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PRESS RELEASE: Johnsons Corporate Brokers the Acquisition of Pratt Safety Systems by Paramount Safety Products

 

Prochoice & Pratt

 

HQ & TeamJohnsons is pleased to announce another successful acquisition of a private, mid-sized Australian business. After facilitating a comprehensive end-to-end research, qualification and negotiations process, our client – Paramount Safety Products – has acquired Pratt Safety Systems for an undisclosed amount. Paramount, the name behind Prochoice Safety Gear, is a leading national manufacturer and distributor of industrial personal protection equipment. Pratt supplies Australian industry with quality site safety and environmental protection products that stand up to the challenges of Australian conditions.

The team at Johnsons were pleased to act as lead advisors to Paramount’s directors and would like to extend our congratulations to both the purchaser and vendor.

In 2015, Paramount’s board delivered a mandate to pursue growth and diversification through acquisition. The directors engaged Johnsons to undertake a strategic acquisitions campaign on their behalf, with instructions to identify a number of suitable, off-market targets and to manage negotiations through to a completed transaction.

Within 8 weeks Johnsons presented Paramount’s board with a qualified, short-list of 19 targets. The directors quickly prioritised Pratt Safety Systems, recognising in it an established and well-reputed player with a complementary product range that represented an ideal fit for its diversification objectives.

For over 50 years Johnsons Corporate has specialised in the provision of business sales and acquisition services for mid-sized, private Australian companies. Our clients get results because Johnsons’ approach is specifically designed for the mid-market business sector, targeting financial and synergistic trade buyers. Custom research and direct marketing capabilities, combined with expertise in sales and negotiations, create a service unavailable elsewhere in the field of traditional business broking and corporate advisory.

NEWS: Johnsons Goes High Tech to Target 1000+ Buyers And To Close M&A Deals in 5-8 Months

CASE STUDY IN THE USE OF SOPHISTICATED M&A TECHNOLOGY.
Originally published by Cloud Navatar’s Alok Misra on March 11, 2016.

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The Johnsons Corporate team pioneered the Six Stage Sales process that helps them systematically cast a wider net when seeking buyers for businesses. Thanks to their adoption of sophisticated M&A technology, Johnsons Corporate is well positioned to be a leader in Australian mid-market M&A, widening their targeting ability to more than 1000 buyers and closing each deal within 5-8 months.

When it comes to selling mid-market businesses, Johnsons Corporate doesn’t believe in taking shortcuts. The Johnsons Corporate Six Stage Sale Process, developed and refined for over 50 years, is based on the conviction that the sale and acquisition of mid-market businesses warrants a systematic approach to cast the net over a broader pool of prospects in more commercial and geographic markets than others would even contemplate.

In practical terms, the Johnsons approach translates into custom marketing campaigns to 500 to 1000 targets (as opposed to 30-40 targets that most corporate advisory firms work with), and it’s central to how they have been able to create a unique position in the Australian mid-market M&A marketspace.

Challenge

Running such a comprehensive process takes more time, and Johnsons realized they needed to “up their game” with sophisticated technology to run the mandates intelligently. Since they were used to finding global buyers, Johnsons scoured every corner of the globe for the right technology. The goal? To define a clear beginning and end to this well-defined process, and deliver faster results to clients — within a range of 5 to 8 months.

Most of the M&A advisory software that Johnsons came across was heavily dependent on consultants to deploy and required spending significant amounts of time and money. They didn’t want to burn valuable deal-making time working with consultants and building software workflow – they wanted a proven product for investment bankers, one that could jumpstart their efforts to lead their market.

Solution

The Johnsons team chose New York based Navatar, the connected growth platform for private markets that leverages data and technology like S&P CapitalIQ and Navatar Deal Connect. The critical test was to figure out whether Navatar’s M&A-out-of-a-box approach would be able to support Johnsons’ Six Stage Sale Process and improve their ability to cast a wider net and deliver faster results for their clients.

