Capstone Strategic’s survey of middle market executives shows most see the same (43%) or growing (31%) M&A activity in their industry. 47% are pursuing M&A in order to access new markets.

Capstone Strategic, the leading M&A advisory firm for the middle market, surveyed middle market executives from multiple industries on their growth and M&A experience in 2016 and their outlook for 2017. The survey was conducted in December 2016 and followed previous annual surveys of the middle market.

M&A activity across the board is mostly seen as the same (43%) or growing (31%).

Looking forward, our respondents are evenly split on whether or not they will pursue M&A in 2017. 35% are less than 50% likely to execute acquisitions and 35% are more than 50% likely. The top driver for pursuing M&A this year is access to new markets (47%).

As for obstacles to M&A, time and attention demanded by the process is the top barrier to pursuing acquisitions in 2017 (25%) while the most common reason for not considering M&A as a tool for growth is lack of appropriate target companies (28%).

The overall growth picture is improving. Those reporting modest growth rose from 58% in 2015 to 67% in 2016 and those reporting high growth grew from 11% in 2015 to 13% in 2016. Those reporting contraction shrunk from 9% in 2015 to 5% in 2016.

The business environment is seen by most in a positive light, with the majority reporting the same (50%) or an improved (35%) environment for growth. Compared to 2015, fewer executives saw a worsening environment for growth (8% compared to 13%).

Capstone’s CEO David Braun said: “The survey confirmed that 2016 remained an active year for middle market mergers and acquisitions and looking ahead, we believe we’ll see begin to see a renewed interest in M&A activity due to pent up demand and supply in the marketplace. 2017 presents a unique opportunity for companies that decide to execute strategic acquisitions.”

The full survey, State of Middle Market M&A 2017, can be viewed by clicking here.

 Feature Photo credit: dan Chmill via Flickr cc

We usually think acquirers are big, multinational companies that gobble up their smaller competitors. However, that’s not always the case. Hudson’s Bay, which has a market value of $1.5 billion, is interested in acquiring Macy’s, which has a market value of $9.4 billion.

This transaction challenges common perceptions about acquirers and sellers and demonstrates that for the right strategic reasons, acquisition can be used as a growth tool by any company. While a smaller company acquiring a larger one is not the norm, it does happen. And, in this case, Hudson’s Bay could use Macy’s to expand its retail presence in the U.S. with another well-known department store. It would be difficult, if not impossible, for Hudson’s Bay to build up the reputation and name brand of Macy’s organically.

Hudson’s Bay, headquartered in Toronto, is an active acquirer and has a history of success in growing struggling retailers and optimizing value from its real estate. It acquired its affiliate Lord & Taylor in 2012 and Saks’s Fifth Avenue in for $2.4 billion in 2013. One year later, the Manhattan Saks Fifth Avenue store was valued at $3.7 billion. Hudson’s Bay has also made other acquisitions including German retailer Galeria Kaufhof for $2.8 billion in 2015 and Gilt Groupe for $250 million in 2016.

It will be interested to see how the transaction is structured and how Hudson’s Bay plans to tackle the challenges Macy’s is facing. Macy’s, like many traditional retailers, is struggling to keep up with market changes. The store is currently in the process of shutting down 100 stores and is planning to cut 10,000 jobs after facing disappointing fourth quarter sales. Perhaps an acquisition will save Macy’s? Only time will tell.

If you are thinking about growing your business, I encourage you to consider strategic acquisitions. Despite what you may think, there are many more options than just a large company acquiring 100% of a smaller company. I hope the example of Hudson’s Bay and Macy’s helps you gain a better understanding of what options might be available for you.

Learn more! Download the whitepaper Nine Pathways of External Growth.

Photo credit: Mike Mozart via Flickr cc

The Street interviewed Capstone CEO David Braun for the article “Hollywood Reporter-Billboard Media Likes Sound of SpinMedia’s Music Brands.”

In the article David Braun analyzes the deal’s strategic rationale and discusses how traditional media businesses can continue to grow amidst a changing environment. As print media declines and digital media consumption rises, traditional publishing and communication companies must find new ways to stay relevant, capture market share and most importantly revenue.

