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Semelhante a HMA CAWA Presentation 2017 (20)
HMA CAWA Presentation 2017
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Presenters
Devin Hart Tom Marx
Managing Partner Partner
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Larger companies acquire smaller companies using affordable capital
to spur inorganic growth
• Economies of Scale
– Goods/services purchased rela5vely more efficiently and at lower cost
– Success aHracts addi5onal investment
• Consolidators Will Con?nue to Acquire for These Main Reasons
– Furthers their compe55ve advantage
– More transac5ons = beHer processes = lessens cost of acquisi5on
Consolida5on will con5nue because it is a virtuous cycle
Aftermarket Consolidation
Source: Brad Mewes, Sep 2015
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AEermarket now at high level of
consolida?on and this results in a changing
compe??ve landscape
• Creates opportunity and risk for
your business
Aftermarket Consolidation
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What was driving the strong
M&A activity levels?
• Supply vs. Demand
• Revenue strong across value chain
• Smaller M&A transac5ons had become more aHrac5ve
• Growth cycle was 4th largest expansion ever
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Supply Side
• Number of jobber, service,
repair, and maintenance
facili5es across the US have
been in decline
Aftermarket Supply & Demand
Demand Side
• Shi- in favor of DIFM segment
• Industry financials were
improving
• Inexpensive cost of capital
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Market Dynamics
Number of Vehicles
in Opera?on
Average Age of
Vehicles Driven
Miles Driven
Per Vehicle
Overall State
of the Economy
Macro Factors
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2015
Sales price mul?ples - mid/large cap
Source: Capital IQ
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2016
Sales price mul?ples - mid/large cap
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What multiples are we seeing for
Micro/Small Cap?
Mul?ples depend on many factors:
• Financial vs Strategic buyers
• Company Performance and Trends
• AHributes Unique to the Business
Wholesale/Retail Distribu?on
Was 5 to 9X , now 4 to 8X
Suppliers/Manufacturers
Was 4 to 7X , now 4 to 6X
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Small/Micro Cap
Items to think about when looking at valua?on mul?ples:
• Don’t get fooled by the higher mul5ples paid by large consolidators of
mul5-loca5on companies
– It takes as much (some5mes more) effort to close a small deal, hence they are
much less aHrac5ve
• Delays happen because small deals get put off or placed at the back of the line
• Lack of knowledge of the seller makes small deals more challenging to a buyer
• Smaller deals are o-en “behind the scenes” and details are rarely known outside of
the buyer and seller
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Aftermarket
Looking ahead:
DO YOU WANT TO TAKE ADVANTAGE OF THIS
‘BRAVE NEW WORLD?’
DO YOU WANT TO REMAIN IN BUSINESS ONCE YOU
UNDERSTAND WHERE THE AFTERMARKET IS HEADING?
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What’s Hot Now?
“While automo5ve M&A ac5vity is off
to a slow start in 2016, we believe
disrup5ve trends will con5nue to drive
M&A headlines. The increased pace of
investment around the Smart Car,
electric and autonomous vehicles, and
ride sharing will drive deal ac5vity in
the next 12 to 24 months.”
–Jeff Zaleski, US Automo5ve Deals Leader
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What type of buyers are most active?
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What are the main differences between strategic,
Kinancial & hybrid buyers?
• Why is it important to know the key differences?
• What are their objec5ves and how do they evaluate an acquisi5on?
• What is their “end game” with respect to their shareholders?
• What are their investment horizons?
• What is a “plamorm” acquisi5on versus a “stand-alone or one-off?”
