Tom Marx presented at Northwood University's Heavy Duty Leadership Class in 2016.

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SURVIVING & THRIVING
IN A CONSOLIDATING WORLD
Tom Marx | July 19, 2016

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Tom Marx
• 30+ years in a:ermarket
o Marke=ng Communica=ons
o Mergers & Acquisi=ons
• Most segments, channels and products
INTRODUCTION

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INTRODUCTION

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HART MARX ADVISORS
Driving Smarter Mergers & Acquisi=ons
AUTOMOTIVE PERFORMANCE SPECIALTY PRODUCTS
MOTORSPORTS COMMERCIAL VEHICLES
& HEAVY DUTY

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SERVICES
BUY SELL
MERGE CONSULTING
SERVICES
BUY
SELL
MERGE
MARKET
RESEARCH
EQUITY &
DEBT
FINANCING
DUE
DILIGENCE
ADVISOR TO
PE FIRMS

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COMPLETED TRANSACTIONS

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CONSULTING

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DELIVERING RESULTS

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INDUSTRY INVOLVEMENT

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Consolida=on
• Larger companies acquire smaller companies using affordable capital to grow
o Economies of scale
– Provides goods/services rela=vely more efficient and at lower cost
– Success aQracts addi=onal investment
o Consolidators will conAnue to acquire for two main reasons
– Furthers their compe==ve advantage
– More transac=ons = beQer processes = lessens cost of acquisi=on
Source: Brad Mewes, Sep 2015
Consolidation will continue because it is a virtuous cycle
MARKET DYNAMICS

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MARKET DYNAMICS
Four Stages of Consolida=on
• Stage 1: FragmentaAon
o Acquisi=ons are o:en “one off” in nature and tend to be opportunis=c
• Stage 2: AcquisiAons
o Frequent and rapid at this stage -- scalability becomes key!
• Stage 3: Expansion
o Less frequent but more focused -- core competency with the process
• Stage 4: Maturity
o Acquisi=ons trickle to a stands=ll
Source: Brad Mewes, Sep 2015

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A:ermarket now at high level of consolida=on and this
results in a changing compe==ve landscape
• Crea=ng opportunity and risk for your business
MARKET DYNAMICS MARKET DYNAMICS

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MARKET DYNAMICS
What’s driving the strong M&A ac=vity level?
• Simple Supply vs Demand rules
• Revenue strong across value chain
• Smaller M&A transac=ons have become more aQrac=ve
o Acquirers seek to strengthen infrastructure posi=ons within key
a:ermarket segments
• Cheap cost of capital
• Current growth cycle is 4th largest expansion ever

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HEAVY DUTY INDUSTRY
Today and Tomorrow
• Consolida=ons drive HD sector
• Deals keep happening
• FleetPride and TruckPro
• Distributors
• Suppliers
• OES
• Independent service dealers

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M&A SURVIVAL OVERVIEW
1 M&A SCENARIOS
2 WHAT TO EXPECT
3 HOW TO SURVIVE...AND THRIVE

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M&A SCENARIOS
Sell/
Divest
Acquire
Merge Ownership
Events
Private
Equity
(PE)
READY — AIM — FIRE

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SELL OR DIVEST
• Exit strategy: planned – or not
• Re=rement and no bullpen
• Accident, illness or worse
• Financial challenges
• Disagreements between partners or family members
• An approach to corporate restructuring
• Get rid of an underperforming or non-core asset
• Capitalize on beQer performing assets or add to core assets
• An offer that cannot be refused
• Freedom – It isn’t fun anymore!

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ACQUIRE
Grow or fade away
• Strategic acquisi=ons
o Territory
o Market share
o Economies of scale
o Gain new customers, suppliers,
management, technology
o Take out the low price leader
A B
A B
A B

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MERGE
Mergers are propelled by
many of the same
reasons as acquisi=ons
• Shared ownership/equity rather
than straight buy-out
• Power and value of the en==es
allow for control of equity, joint
power to make decisions, and
shared responsibili=es
A
B
C

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Strengths or weaknesses of the parties
deJines if it’s a merger or acquisition
© 2015 Marx Group Advisors, LLC 20

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OWNERSHIP EVENTS
Succession planning
gone RIGHT
• Next genera=on moves into leadership
• Seamless
• All on the same page
• Plan successfully executed with
minimum of drama

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OWNERSHIP EVENTS
Succession planning
gone WRONG
• Illness or worse
• Current genera=on won’t let go
• Fric=on builds, frustra=on grows and
finally outside therapy comes to rescue
• Drama creates ri:s, slows growth,
creates risk
• Plan isn’t executed

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ROLE OF PRIVATE EQUITY
PE firms drive consolida=on
• Provide funds/exper=se needed to grow the
business
• Higher mul=ples mo=vate sale
• Supports succession planning
• Buys out certain family members
• Some acquisi=ons are 100% and some can be
par=al cash-out or as mo=va=on to stay
• The ul=mate exit strategy
• Result: You now are accountable to someone else

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CHANGE – RELEVANCE TO YOU
Have you experienced these scenarios?
• Sell
• Acquire
• Merge
• Private equity
• Ownership event

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What to expect
• Survival
• Organiza=onal consolida=on and adjustments
• Your value to surviving en=ty
• Leadership
CHANGE – RELEVANCE TO YOU

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The inner sanctum
• What does this mean?
• How do I get there?
• How will I know?
• How do I react when surprises happen?
CHANGE – RELEVANCE TO YOU

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Will I thrive?
• Stay posi=ve
• Find ways to drive collabora=on
• Show objec=vity
• Be focused
• Know when to hold ‘em vs. when to fold ‘em
• And through all this – get your day job done
CHANGE – RELEVANCE TO YOU

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• Be me=culous with preparing company for
transi=on
• Keeping it quiet—the true meaning of an NDA
• Where do I go to release the tension?
• The ul=mate sign of maturity
YOUR COMPANY IS SELLING
SINCERITY
TRUST

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• Devil is in the details
• Integra=on o:en is the difference between
success or failure
• Planning is important – execu=on is everything
• Build a diverse team
• Opportunity knocks
YOUR COMPANY IS BUYING

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• Crea=ng financial gain
• Efficiency is key
• Keeping customers happy
• Opportunity knocks
• Do I jump ship?
YOU’RE SELLING/MERGING

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• The founda=on for successful M&A
• Make sure that the whole is more valuable than the
sum of the parts
• No room for duplicate expenses
• Expect many changes
• Keep focus on the metrics required by board, bank
or PE firm
YOU’RE SELLING/MERGING

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• Team builder
• Accountable
• Decision maker
• Redesign or refine the company’s culture
ALWAYS BE YOUR BEST

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• Retain the best people
• Keep your team informed
• Maintain/increase produc=vity
• Handle issues before panic sets in
MANAGE YOUR PEOPLE

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SUCCESS IS OFTEN UP TO YOU
Demonstrate
leadership
Listen to points
of view
Find
SoluAons
Build the
team
No room
for egos

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SHAPE THE FUTURE
• Grow the business
• Build the brand
• Clarify value proposi=on
• Focus on sales
• Target marke=ng
• Streamline opera=ons
• Understand the finances

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QUESTIONS?
1 2 3 4
Where are you
in the process?
What else are you
curious about?
What are your
concerns?
What
stops you?

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Tom Marx | 415.453.0844 x106
tmarx@hartmarxadvisors.com
For ar=cles, resources and to sign
up to our e-newsleQer please visit
hartmarxadvisors.com
Contact me if you would like
a copy of this presentaAon
or further informaAon on
buying or selling.