Read the full article on The Street here: Hollywood Reporter-Billboard Media Likes Sound of SpinMedia’s Music Brands.”

2016 continued be a strategic, rather than a financial buyer’s market and strategic buyers deployed large cash reserves to pursue growth through M&A. Unlike financial buyers, which typically look for a three to five years return on investment, strategic buyers can afford to pay more due to their long-term focus.

The middle market has been eager to use M&A as a viable tool for growth. Despite a challenging economic environment, activity in the middle market remained stable in 2016, dropping only 3.5% in 3Q 2016.

As we close out 2016 and look forward to 2017, here is a roundup of the most popular posts of the year from the Successful Acquisitions blog.

  1. The Most Important Thing about M&A According to Warren Buffett
  2. 10 Signs You Should Walk Away from a Deal
  3. M&A Activity after the U.S. Election: Analysis and Outlook
  4. 7 Strategic Questions to Ask Before Pursuing Mergers & Acquisitions – New Webinar
  5. How to Avoid Irrational Decision-Making in M&A
  6. 5 Tips for Taking a Strategic Approach to M&A in 2016
  7. Is Middle Market M&A on the Rebound?
  8. Growth Through Acquisition – Exit Readiness Podcast Interview
  9. How to Break Bad News without Sinking Your Acquisition
  10. What Is Happening with Valuation Multiples Today?

Thank you for reading and we will see you all in 2017.

Photo Credit: Barn Images

As expected, Verso is consolidating locations and moving its headquarters from Tennessee to Ohio. Verso purchased NewPage Holdings for $1.4 billion in January 2014, but later filed for Chapter 11 bankruptcy. While Verso has emerged from bankruptcy, the company is not out of the woods yet.

“You’ve got a wounded company cutting staff, and that hurts morale,” says Capstone CEO David Braun in The Memphis Business Journal. David says Verso will have to do more than simply cut costs in order to be successful in the long-run. Read the full article here: Even after move, Verso will have more cuts to make

 

With every acquisition you have a choice of how you will integrate the two entities. Often buyers assume a “winner-takes-all” approach where they impose their systems and culture on the acquired company. This is not always the best way to successful integration. In fact, it may be best to integrate some of the seller’s practices into your own organization.

In our new M&A Express Videocast, I advocate a strategic approach that leverages the best from both entities. I will also introduce the power of the 100-day plan in achieving a successful integration.

How Far to Integrate

April 5, 1:00 pm – 1:20 PM ET

About M&A Express

M&A Express is a high-impact series of videocasts presented by David Braun, founder of Capstone and author of Successful Acquisitions. Each videocast runs 20 minutes or less, and delivers cutting-edge insights on proven growth strategies for middle market companies. M&A Express is free! M&A Express is free! Visit our website for more information.

Watch previous Videocasts on-demand:

  • Why You Need a Roadmap
  • Where to Start Your Search
  • When to Walk Away
  • The Hidden Power of Minority Ownership
  • Cultural Due Diligence
  • The Letter of Intent: A Key Milestone

Capstone’s survey of middle market executives shows 53% likely to pursue mergers and acquisitions in 2016 compared to 41% when last surveyed.

Capstone surveyed middle market executives from multiple industries on their growth and M&A experience in 2015 and their outlook for 2016. The survey was conducted in December 2015, and followed a previous survey in 2014.

Respondents gave a mixed picture of growth for their industries in 2015. More respondents saw extremes in their industries. Those reporting high growth grew from 4% in 2014 to 11% in 2015, while those reporting contraction grew from 2% in 2014 to 9% in 2015. Between these two poles, most respondents were seeing modest growth in their industries during 2015 (58%).

How likely is it that your company will pursue some form of M&A or external growth in 2016?

How likely is it that your company will pursue some form of M&A or external growth in 2016?

The environment for growth in 2015 was seen by most in a positive light, with the majority reporting the same (46%) or an improved (36%) environment.
M&A activity across the board in 2015 was mostly seen as the same (36%) or growing (33%) when compared to 2014.

Looking forward to the coming year, companies showed a stronger inclination to engage in M&A, compared to predictions when we last asked this question in 2014 (53% certain or likely, compared to 41%).