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Strategic
• Opera5ng companies
• O-en compe5tors, suppliers, or customers
• Looking to build “long term” shareholder value
• Looking to capitalize on synergies:
– Cost
– Revenue
– Financial
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Financial
• PE firms, venture capital firms, hedge funds, family investment
offices, and ultra high net worth individuals
– Buyers have deep pockets and must expand faster than
economy to sa5sfy Return on Investment (ROI) demands from
their equity partners
– ALL about return on investment
• Looking to iden5fy companies with aHrac5ve growth opportuni5es
• Looking for companies with:
– Compe55ve advantage
– Rela5vely short (avg. 3-5 year) return on capital invested
• Strong management team in place (not operators)
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Hybrid
• Achieves the goals of Financial & Strategic Buyers
• O-en a bolt-on to an owned plamorm company
• Incrementally increases revenue and value of
combined en5ty
• May jus5fy an increased valua5on of the acquisi5on
candidate, especially if strategic products and/or
customers are acquired
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What’s the difference between a “Platform” acquisition
and a “Bolt-On?”
Plaaorm
Common when a company enters a new region or market:
• Exis5ng business with sizeable base of opera5ons
• Usually “market leaders” or at least considered a “top player”
• Does not need to be largest, but exerts influence in opera5ng area
• Experienced management with solid opera5ng procedures
Likely result: Can command a higher price at sale
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What’s the difference between a “platform” acquisition
and “Bolt-on?”
Bolt-On
Typically medium to smaller “me-too” companies
• May have aHrac5ve customer base for acquirer
• Management/ownership may be looking to cash out
• May lack formal opera5ng procedures and may not have the ability to
grow much beyond current size
Likely result: Value will o-en come from synergies formed
with the plamorm post acquisi5on
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What are the characteristics of a
“Stand-Alone or One-off” acquisition?
• O-en smaller than a plamorm and larger than a bolt-on
• Operates on its own merits
• May fulfill needed diversifica5on of the owner or fulfill some
strategic need or financial/market balance for the pormolio
• May sell products or services to another member of the pormolio,
enhancing the margins or profits of the other member
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What do acquirers really care about?
• Leadership and succession (a-er YOU)
• 12-15% profit and 15-18% adjusted EBITDA
• 3-6% annual growth over past 3-5 years
• Facili5es and opera5ons (maybe)
• Cash flow to pay for the deal (YOU are paying for the deal!)
…acquirers do not care about non-aligned inventory, machine-shop
capability/equipment, and IT that doesn’t adapt to their plamorm
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What does the future hold?
• The industry will see more innova5on in the next 10 years than it
has for the past 50
• By 2030, consumers may not be choosing which car to buy, but
whether to buy at all
– Shared or fleet ownership will be the norm
• Cars of the future will be internet connected and most baHery
operated
• Self-driving cars will become the norm
• Focus on customers will shi- away from individual car owners
to fleets
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So what are the right moves for your business?
Are you going to be ready to make the huge changes your business will require
in the future?
• Investment in technology?
• Learning new ways of doing business in a digital world?
• Training millennials that may have limited auto experience?
• Declining number of repair shops; and selling to larger and more successful shops?
• Compe5ng against the aggressive new OE dealer programs?
• Compe5ng against the new LCC Amazon direct model?
• Changing customer base to fleets and shared maintenance management
companies?
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So what are the right moves for your business?
If you ARE excited – then grow organically and inorganically
If you are NOT excited – then build a succession plan
or sell the business
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The M&A Journey...
...Is a process
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Buy-Side
Establish
Acquisi?on Criteria 1
Leverage
Networks 2
Iden?fy & Qualify
Prospects 3
Review & Approve
Candidates
4
LOI &
Due Diligence 5
6 Close
Transac?on
Process
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Sell-Side
Valua?on/
Due Diligence 1
Offering
Package 2
Iden?fy & Qualify
Prospects 3
Facilitate
LOI 4
Site Visits &
Due Diligence 5
Sale Agreement
& Close
6
Process
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Aftermarket Experts
Mergers & Acquisi?ons Specialists
A-ermarket, Tier 1 and Tier 2
AUTOMOTIVE
PERFORMANCE
SPECIALTY PRODUCTS
MOTORSPORTS COMMERCIAL VEHICLES
& HEAVY DUTY
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