BUSY M&A ACTIVITY - UPDATE ON RECENT INDUSTRY DEALS
If the recent flurry of deals is any indication, 2021 will be a big year for mergers and acquisitions in the convenience services industry. Here is an update on some recent sales overseen by VBB Advisors and our thoughts on why 2021 will be an active year in our industry.
Following a steady flow of deals for VBB Advisors in 2020, December capped off the year with two sales in Ohio, both of which had multiple buyers in the mix, with VBB Advisors acting as the sell side representative.
Our first December deal was the sale of Midwest Refreshments, based in Dayton, Ohio. It was owned by Bill and Tena Meckstroth, who founded the business in 1969. Bill and Tena will be staying on with the new company in sales and management roles, with a plan on retiring in a year or so. As an added benefit, we were able to sell their warehouse facility to the buyer.
In another December deal, VBB served at the sell side advisor for Apex Vending. This Ohio company was founded in 1999 by Mike Hammergren. Mike will be staying on in a management role.
In both deals, VBB negotiated favorable earn-out provisions that give our clients an opportunity to recapture some of the value lost because of Covid-19.
Active Q1 – For good reason (capital gains for one)
Not surprisingly, the active M&A pace has carried into January as VBB Advisors has buyers lined up for sellers who are actively exploring the possibility of selling their company.
One good reason why operators are exploring an early sale in 2021 – Capital gains taxes.
There is wide speculation in financial circles that capital gains taxes are going up under the Biden administration, but not immediately. As Forbes magazine points out, “President-elect Joe Biden’s tax plan calls for capital gains tax rates to nearly double, from 20% to 39.6 on investment profits over $1 million— functionally matching the highest bracket of ordinary income rates.”
With Covid-19 as the top priority, sellers may have some time before the newly aligned Congress easily passes this huge increase. This potential tax change is accelerating interest by sellers to make a move within the first six months of 2021.
An active Q1 – Because fatigue is taking a toll
The Forbes article echoes a point that I have been making for several months. 2020 has taken a toll. Operators are fatigued and reassessing their life priorities. “Some are asking themselves; do I really want to continue moving forward with my business – and then face the next crisis?”
An active Q1 – Because for baby boomers, it is time
When you look at the demographics, everyone who studies mergers and acquisitions is saying the same thing – our industry is no exception. Baby boomers are aging and unless there is a family member to step in, the business will be up for sale.
The Forbes article agrees, noting that for business owners, the “pandemic crisis has caused them to reevaluate what’s important. That may be particularly true for the 12 million Baby Boomer business owners, who may have experienced personal health scares or sadly, the deaths of their loved ones. Is it time to slow down and enjoy my family and my life?”
The companies who are requesting our free 2021 Exit Strategy Planner fit the profile of baby boomers -ready to sell. In every industry, a tsunami of baby boomers is gearing up to make a move.
Big Operators are ready to accommodate sellers
The nation’s largest operators have taken a huge hit in sales during 2020. How will they quickly recoup those sales? They will do it the old-fashioned way – acquisition. There is currently no shortage of buyers and the big players are hungry for sales and ready to make deals.
The cost of money encourages buyers
With interest rates this low, buyers have the power to spend money. As the Forbes article notes, M&A activity is on the upswing, buoyed by low interest rates.
“According to research firm Mergermarket, after a collapse in the second quarter, the M&A market saw a 33% increase in deal volume and a 140% increase in deal value in Q3 over Q2. What’s more, with zero-interest rates, big bucks have been building up on the sidelines waiting to be invested.”
There is more private equity money available for acquisitions than ever before. Is some of that money destined for you?
“No matter what is going on with the economy or the world, it is time to sell your business if you are ready and we can make the right deal, a deal that makes sense for you, your family and your company.”
My philosophy is driven by the fact that I do not represent buyers. I represent sellers. Please consider what that means for you. I am not interested in just making a deal. I will not be jockeying from one side of the table to the other. I do not subscribe to the idea that a deal requires both sides to feel a little pain. As the seller – you know what you need to receive to move on, to retire, to go in a different direction – comfortably.
I never lose sight of the fact that there is more than one buyer out there for your business. This is a defining characteristic of a “sell side broker.”
That is why I offer free resources like the 2021 Exit Strategy Planner. I want you to have your eyes wide open when you consider whether it is time to sell your business.
Buyers come to me because they know that I serve sellers who have thoroughly and thoughtfully considered their exit strategy with my help. That is the type of seller that you want to be – a seller who has their ducks in order, has taken steps to make their business as attractive as possible and a seller who values their employees enough to make a deal that everyone will feel good about.
Take that critical first step. That is often the toughest one to take.
Order my free 2021 Exit Strategy Planner. At the very least, it will provoke some thought, and this is a good time to think about your future.
Why make VBB Advisors a part of your team?
There are at least three very good reasons to talk to me about being a part of your team for this important chapter of your business journey.
Experience – I have done more significant deals than any other business broker in our industry.
Access to buyers – Throughout the pandemic, I have been in ongoing discussions with potential buyers, from both inside and outside the industry.
We are a sell side broker – We only represent the seller. Everything we do is on behalf of the seller.
Whatever your reasons are to sell your company - the timing, the current frustration, the desire to enjoy life or an interest in rewarding yourself for years of hard work – VBB Advisors can help you realize your goals.
We specialize in sell-side advisory services and mergers & acquisitions. Our focus is on maximizing the realized value on behalf of our clients. VBB manages the entire process from valuing your business, assembling
information, to qualifying prospective buyers, through due diligence, legal documents and closing. Our process is entirely confidential in order to protect the interests of our clients.
Business Valuations. VBB business valuations are based on financial analysis and actual market comparables producing extremely accurate estimates of value.
Financing Assistance. VBB will provide assistance to businesses in the acquisition of various types of financing. Services include preparation of loan packages and presentation to various funding sources.
Strategic Consulting. With over 30 years of experience in the industry, VBB brings to bear a wealth of knowledge in all aspects of the business.
Buy-Side Services. On a contract basis, VBB will assist qualified, well-financed buyers seeking acquisitions in the vending, office coffee and bottled water industries.
Preparing Your Business for Sale. VBB offers a two year strategic plan designed to prepare a business for a successful sale and maximize value on exit.