The Johnsons process was implemented within four weeks. In a short time, Johnsons was able to create a custom database of prospective targets and improve how they were managing their marketing campaigns to target segments. Where Navatar really shined was in managing the engagements. After deployment, the Johnsons’ team, across different offices, could drill down to any engagement and immediately see what was required next and by whom. They are now able to efficiently profile and track a whole range of acquisitive trading companies from across multiple industry segments, as well as financial buyers and their preferences. They can also leverage their custom research in a much more effective & meaningful manner and use it across multiple campaigns. And they are able to provide their clients with detailed & regular reporting throughout the whole process.

Johnsons has been able to streamline the marketing activities that target multiple synergistic acquirers from across the same industry as their client, as well as adjacent industry segments. They also reach out to international acquirers as a member firm of M&A Worldwide, a global network of more than 40 boutique M&A firms operating in over 36 countries. In addition to financial and strategic buyers, Johnsons also markets to accounting firms nationally, positioning the business as a prospective acquisition opportunity for clients of these firms.

With greater visibility across their business, Johnsons is eyeing rapid growth. “Navatar was the only technology that matched our ambition – and it did so out of the box” said Adrian Ness, Director, Johnsons Corporate. ”Thanks to Navatar, we are able to simultaneously manage and communicate with multiple local and international buyers across several campaigns at any one time. Additionally, our campaign reporting to clients is now fully automated providing complete visibility across all buyer communications. This empowers our clients to make better business decisions in relation to the sale of one of their most valued assets – their business.”

With over 50 years of experience buying and selling private & family owned businesses, Johnsons Corporate offers an approach specifically designed to maximize the value of a business.  They always adopt a customised marketing strategy to each and every engagement. And every client they take on has an associated marketing campaign in order to sell their business and create competitive tension at the table.  Their experience and expertise lies in executing business sales and acquisitions to strategic buyers & sellers, whether they come from local or international markets (via our partners M&A Worldwide).

See the original Blog Article as published by Navatar Group: a premier provider of cloud solutions – which combine CRM, content management and data – for the financial services industry.

PRESS RELEASE: Johnsons Corporate Brokers the Sale of Bridgeman Stainless Solutions to Direction Fund Limited

 

Bridgeman logo             DFL

IMG_0119Johnsons is pleased to announce the successful sale of a private, mid-sized Australian business to a financial buyer. After facilitating a comprehensive, end-to-end sales and negotiations process, our client – Bridgeman Stainless Solutions – has been acquired by Direction Fund Limited for an undisclosed amount. Bridgeman is the manufacturer and supplier of a wide variety of customised stainless steel products and solutions for a number of commercial and industrial sectors. DFL is an investment fund that invests in SMEs and listed stocks in order to enhance returns for charitable organisations for the deaf and hearing impaired.

The team at Johnsons were pleased to act as lead advisors to Bridgeman’s directors and would like to extend our congratulations to both the vendor and the purchaser.

In 2015, Bridgeman engaged Johnsons as its managing director sought to step back and set in place a succession strategy for his retirement. The directors also believed the Business would benefit from a new owner with the capital and capabilities to take the business to the next level.

Prior to engaging Johnsons Corporate, Bridgeman had dealt with two other advisors over a 2+ year period with no successful outcome. Within 4 months of going-to-market, Johnsons’ proactive approach had secured 3 written offers to acquire the Business. Of those, DFL went on to undertake exclusive due diligence and complete the acquisition.

For over 50 years Johnsons Corporate has specialised in the provision of business sales and acquisition services for mid-sized, private Australian companies. Our clients get results because Johnsons’ approach is specifically designed for the mid-market business sector, targeting financial and synergistic trade buyers. Custom research and direct marketing capabilities, combined with expertise in sales and negotiations, create a service unavailable elsewhere in the field of traditional business broking and corporate advisory.

PRESS RELEASE: Johnsons Corporate Brokers the Successful Sale of SRO Group to Murray Engineering

 

SRO Group         Murray Engineering

SRO Aerial ShotJohnsons is pleased to announce the sale of a private, mid-sized Australian business to a trade buyer in the same industry sector. After facilitating a comprehensive, end-to-end sales and negotiations process, our client – SRO Group – has been acquired by Murray Engineering for an undisclosed amount. SRO Group is a leading electrical engineering business with operations in Australia and China that provides turnkey solutions for the design, manufacture and integration of electrical infrastructure for heavy industrial projects. Murray Engineering is a Western Australia resources services provider.

