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Deal Structure Flexibility Will Help You Sell Your Business

July 29, 2011 By Leave a Comment

It was recently announced that WRM America Holdings, a specialty lines property and casualty insurance and risk management holding company, had agreed to acquire the flood insurance business of Fidelity National Financial for $210 million. Fidelity National Financial’s flood and excess flood business – Fidelity National Indemnity Insurance Company (“FNII”) – will operate as a wholly owned subsidiary of WRM America.

WRM, a portfolio company of Aquiline Capital Partners, is a new A.M. Best A- rated specialty property and casualty insurance company created by Wright Risk Management, a respected insurance management company. According to the press release:

“The addition of the largest provider of federal flood insurance through the NFIP to the WRM America family of companies is another step in our continued growth as a specialty lines insurance company, is representative of our dedication to current and future public-private partnerships, and considerably increases our fee-for-service offering,” said William Fishlinger, CEO and Chairman of WRM America.”

So here we have another great example of a synergistic acquisition of a private equity firm’s portfolio company. But what got my attention in this transaction was the deal structure.

Private Equity Banks More Capital

July 27, 2011 By Leave a Comment

As we have discussed in prior articles, equity funds are currently sitting on a sizable amount of dry powder (dry powder refers to capital raised that is unspent and available for investing purposes). In fact, a few months ago it was reported that equity firms had nearly $500 billion stocked away looking for deals to invest in.

So I find it really interesting that despite already sitting on a significant amount of dry powder, equity firms continue to have little trouble raising additional funds. According to Dow Jones, 201 U.S.-based private equity funds collectively raised $64.7 billion in the first half of the year, a 35% increase in capital committed over the $47.8 billion raised by 225 funds during the first half of 2010.

Betting Big on Heavy Construction

July 25, 2011 By Leave a Comment

It was recently announced that Summit Materials had acquired six companies:

  • Elam Construction
  • Grand Junction Concrete Pipe
  • Fischer Quarries
  • B&B Resources
  • Triple C Concrete
  • Wind River Materials

It always peaks my curiosity when I see a company announce this many acquisitions. So I did a little digging. Turns out that Summit Materials is a “platform company” and was formed by a group of investors, including The Blackstone Group and Silverhawk Capital Partners, in 2009. The goal of the platform company is to acquire companies in the “aggregates and heavy-side building materials sector,” according to Summit’s release.

Middle-Market PE Firms Create Win-Win Scenarios

July 22, 2011 By Leave a Comment

Recently it was announced that FedCap Partners, LLC, a private equity fund, through its holding company National Security Partners, Inc., had acquired Point One, LLC and FuGEN, Inc. The combined entities will collectively be called Point One after the acquisition.

Headquartered in Arlington, Virginia, Point One provides cyber security policy development, as well as strategic planning and operations support to the U.S. Intelligence and Defense Community.

Knowing that this niche is a very hot M&A sector, I decided to do a little research on FedCap Partners. It turns out that FedCap is a classic middle-market focused investment firm; but unlike many middle-market professional investors who are typically industry agnostic, FedCap has a very defined industry focus.

In Genuine Scooters (yes…scooters) a PEG sees the future, not a fad

July 21, 2011 By Leave a Comment

Those of you that read this publication religiously know that deals are frequently announced that catch my eye.  And when they do, I usually introduce them in this forum because of some unique feature that I think might be of interest to you as well.

A few weeks ago another deal closing announcement got my attention.  At the time, I thought, wow, what a unique investment. It wasn’t until a few weeks later when reading about the premiere of the new Tom Hank’s movie, Larry Crowne that it all began to make sense.

U.S. Manufacturing Enjoying Rebirth and Renewal

July 20, 2011 By 1 Comment

Lost amidst all of the negative economic news that the business media seems so focused on is the fact that there are quite a few pockets of the US economy that are doing well. One of them is a sector that was written off for dead about five years ago.  I am referring to manufacturing – the sector that saw the mass flight of factories to Asian and Latin American countries over the past decade.

Serial Acquirers Out In Full Force

July 15, 2011 By Leave a Comment

Most middle-market business owners are surprised when they learn how active professional buyers are in the U.S. The misconception that I find all too common is that the recession killed M&A activity and that it has yet to recover. I think we have put most of that myth to rest in past articles we have published about today’s market being a seller’s market, M&A activity being up 30% and a number of synergistic private equity add-on acquisitions. But what really surprises people is just how active strategics are in today’s market. Most of these deals get very little publicity since they usually are not billion-dollar mega-deals. Buyouts recently analyzed the most active strategic buyers since January of 2010.

Mergers And Acquisitions Activity Up By 30%

July 14, 2011 By 1 Comment

If you want to sell your business, your timing couldn’t be any better. According to the ACG (Association for Corporate Growth), M&A activity is up by 30% through May of this year. The ACG’s 14,000 members include professionals from private equity firms, corporations and lenders that invest in middle-market companies, as well as law, accounting, investment banking, and other firms that provide advisory services. It is an international organization dedicated to fostering sound corporate growth primarily via mergers and acquisitions.

Because their membership is largely skewed towards dealmakers focusing on the U.S. middle market, their information is a really good barometer of M&A activity. According to the ACG, although M&A activity has not reached pre-recession levels yet, valuations have largely recovered. Given the significant amount of capital chasing deals right now, this is not surprising. In fact, according to Pricewaterhouse Coopers, we are at the beginning stages of a seller’s market.

Equity Firms Focusing on Smaller Deals

July 13, 2011 By Leave a Comment

So far 2011 is turning out to be a great year if you are an equity firm. Assuming that you are one of the dozens of equity firms sitting on accumulated cash (on a combined basis it is estimated that U.S. equity firms have nearly $500 billion to invest), you are making a much more aggressive play for deals than you did in 2009 and 2010. And most interestingly, if you are like most of the equity firms that are active in the market, you are looking for smaller deals. As we have discussed before, equity firms find the middle market really attractive. According to PitchBook News, during the first quarter of 2011, more than 40% of the deals closed by equity firms were valued below $50 million and nearly 80% were below $250 million.

Deloitte Survey Shows Middle Market Perspectives

July 11, 2011 By Leave a Comment

Recently a colleague of mine sent me a link to a study recently published by Deloitte. She thought I might find it of interest because it was based on a survey earlier this year of middle-market business owners. Given that this publication is dedicated to developing a dialogue with this group, I certainly was interested.

In February of 2011, Deloitte in conjunction with the Economist Intelligence Unit (EIU) conducted a survey of over 500 private and public middle-market companies in the U.S. The survey was quite comprehensive covering a wide range of topics, including questions about pre- and post-recession metrics, growth plans, and the general outlook regarding the future of the companies and the economy. The findings were quite compelling.

Many of you are aware of just how vital the U.S. middle market is to the engine of our economy. According to the EIU, the middle market generates $6.1 trillion in revenue (this survey included companies with revenues from $50 million to $1 billion), which is about 40% of the entire U.S. GDP. In addition, this group employs 24.6 million people. So the middle market is possibly the most important component of our economic health.

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