When asked about their growth goals, respondents were evenly split between “selling current products in new markets” (40%), “creating and selling new products in current markets” (36%), and “increasing sale of current products in current markets” (38%). (Some respondents were pursuing more than one goal).

As for barriers to engaging in M&A, these were largely internal, with respondents citing “lack of resources” (33%) as a primary reason not to pursue transactions.

Capstone’s CEO David Braun said: “This survey confirms what we ourselves observed, that 2015 was an active year for middle market M&A and 2016 is likely to prove an even stronger year. We see a growing polarization between growth-focused companies and those that are sitting on the sidelines. While many companies are still holding cash, more players are emboldened to expand through external growth. This includes acquisitions but also minority ownership deals, joint ventures and strategic alliances. When growth stagnates, M&A can often provide the fastest path forward. When growth is high, companies should seize the opportunity to plan for further expansion.”

The full survey, State of Middle Market M&A, can be viewed by clicking here.

Capstone CEO David Braun’s Analysis in the Memphis Business Journal

Verso Paper, after acquiring NewPage Holdings for $1.4 billion in January 2014, has filed for Chapter 11 bankruptcy. Verso, which manufactures coated paper used in products like magazines, is struggling in a declining market. With its new acquisition, the company failed to realize desired economies of scale needed to compete in a world of rising digital media.

What happened? David Braun analyzes what went wrong and what Verso might do to survive in his interview in the Memphis Business Journal. Read the full article here: “Analysis: What might Verso look like after Chapter 11?

The Letter of Intent (LOI) is far more than a legal document. It’s a key milestone in the M&A process and can be a powerful tool for getting the deal done. The LOI provides an opportunity to solidify your relationship with the seller and brings about a new level of commitment and resolve to getting the deal done.

Please join me for a 20-minute M&A Express Videocast this Thursday, January 28 at 1:00 PM ET. In this new videocast you will see how the LOI can help you position the deal in the eyes of sellers and their influencers. You will also learn how to use the LOI to test your assumptions, and set the seller’s expectations about deal structure, price and the acquisition process.

The Letter of Intent: A Key Milestone

January 28, 1:00 pm – 1:20 PM ET

About M&A Express

M&A Express is a high-impact series of videocasts presented by David Braun, founder of Capstone and author of Successful Acquisitions. Each videocast runs 20 minutes or less, and delivers cutting-edge insights on proven growth strategies for middle market companies. M&A Express is free! M&A Express is free! Visit our website for more information.

Watch previous Videocasts on-demand:

  • Why You Need a Roadmap
  • Where to Start Your Search
  • When to Walk Away
  • The Hidden Power of Minority Ownership
  • Cultural Due Diligence

 

Photo Credit: shankar s. via Flickr cc

We are excited to share our expertise on strategic growth through M&A with our new M&A U™ Webinar certificate.

M&A U

The M&A U™ Webinar certificate will be awarded to those who attend all 12 monthly Capstone Webinars live. Each live webinar features a seasoned M&A expert sharing practical tools and tactics to accelerate your company’s growth. CPE credits are available.

We hope these webinars are a valuable resource for you as you continue exploring strategic growth through mergers and acquisitions.

  • Subscribe to an entire year of webinars
  • 12 webinars led by experts in M&A, Valuation and Tax
  • Receive a 15% discount
  • Earn up to 12.5 CPE credits
  • Become M&A U™ Webinar certified
  • Access webinar recordings on-demand

2016 Capstone Webinar Schedule

  • Five Options for Growth – January 21
  • How to Pick Top-Notch Markets – February 18
  • Building a Robust Pipeline – March 17
  • The First Date: Contacting Owners & Successful First Meetings – April 21
  • A New Look at Due Diligence – May 26
  • Successful Negotiation Tactics – June 16
  • Mastering Valuation for M&A – July 21
  • Keys to Integration Success – August 18
  • Tax Considerations in M&A – September 15
  • Contemporary Legal Issues in M&A – October 20
  • M&A: From LOI to Close – November 17
  • Brand Integration: An Acquisition Challenge – December 15

Photo credit: Barn Images

2015 was the “strongest year for deal making on record,” according to Thomson Reuters.  Global deal value reached $4.7 trillion, a 42% increase from 2014, and U.S. deal value reached $2.3 billion, a 64% increase. Despite this record-breaking activity, the number of deals announced globally remained relatively flat and in the U.S., the number of deals actually decreased by 1.65% from 10,129 in 2014 to 9,962 in 2015. This is mainly due to the large number of mega deals (deals over $5 billion) announced in 2015.