The Johnsons team were pleased to act as lead advisors to SRO Group and would like to extend our congratulations to both the vendor and purchaser.

In 2015, SRO Group engaged Johnsons to find an investor to help take the business to the next level. This was Johnsons second engagement with the Business, having previously divested the Group’s mechanical division in 2013.

For Murray Engineering the acquisition opportunity represented a chance to create a national presence. Managing director, Craig Lindsay-Rae, said the acquisition was a union of two like-minded companies. “SRO’s expertise and professionalism provides Murray Engineering with electrical and mechanical opportunities on the eastern seaboard.”

For over 50 years Johnsons Corporate has specialised in the provision of business sales and acquisition services for mid-sized, private Australian companies. Our clients get results because Johnsons’ approach is specifically designed for the mid-market business sector, targeting financial and synergistic trade buyers. Custom research and direct marketing capabilities, combined with expertise in sales and negotiations, create a service unavailable elsewhere in the field of traditional business broking and corporate advisory.

PRESS RELEASE: Johnsons Corporate Brokers the Successful Sale of Tradequip to Borum Importers

 

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Johnsons is pleased to announce another successful sale of a private, mid-sized Australian business to a synergistic trade buyer. After facilitating a comprehensive, end-to-end sales and negotiations process, our client Tradequip – a leading Australian importer and wholesale distributor of industrial tools and equipment for the professional trades markets – has been acquired by Borum Importers – a growing Perth-based industrial equipment distributor – in a structured asset sale for an undisclosed amount.

In late 2014, Tradequip’s directors engaged Johnsons to divest the Business in order to pursue retirement plans. Furthermore, they believed the Business would greatly benefit from being part of a larger distribution company.

Commenting on Johnsons divestment strategy, which positioned Tradequip as an ideal bolt-on opportunity for existing equipment distributors, company director Frank He noted: “This focussed approach resulted in a number of meaningful discussions with interested parties within our sector. The end result was a great match with the final purchaser in Borum Importers.”

For Borum the acquisition opportunity represented a great fit with its strategic growth plans. Based in Western Australia, the purchase gives the business a solid entry into the Victorian market and, critically, an established base for expanding across Australia’s Eastern Seaboard.

The team at Johnsons were pleased to act as lead advisors to the deal and would like to extend our congratulations to both the vendor and buyer.

For over 50 years Johnsons Corporate has specialised in the provision of business sales and acquisition services for mid-sized, private Australian companies. Our approach gets results because it is specifically designed for the mid-market business sector. Our custom research & targeted marketing capabilities combined with our expertise in sales & negotiations provide a service unavailable elsewhere in the world of traditional business broking and corporate advisory.

Asset or Share Sale? Which is Best for You?

When a business is sold, it is usually one of two types of transaction: an asset sale or a share sale. This article looks at the pros and cons of each.

What is an asset sale?shutterstock_165807425 (1)
An asset sale is where the assets of the business are sold, while the seller retains ownership of the business entity and company structure. Assets can include plant, equipment, inventory, property, company name, intellectual property and goodwill.

What is a share sale?
A share sale is where the buyer purchases shares in a business’s legal entity, rather than just the assets. In a share sale the acquirer may purchase anywhere from a minority shareholding to a majority or controlling interest to 100% of an entity. Generally speaking, acquisitions through share sales are more complex and involve greater risk than asset sales and therefore require greater due diligence (DD) by the purchaser to make sure the business is ‘clean’.

Which is right for you?
Ultimately, commercial, legal and tax considerations will determine whether a transaction is structured as an asset sale or share sale. Each type of sale has advantages and disadvantages, and the type of sale you opt for will be influenced by whether you are buying or selling.

Asset sale pros and cons for buyers
Asset sales generally pose a lower risk to buyers, as they are only purchasing the company’s assets and not the business legal entity, which may have unknown encumbrances associated with it. These could include contingent liabilities such as product liability, contract disputes, employee lawsuits or issues with product warranties.

On the downside, employee contracts are not transferable in an asset sale and must be re-negotiated with the new owner and entitlements factored in, all of which can affect the selling price.

Contracts with suppliers and customers as well as special licenses and permits may also not be transferable, and the consent of third parties may be required, which can also affect the sale price.

