failure to establish and follow a defined process likely means key steps may be missed or underemphasized during negotiations. In fact, parties should avoid even the appearance of disorganization and lack of preparation that could turn off interested parties before they even sit down at the table.
Timely performance is key to avoiding frustration and deal fatigue – perennial deal busters. Leaders have to keep their teams focused on moving forward with a timeline that includes concrete dates for each task. They should move quickly to resolve the inevitable unexpected issues and delays but avoid becoming bogged down in negotiations that will have little impact on the outcome.
Selling or acquiring a business can be extraordinarily stressful, even under the best of circumstances. Regardless of the parties’ depth of experience in the M&A market, they should keep in mind that each deal is unique, bringing its own set of potential pitfalls for the unwary.
Whether a prospective buyer or hopeful seller, most players would do well to seek a third-party perspective on valuation matters and other variables. This can inject the objectivity and dispassionate analysis needed to get a deal off on the right foot to begin with – or back on track should either party falter.
Contact us to learn how we can help your business reach its potential.