As we look forward to what will most likely be another year of exciting M&A activity, let’s take a look back at the posts from the Successful Acquisitions blog that you, our readers, found most interesting.

  1. Why You Don’t Need a 51% Stake to Control a Business
  2. CVS and Target Pharmacy Acquisition, Divestiture and Co-branding
  3. Strategic vs. Financial Acquisitions – What’s the Difference?
  4. How You Can Manage the M&A Process: Tools for Success
  5. Strategic Acquirers at an Advantage in Today’s Market
  6. Why ConAgra Plans to Sell Ralcorp Less than 3 Years Later
  7. New Webinar – “Leadership Essentials for Successful M&A”
  8. When Organic Growth Stalls, Consider M&A
  9. Pharmaceutical M&A: The Rush to Acquire
  10. 2014 Record Breaking Year for M&A
Photo Credit: Barn Images

In light of recent FTC rulings against market domination, Sysco has changed its M&A strategy to focus on smaller, strategic deals rather than large transformative deals. Although Sysco’s change is motivated by regulatory obstacles to larger acquisitions, using strategic, smaller deals is an excellent approach from a strategic perspective. We have long recommended that our clients pursue a series of small transactions to achieve their long-term growth goals. We call this strategy taking “frequent small bites of the apple” because it’s much easier to eat an apple one bite at a time than to cram the whole fruit into your mouth!

Among the advantages of pursuing a series of smaller deals:

1. Focus on One Reason

You may have many needs to meet before you reach your long-term growth goals, for instance improving talent and technological capabilities and expanding geographically. If your vision is growing into a worldwide paint manufacturer and distributor, but you only have manufacturing operations on the East Coast, you will need to expand geographically, build your distribution networks, and perhaps improve on your manufacturing capabilities. Doing all this with only one company may dilute your efforts, or you might acquire a company that really doesn’t fulfill any of your strategic needs.  A better approach: first focus on acquiring a company with an excellent distribution network in the U.S and then another company with quality manufacturing capabilities that match your acquisition criteria. Once you’ve adjusted to this change, you might look at acquisitions outside the U.S.

2. Stay Below the Radar

Large transactions draw attention, especially the mega-deals valued at over $5 billion that have boosted M&A value to record levels. But many transactions are much smaller than these multi-billion dollar deals; in the U.S. from November 1, 2014 to October 31, 2015 there were 12,663 M&A transactions, according to Factset data. 95% of these deals were under $500 million or undisclosed. (Undisclosed deals are typically privately held, smaller transactions that are too small for financial reporting). Smaller strategic transactions allow you to make moves below the radar, out of sight of your competition.

4 reasons why smaller acquisitions are better

3. Adjust to Integration Challenges More Easily

Even the most carefully planned acquisition encounters integration challenges as people and systems adjust to the newly merged company. By acquiring a smaller company, you dramatically limit your integration challenges. Once you’ve had time to work out any kinks and make sure your new company is operating smoothly, you can begin pursuing the next acquisition.

4. Minimize Risk of Acquisition Failure

Although acquisitions are inherently a risky undertaking, smaller strategic transactions are much less risky than large transformative deals. Because integration challenges are minimized, you can remain focused on your strategic objectives, increasing your chances of realizing synergies from the deal. There’s also less financial risk associated with smaller acquisitions; you can minimize capital outlays while rapidly growing your company to reach your long-term goals.

Executing a series of strategic acquisitions is a proven way for middle market companies to grow.

A small deal is also ideal for first-time acquirers who have never pursued growth through mergers and acquisitions. All in all, smaller acquisitions allow you to remain focused, move covertly in the market, and increase your chances of success while still rapidly moving you closer to your vision for the future.

Photo credit: UnknownNet Photography via Flickr cc

In my over 20 years of pursing strategic, not-for-sale acquisitions for clients, the most important piece of advice I have is: be prepared. It may sound simple, but I cannot stress enough how critical preparation is to M&A success. This applies to every stage of the Roadmap to Acquisitions, our M&A process, from initial strategy to research, to due diligence and integration.