Certain assets can also be harder to transfer due to issues of assignability, legal ownership, and third party consents. Such assets could include certain kinds of intellectual property, leases, permits and contracts; all of which can slow down the sale and increase costs for the buyer.

Asset sale pros and cons for sellers
Asset sales can be advantageous for sellers in that they can stipulate the assets they wish to sell and retain ownership of those they do not  (i.e. they may wish to retain certain assets such as their cars or items of equipment).

However from a taxation point of view, they may wish to sell all of their assets as if this qualifies them for the sale of what is known as a ‘going concern’, then they may not be liable to pay GST on the sale.

One possible disadvantage of asset sales for sellers is that they may be subject to Stamp Duty, which is generally higher on the sale of assets than on shares.

Share sale pros and cons for buyers
One of the main advantages for buyers in share sales is the fact that they assume full control of the business and the transaction is usually smoother than an asset sale. This is because all contracts with suppliers and customers remain intact and as far as the outside world is concerned, the only thing that has changed is ownership of the business.

Continuity is also maintained with the company’s employees, as terms and conditions of employment remain unchanged with the new ownership.

The main downside of share sales for buyers is the increased risk they are exposed to, because they stand to inherit every element of the business, including any unknown legal, tax or other liabilities the seller may have.

The increased due diligence required to identify these possible encumbrances can also increase the cost of the transaction for the buyer.

Share sale pros and cons for sellers
The main advantage of share sales for sellers is that all of their potential liabilities are re-assigned to the buyer and they can make a clean break from the business

On the downside, because of the potential encumbrances the buyer is taking on, they may require more stringent warranties and indemnities from the seller.

Whichever type of sale structure you opt for as a buyer or seller, it is vital to get the right accounting, taxation and legal advice before committing yourself to a sale. If the size of a transaction exceeds $1 million, then hiring an independent business broker would be a wise decision.

What is Due Diligence?

Due diligence (DD) is the process of appraising a business prior to its acquisition. Usually initiated by a potential buyer, DD looks in detail at a company’s operations, finances, contracts, assets and liabilities in order to determine whether it is a commercially viable business and a worthwhile acquisition. The process is used to identify any risk associated with the purchase whether legal, regulatory, financial or commercial. Its findings typically influence deal structure and terms and may affect the final sale price.shutterstock_175108397

Who conducts due diligence?

Due diligence is usually conducted by either the purchaser or an independent DD provider. usually be called in after the buyer and seller have agreed in principle to the sale.Independent audits are performed by firms who are highly experienced in DD matters, and who will

In case any risks associated with the business or its acquisition cannot be adequately addressed, the DD provider is required to conduct an audit within a set time period (specified in a letter of intent) to ensure that the process does not go on indefinitely and that there is as minimal disruption to the business as possible.

What does due diligence involve?

Depending on whether the purchase is one of assets or sales, DD can involve looking at every aspect of a business, including its legal and tax compliance, financial and sales records, business operations, assets, expenses and debts.

Legal

  • The terms and conditions of any applicable lease agreements and what the buyer’s obligations and rights are in regard to such agreements.
  • Any outstanding notices or government requirements for work to be carried out on the premises, such as water or sewerage work.
  • Any current or pending legal proceedings that may have been instituted against the business or the person selling it.

Tax

  • Whether there are any capital gains tax implications, such as those that apply if the business is sold again within one year of purchase.
  • If there may be stamp duty implications, such as those that would apply if the buyer plans to restructure the business.
  • What the GST implications are for the buyer.
  • Whether the assets of the business have been valued for the best tax advantage.

Finances

  • Analysing its financial records over the short to medium term (past 3-5 years) to confirm historical performance and determine future cash flow and profitability projections.
  • Examining the accounts receivable with regard to any doubtful debts or payments made to the seller such as deposits that may be owed to you.

Sales

  • Whether they are accurate, or whether bad debts are still recorded as receivables.
  • Whether sales patterns are consistent or fluctuate according to seasonal factors or business cycles.
  • Whether sales levels can be maintained and improved with current resources.
  • Whether a few particular clients or salespeople are responsible for a large percentage of sales.
  • Whether the buyer has obligations with regard to existing warranties on goods sold.

