Tuesday, August 19, 2008

Valuing Companies

Valuing Aftermarket Businesses, Dan Brinker, President & CEO, American TonerServ

As a professional in the Merger and Acquisition side of the industry, his firm (a public company) has talked to 300 companies, has done five acquisitions in the last two years. He notes that the time for consolidation is upon us -- quoting Gartner Group "Printing is like the copier industry last 10 years", Print industry growing 11% and copiers -2%.

When? The time is now, impacting all segments of the industry.

Why? -- creates economies of scale
Where? -- worldwide
How? -- must change to compete effectively; strong strategic relationships, managed print end-to-end
M&A generally -- credit turmoil since mid-07, private equity slow down, valuations down, strategic buyers, conclusion -- fewer bidders, debt terms more onerous to the private equity firms, larger amounts of equity required due to credit risks
Valuation considerations -- EBITDA analysis, Retenton of entrepreneur and key personnel, SWOT analysis, balance sheet review, inventory accounting
Strategic versus non-strategic buyers
Valuation issues for strategic buyers include: Management post-acquisition – stay or leave; 150 Day Plan to realize synergies; Integration Issues; Customer/Vendor Issues; and Corporate Culture Issues.
Final advice: Negotiate a win/win, and close the gap (seller and buyer valuation)

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