Capstone Roadmap to Acquisitions

The Roadmap to Acquisitions in a strategic, proven process for pursuing M&A, based on over 20 years’ experience.

Develop a Plan

In the early stages of the M&A process, you must develop a carefully planned strategy to guide your search for the right acquisition. This means that before running off to pursue companies to buy, you take the time to really examine your business and your vision for the future. Think about your overall strategy, how M&A can help you achieve it and what steps you will be taking to execute. The point of pursuing acquisitions is not for the sake of buying another company – rather, executing an acquisition should be a tool for reaching your strategic goals.

This foundational step will determine the success or failure or your program. Acquisitions are inherently risky and those who come to the table armed with a plan increase their chances of success.

Do Your Homework

As you move along the acquisition process into conducting market and company research, preparation remains important, especially when it comes to primary research. When calling key contacts in the marketplace or owners of companies, it’s important to be knowledgeable about the industry so that the caller takes you seriously. We call this “doing your homework.” This means, that before you even pick up the phone to conduct primary market research, you have already conducted secondary research by accessing articles, websites, reports, and databases. And before making contact with an owner, you have already analyzed the market, researched the owner and studied the company.

Without preparing for these conversations, it’s difficult to maximize the value of your discussion and ask the right questions. You may miss out on an opportunity to gain new insights, the caller may refuse to speak with you or you may even damage a relationship with a potential acquisition prospect.

On the other hand, if you have prepared well, you may gain new insights about the market or the industry, and begin to develop a relationship with an owner that may turn into an acquisition.

Move Swiftly

When it finally comes to executing the deal, a lot of your hard work and preparation pays off. Ideally you have identified the best candidates for acquisition in the most effective way by following your strategic acquisition program and by thoroughly researching markets and companies.

It’s also helpful to have all your documents and financing ready in order to maintain momentum. Nothing kills a deal like stalling and you do not want to be scrambling at the last minute to put together a financing package or paperwork for the deal.

Being prepared is important even after the deal closes. Integration issues remain a top reason for acquisition failure. Slow integration can interfere with the effectiveness of a deal, and in some cases it can even lead to acquisition failure. After the deal closes, you only have about 100 days to implement changes, or employees become resistant. And there are a number of mission critical items that must be addressed on Day 1. One way to mitigate, or even avoid integration issues, is by developing an integration plan long before the deal even closes. This way, you’ve had the time to anticipate integration challenges and develop solutions and your integration plan is ready to be deployed on Day 1.

No Short Cut, Just Hard Work

There is no short cut to preparation. It takes good old-fashioned work, strategic thinking and attention to detail. While it does take time and effort, it’s the most effective way to increase your chances of acquisition success.

On yesterday’s M&A Express videocast, The Hidden Power of Minority Ownership, I mentioned Marcus Lemonis, a businessman who turns around struggling businesses in the CNBC show, the Profit.

I’ve written about Lemonis before on the blog, and how he really prefers to use minority ownership so that the founders or original owners of the business continue to have a stake in it. A good operating agreement and dispute resolution are key to the rules of engagement of how you’re going to do business together – whether it be with a majority or a minority investment. In my blog post, I discuss this issue more in depth. Here’s the repost for those of you who may have missed it:

Why You Don’t Need a 51% Stake to Control a Business

“I always take control, but I did not buy 51 percent. Control doesn’t have to be 51 percent. I think people get confused by that.” Marcus Lemonis comments about minority investment on Squawkbox are spot-on.

When asked to elaborate, he explained, “I just document everything: full financial control, full operational control. I can have 10 percent [invested in a company]…and I’m still going to [run it]…”

When I speak with executives or owners about minority investment as an option, I usually hear the same pushback: We don’t want to do minority investment because we want to control the business. Well, as Lemonis’ comments demonstrate, control and minority investment are not mutually exclusive. You do not need a majority stake or 100 percent acquisition in order to have control.