Operations

  • Whether it is part of a group or franchise, which could restrict the buyer’s autonomy.
  • Whether it has all the necessary authorisations and licences to carry out its functions.
  • Why the owner is selling and whether they intend to operate in competition to you in the future.
  • Whether the seller is pivotal to the success of the business and whether the buyer has the necessary skills to fulfil the vacated role.
  • Whether the business is in a good location and if this is likely to continue.

Industry

  • The current state of the industry and whether it is likely to expand or contract in the future.
  • Where the business ranks in relation to its competitors.
  • Whether the same suppliers will be accessible on the same terms.

Assets

  • The book value, market value and replacement value of the fixed assets,which the buyer will pay for.
  • The intangibles and whether they are transferable to the buyer.
  • That the inventory has been accurately valued in cost of goods sold statements.
  • Whether plant and equipment is owned or leased, in good working order and if reasonable depreciation is being claimed.

Expenses

  • Whether any large expenses have been put off by the seller.
  • Whether any large expenses are likely in the near future.
  • Whether there are any ongoing expenses such as advertising costs that the buyer would be obliged to honour.

Debts

  • What the terms of repayment are and whether there are any risks for the buyer.
  • Whether the business generates sufficient cash flow to cover its debts.

When you’re looking at acquiring a business, due diligence is a way of ensuring you know exactly what you’re buying. It should be a part of every acquisition, because unless you know the true value of a business, you can never be sure whether you’re buying an asset or a potential liability.

An Overview of the Different Types of Mergers and Acquisitions

Mergers and acquisitions occur every day in the business world for a variety of different reasons. Corporate restructuring is going on all the time. If you look in a newspaper, chances are there will be at least one announcement of a merger or acquisition. In the world of small and medium sized business, acquisitions and divestments are also happening all the time, even if we rarely hear about them. It is simply the nature of business – and the ultimate aim is either to grow and/or divest at the expense of another or with their mutual support.

shutterstock_177263111This article looks at the main types of mergers and acquisitions and the motives of the participants in each case.

Mergers

A merger is where two or more companies join forces for mutual benefit. Control and operational management form part of negotiations and may be shared or end up in the hands of a single party There are five common types of mergers that occur:

  • Conglomerate merger – A conglomerate merger is where two companies that have nothing in common with each other merge in order to share assets or to reduce their business risk.
  • Horizontal merger – This is where two companies in the same industry merge. They are often competitors, and the aim of such a merger is to reduce costs and to gain a greater share of the market.
  • Market extension merger – Market extension mergers are when two companies in the same industry but in separate markets merge, with the aim of creating a larger customer base.
  • Product extension merger – This is where two companies in the same industry but producing different products merge in order to increase profits by grouping their products together to access a bigger market.
  • Vertical merger – A vertical merger is where two companies producing different products in the same supply chain merge together to increase their efficiency.

Acquisitions

An acquisition is where one company takes control of another by purchasing its assets or the majority of its shares. There are five main types of acquisitions:

  • Value creating – Value creating is where a company acquires another company, improves its performance and then sells it again for a profit.
  • Consolidating – This is where a company acquires another company to remove competition from an over-supplied market.
  • Accelerating – Accelerating is when a larger company acquires a smaller company and uses its greater resources to accelerate market access for the smaller company’s products.
  • Resource acquiring – This is where a company acquires other companies to gain resources, skills, intellectual property, technologies or market positioning they need, because it is more cost effective than developing their own.
  • Speculating – Speculating is when a larger company acquires a smaller company with a new product, with the aim of cashing in on its future growth potential.

Businesses involved in M&A

Much discussion and most news coverage of M&A activity focuses on the actions of large and/or publically listed enterprises. In reality, M&A activity occurs as frequently if not more so in the SME market, which comprises small and medium sized businesses.

