CONTRACT & TOLL MANUFACTURING
for us to step into a situation and say current management doesn ’ t get it . It ’ s possible , but not usually , and then typically only in situations where the pricing model can be changed from something like cost-plus to value added .” From the perspective of the deal maker , Yttre explained that “ we find that buyers pursue transactions through one of two ways : either through a proprietary transaction where they are talking directly to the owner , or through a competitive bidding process , oftentimes involving an advisor .” In many cases , he said , Grace Matthews is retained by an owner to market a business after that owner has received an unsolicited expression of interest , where a buyer is requesting information to make an offer . “ The amount of capital chasing deals right now makes it hard for owners , many of whom are likely receiving weekly inquiries from interested parties , to differentiate between a credible group and just a speculator dialling for dollars .” The other major factor that Yttre stressed is the reverse interview process . Owners may be seeking a range of priorities in a potential transaction . Some place the highest importance on value and transaction terms .
Building a legacy
“ In our experience , many private owners are selling a business that they – and their family , and some trusted partners and managers – have built over decades ,” he said . “ In many cases , while value and transaction terms are important , those owners may place more importance on intangible factors , and are looking for the next steward of their business , and ultimately of their legacy .” In those situations , Yttre reminded sellers , “ we are advisors , but not decision-makers . Our job is to create options and help owners evaluate each potential path in order to achieve an outcome that aligns with their priorities for a sale .” That said , “ the process of selling a business , even just marketing it , can change the outlook of the owner . For example , there can be a concern about what happens to the management team . If a strategic company is the buyer , it may pursue headcount reductions . Understanding buyers ’ intentions and motivations for the deal are important . A financial buyer may be more likely to keep the management team in place .” In any case , Yttre added , “ it is not uncommon for the party that showed the initial unsolicited interest not to be the successful bidder in the end . We design transaction processes of all shapes and sizes – from a narrow process focused on only a handful of buyers , to a broadly marketed process with more than 200 potential buyers . There is a perception that more is better . However , these days we are seeing fewer but ‘ better ’ bidders . By that I mean serious ones that could be a good match .” The M & A market is very frothy these days , and Yttre noted that in such an environment , “ potential buyers are not going to waste their time and resources on making bids casually . Smart and sophisticated buyers understand a hectic market . They are making their decisions earlier and are leaning into those decisions harder .” On the other side of the equation , he urged sellers to be prepared and patient . “ The quality of the bid is going to vary with the quality of the information provided to the bidders . If you are organised and prepared for the scrutiny of buyers you will have an advantage because serious bidders do deep diligence . Sellers that are organised and prepared have leverage , and can preserve leverage as long as they can in the process .” •
SOCMA
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54 SPECIALITY CHEMICALS MAGAZINE ESTABLISHED 1981