Perhaps you do not have sufficient funding to acquire 100 percent of a company, or you would like to diversify your investments. You may still be able to use minority investment to achieve your strategic goals. Find out what parts of the business are important to your growth strategy and write them into your purchase agreement. Perhaps you need full control over one specific product line of the business. Make sure to document your desired level of control in the agreement.

Another idea is to build an option for purchasing further shares or a complete buyout into the agreement. You can even make this option contingent on specific performance conditions.

Minority investment is one of those pathways to growth that’s often overlooked. Don’t let this opportunity pass you by because you have misconceptions about “control.”

Check out Lemonis’ full interview on Squawkbox.

On September 23 we will be launching the second series of M&A Express. The new series will feature the following videocasts:

  • The Hidden Power of Minority Ownership
  • Cultural Due Diligence



We are also pleased to announce previous videocasts from our first series of M&A Express are now available online whenever you wish to watch them. Access practical, expert advice on growth through M&A in 20 minutes or less, with CEO and author David Braun. This new resource for middle-market company owners and executives is available at no cost.

Topics include:

  • Why You Need a Roadmap
  • Where to Start Your Search
  • When to Walk Away

About M&A Express

M&A Express is a high-impact program of videocasts presented by David Braun, founder of Capstone and author of Successful Acquisitions. Each videocast runs 20 minutes or less, and delivers cutting-edge insights on proven growth strategies for middle-market companies.

M&A Express is free! Learn more and register on our website.

If you’re reading this post, you’ve probably noticed the Successful Acquisitions Blog has a new look. You can still find the latest on middle-market M&A at our redesigned site.

This mobile-friendly site features a fresh design that’s easy to read on all your devices. So now you can follow middle-market M&A whether you’re in the office or on the go.

As before, expect brief, insight-packed posts on M&A news — plus enduring insights on successful growth through M&A.

The Successful Acquisitions Blog is a rich resource for any company owner or executive interested in new pathways to growth. So check out the site and let us know your thoughts!

Negotiation is a critical skill, especially in mergers and acquisitions where negotiating involves more than forcing the other party to agree to your terms.

Experienced M&A negotiators understand the importance of the human factor. In acquisitions, negotiations are not about winning or losing, but bringing two sides to an agreement. This concept is extremely important in strategic, not-for-sale acquisitions because in many cases the seller will be staying on at the newly merged company.

The illustration I use is negotiating with a car salesman. Typically, we press for the most favorable price, using whatever hard-nosed tactics we can to get the best deal. When we reach an agreement, we drive away with the car, never to see the salesman again. In M&A it’s more like driving away with the salesman in the car. You would probably negotiate a bit differently if you had to see and work with the salesman once the deal is completed!

This is just one of the nuances of negotiations in M&A. An acquisition has many moving parts and a skilled negotiator needs to assemble the right pieces and guide conversations so that both parties reach an agreement.

It’s worth investing time and energy to hone your M&A negotiation skills. Here’s one step you can take immediately. Join us for a webinar on “Successful Negotiation Tactics” on July 30. CPE credit is available. To learn more and to register click here.

 

Earlier this summer I had the opportunity to present an alumni webinar, “Grow or Die: Strategic Mergers & Acquisitions,” for the College of William and Mary Mason School of Business. I had a great time sharing my passion for company growth with my alma mater and fellow alumni.  Here is a behind-the-scenes picture of me in the studio.

David Braun William and Mary Webinar 2015

In the studio at the William & Mary Mason School of Business preparing to broadcast the live webinar.

In the webinar we explored how you can grow ─ even when growth seems impossible. I challenged attendees to consider acquisition as a new tool and one of the quickest and most effective means of growing their business.

I’m incredibly thankful for the invitation and humbled by the number of people who joined in. Thanks to all the hard work from the William and Mary Alumni Relations team for making the webinar a possibility.

You can also view the recorded webinar at this link.

Subscribe to the Successful Acquisitions blog to receive timely news, surprising insights and practical tips on M&A from CEO and author David Braun.

Sometimes an acquisition that looked promising turns out to be less than ideal as you get closer to finalizing the deal. The question becomes: Should we proceed or should we back out?

Join me for our new M&A Express videocast, “When to Walk Away,” on May 13th. M&A Express is new, complimentary resource for middle market executives that teaches essentials of mergers and acquisitions in 20 minutes or less.