When acquisitions involve smaller companies transacting with each other, most of the purchases fall into either the “resource acquiring” or “accelerating” categories (see above). In this space there are two main types of buyers – trade and individual. The former refers to businesses buying businesses and the latter to individuals buying businesses. Buyer motivation and perception of value in this space depend on what problem they want to solve. Some typical reasons why smaller entities acquire other businesses include:

  • Geographic scale – to enter a new geographic market
  • Market extension – to acquire access to a customer base and/or demographic in order to grow market share.
  • Channel extension – to gain new channels to market for an existing product / service offer.
  • Product extension – to gain new products or services for offer to an existing market and/or channel, thereby extending market share.
  • Revenue growth – acquire a similar business offering similar product / service to similar markets in order to grow revenue and customer base faster than through organic growth.
  • Brand or positioning acquisition – to gain improved market position through a recognised brand or competitive position.
  • Operational bolt-on – to increase capacity and/or resources through infrastructure, capabilities, intellectual property and/or human resources, when the acquisition is more cost and time effective than building them organically.
  • “Buying a job” – where an individual buys a business to gain access to an income stream and potential long-term equity growth.

Five Tips for Effective Business Divestment

Selling a business is much like selling anything else in that it must be presented as a solid investment with the potential to benefit the buyer. Following are five tips to help you present your business to buyers in the best
possible light and to divest yourself of it in a timely manner and at the right price.

Create a good impressionshutterstock_112048142
First impressions are everything, so make sure your business is clean, tidy and running efficiently when buyers come to look at it. Show them examples of your past accomplishments and of your company’s potential for future growth.

Be ready with the right answers. For instance, they will want to know the reason you are selling your business. Have your answer prepared and ensure you tell them that it is for a valid reason, such as to pursue other interests or retire. Otherwise they may assume that the business is changing adversely or that the industry/market outlook may have diminished for reasons they are unaware of.

Have your books in order
No matter how good your first impression, a buyer will always want to see hard evidence of performance, profitability and future opportunities. Make sure your books are up-to-date and on hand, and that they clearly illustrate the viability of your business. Show them your solid sales figures and mid to long term margin performance. Put your vision of the company’s future down on paper in the form of projections, as demonstrating your company’s growth potential in the hands of an acquirer is key.

Use professionals
Selling a business has legal and tax implications, so make sure you use professionals such as an accountant, financial advisor and solicitor to draw up contracts and to advise you of your obligations.

If you want to increase the number of potential buyers, you should also invest in the services of a broker, who will assist you in finding prospective buyers, present your business in the best possible light, qualify interested parties and negotiate the sale on your behalf.

Reduce perceived buyer risk
When evaluating a business, buyers look at both the prospective upside and potential down-side. This means that as critical as it is to demonstrate current value and future performance and growth potential, it is equally important to reduce any perceived risks in the purchase of your business.

Some concrete “risk-reduction” steps you can take prior to marketing your business are:

  • Have your books and financial statements in order, i.e. performance data is available, consistent and up to date.
  • Eliminate any bottlenecks such as reliance on a single staff member, customer or supplier.
  • Make a handover appear less risky by putting in place management structures and resource(s) as well as industry-standard or benchmark processes and information systems.
  • Resolve any outstanding legal or regulatory risks and issues, e.g. those involving staff, clients, suppliers or industry bodies.
  • Be prepared to offer to stay around during an agreed handover period to ensure a seamless transition between old and new ownership.
  • Make sure current client contracts and purchase orders are documented and up-to-date.
  • If and where issues or uncertainties do exist, it is better to raise them earlier in discussions rather than later. Do not wait for a prospective buyer to discover “hidden skeletons” during due diligence. This experience will create fear and mistrust for the buyer – in the best case prolonging due diligence and in the more common case devaluing the sale price if not derailing the transaction completely.
  • Finally, if and where issues and uncertainties do exist, you may have to consider a staged buyout, in which some portion of the agreed sale price is paid on a deferred basis and dependent on actual performance milestones.

Be flexible and patient
It’s not over until the proverbial lady sings, and divesting a business can in some instances take time. After completing offer and acceptance with an interested party, many vendors find the due diligence and closing stages of a deal especially long and frustrating. It seems like the deal is done, but settling on the terms of sale, of payment, and of handover can involve lots of give and take on all sides. Add the involvement of third parties like solicitors and the mix of different agendas can easily knock a deal off the rails.

As a vendor it is therefore important to keep an open mind, as you might have to explore options that diverge from your original expectations or vision of getting out. It’s best to enter into a divestment process with as few fixed ideas as possible and focus on the long-term outcome for yourself and return on investment for your acquirer.