When to Walk Away

May 13th, 1:00 PM – 1:20 PM ET

Register here — it’s free

In this important videocast, you’ll learn clear criteria for abandoning an acquisition before it’s too late. The information here can save your company millions of dollars and years of heartache.

After the videocast I will be answering questions, so please have your questions ready. In the meantime you can contact or submit questions at any time by commenting on this post or using the contact form.

Learn more about M&A Express.

Subscribe to the blog.

CEO Paul Villella of HireStrategy recently shared why he sold his company ─ despite not actively looking to sell ─ and the results one year after the acquisition.

Paul addressed a packed room of CEOs, CFOs and senior-level executives from the Washington-DC area at “Grow or Die: A Panel Discussion on Middle Market M&A” hosted by Capstone and Access National Bank on April 23 at the Tower Club.

Paul, who founded HireStrategy in 2000, grew the firm from a three-person startup to the leading staffing firm in the Washington, DC area and to one of Inc. Magazine’s fastest growing firms in the U.S. By 2014, the company had reached $33.17 million in revenue. Paul was focused on investing in, and growing, the business when he received an unexpected phone call about a potential acquisition opportunity from the Addison Group, a Chicago-based staffing firm.

In his comments, Paul said he had a “walk away” attitude for most of the acquisition talks. Like many owners, he was not interested in selling his company. HireStrategy was growing without the acquisition – so why sell?

Paul Villella, CEO of HireStrategy, shares his acquisition story.

Paul Villella, CEO of HireStrategy.

In our 20 years working with not-for-sale transactions, we’ve found this attitude is not uncommon. There are many reasons why owners say “no” to selling and also many reasons why they say “yes.” It is up to strategic-minded buyers to find the right equation that will change “no” to “yes.” Acquirers should remember that this equation includes much more than financial incentives.

So why did Paul decide to sell HireStrategy? “The Addison Group was willing to truly partner with us and structure the deal in a way that would allow me to continue running the business with my team,” he said. Paul and the Addison Group arrived at a solution that suited both parties.

Under the agreement, Paul maintained control of HireStrategy and, equally important, retained his core team. In addition, HireStrategy kept its own brand and his staff received improved benefits. The Addison Group was also willing to pay an aggressive multiple for the firm because it was a key part of its strategy plan to expand on the East Coast.

The staffing industry is notorious for poorly handled mergers, but HireStrategy’s transaction was successful. One year after the acquisition, the company has reached all its 2014 targets and is on track, or ahead, for all of its 2015 goals. In addition, the majority of the staff has stayed on.

During his presentation, Paul explained the process of the acquisition, including how and when he involved his investors, outside advisors, and legal experts, and how and when he communicated with the rest of his team. On a more personal note, Paul discussed the opportunities for growth not only for HireStrategy for himself as a leader.

Mike Clarke, CEO of Access National Bank, and David Braun, CEO of Capstone, also commented on trends in lending and banking, and the state of middle market M&A today.

HireStrategy’s story prompted lively engagement and questions from the executives in the audience. Our hope is that through this event and events like these, owners and executives will continue thinking about external growth as a pathway that holds great potential.

“Grow or Die” was our third event hosted by Capstone and Access National Bank.

Below are some photos from this exciting event.

Interested in strategic growth and mergers and acquisitions? Contact Capstone today.

 

Mike Clarke, CEO of Access National Bank speaks on lending trends at "Grow or Die."

Mike Clarke, CEO of Access National Bank speaks on lending trends at “Grow or Die.”

 

CEO, CFOs and senior-level executives in the Washington-DC area gather for Grow or Die: A Panel Discussion on Middle Market M&A.

CEO, CFOs and senior-level executives in the Washington-DC area gather for Grow or Die: A Panel Discussion on Middle Market M&A.

 

David Braun, CEO of Capstone comments on M&A at "Grow or Die"

David Braun, CEO of Capstone comments on M&A at “Grow or Die.”

 

Grow or Die David Braun Paul Villella Mike Clarke

David Braun, Capstone; Paul Villella, HireStrategy; and Mike Clarke, Access National Bank at Grow or Die: A Panel Discussion on Middle Market M&A.