{"id":45406,"date":"2021-06-17T11:35:11","date_gmt":"2021-06-17T18:35:11","guid":{"rendered":"https:\/\/www.enxmag.com\/twii\/?p=45406"},"modified":"2021-06-17T20:46:01","modified_gmt":"2021-06-18T03:46:01","slug":"no-discounts-pandemic-makes-pricing-and-selling-a-tricky-proposition","status":"publish","type":"post","link":"https:\/\/www.enxmag.com\/twii\/feature-articles\/2021\/06\/no-discounts-pandemic-makes-pricing-and-selling-a-tricky-proposition\/","title":{"rendered":"No Discounts: Pandemic Makes M&A Pricing (and Selling) a Tricky Proposition"},"content":{"rendered":"\n
\"\"<\/figure><\/div>\n\n\n\n

The wait-and-see approach to making deals\u2014a factor of the pandemic and dealers not wanting to base selling prices off of a trailing 12-month period\u2014is as obvious as it is frustrating. The earnouts option has helped a number of deals get to the finish line, but some sellers don\u2019t like the idea of tying compensation into future performance.<\/p>\n\n\n\n

Fear not, gentle readers. We can hear the Tom Petty refrains about \u201cthe waiting is the hardest part,\u201d but as business activity continues to kick back into high gear, sales volumes should enable negotiating parties to more easily pinpoint a number. But are we still talking the same EBITDA multiples that were realized before March 2020 rolled around? And what are the seller\u2019s expectations?<\/p>\n\n\n\n

\"\"
Jennifer Johnson, Marco<\/figcaption><\/figure><\/div>\n\n\n\n

\u201cTiming will become very important as we all assess the health of both the economy and the print industry,\u201d notes Jennifer Johnson, executive vice president of acquisitions and integration at Marco. \u201cSome sellers are holding tight to historical values while buyers are trying to anticipate the future based on industry trends. There is money available to put deals together at the right price.\u201d<\/p>\n\n\n\n

With many potential sellers believing the first quarter of 2021 is more indicative of their company\u2019s true, current performance level, Dan Ruhl believes a greater influx of deals will transpire in the second half of 2021. Ruhl, a partner with Oval Partner, the private equity engine behind Flex Technology Group, feels while overall performances will continue to rise, activity is close enough to normal for sellers and suitors to feel comfortable.<\/p>\n\n\n\n

\"\"
Dan Ruhl, Oval Partners\/FTG<\/figcaption><\/figure><\/div>\n\n\n\n

\u201cThe transactions are going to have to be more highly structured, where there\u2019s going to be some credit given for some of the negative outcomes during COVID,\u201d he said. \u201cThey might have to be some catchup periods, but businesses have sort of stabilized and are coming back as opposed to where we were in the middle of 2020, when it was really tough to gauge the performance of a business.\u201d<\/p>\n\n\n\n

Pricing Game<\/strong><\/p>\n\n\n\n

John Lowery, president and CEO of Applied Imaging, has encountered sellers who sought a multiple higher than he was willing to pay, which is part of the negotiating gamesmanship. It\u2019s not surprising that a dealership would see itself as being worth more than the numbers indicate.<\/p>\n\n\n\n

\"\"
John Lowery, Applied Imaging<\/figcaption><\/figure><\/div>\n\n\n\n

Motivated seller or not, it has to work for both parties. And Lowery has been involved in enough transactions to know when it might be time to walk away\u2026but he\u2019s always willing to listen.<\/p>\n\n\n\n

\u201cWe don\u2019t want to steal the company,\u201d he said. \u201cWe want (the seller) to walk away and feel really good about it. If they don\u2019t want to do it, and if they think they can hang in there and do better by staying in business for themselves, that\u2019s totally fine. We\u2019re not a venture capital company. We\u2019re going to take care of these companies and their employees. We\u2019re going to take care of their clients. And were going to pay a really fair price, and not pay a premium.\u201d<\/p>\n\n\n\n

\"\"
Jim Sheffield, UBEO Business Services<\/figcaption><\/figure><\/div>\n\n\n\n

One executive who sees the pricing market as fairly balanced is Jim Sheffield, CEO of UBEO Business Services. He believes most buyers are willing to pay roughly the same price; in fact, he says many of his own company\u2019s deals have been competitive. <\/p>\n\n\n\n

For Sheffield, culture and not price is the optimum dealer maker or breaker. \u201cIt\u2019s really about what culture they believe in, what team they want to join,\u201d he said. \u201cThese owners love their employees, so even if some of them are going to leave right away or a year after the deal is done, they still very much care about who their employees are going to work for.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

The wait-and-see approach to making deals\u2014a factor of the pandemic and dealers not wanting to base selling prices off of a trailing 12-month period\u2014is as obvious as it is frustrating. The earnouts option has helped a number of deals get to the finish line, but some sellers don\u2019t like the idea of tying compensation into future performance. Fear not, gentle readers. We can hear the Tom Petty refrains about \u201cthe waiting is the hardest part,\u201d but as business activity continues to kick back into high gear, sales volumes should enable negotiating parties to more easily pinpoint a number. But are we still talking the same EBITDA multiples that were realized before March 2020 rolled around? And what are the seller\u2019s expectations? \u201cTiming will become very important as we all assess the health of both the economy and the print industry,\u201d notes Jennifer Johnson, executive vice president of acquisitions and integration at Marco. \u201cSome sellers are holding tight to historical values while buyers are trying to anticipate the future based on industry trends. There is money available to put deals together at the right price.\u201d With many potential sellers believing the first quarter of 2021 is more indicative of their company\u2019s true, current performance level, Dan Ruhl believes a greater influx of deals will transpire in the second half of 2021. Ruhl, a partner with Oval Partner, the private equity engine behind Flex Technology Group, feels while overall performances will continue to rise, activity is close enough to normal for sellers and suitors to feel comfortable. \u201cThe transactions are going to have to be more highly structured, where there\u2019s going to be some credit given for some of the negative outcomes during COVID,\u201d he said. \u201cThey might have to be some catchup periods, but businesses have sort of stabilized and are coming back as opposed to where we were in the middle of 2020, when it was really tough to gauge the performance of a business.\u201d Pricing Game John Lowery, president and CEO of Applied Imaging, has encountered sellers who sought a multiple higher than he was willing to pay, which is part of the negotiating gamesmanship. It\u2019s not surprising that a dealership would see itself as being worth more than the numbers indicate. Motivated seller or not, it has to work for both parties. And Lowery has been involved in enough transactions to know when it might be time to walk away\u2026but he\u2019s always willing to listen. \u201cWe don\u2019t want to steal the company,\u201d he said. \u201cWe want (the seller) to walk away and feel really good about it. If they don\u2019t want to do it, and if they think they can hang in there and do better by staying in business for themselves, that\u2019s totally fine. We\u2019re not a venture capital company. We\u2019re going to take care of these companies and their employees. We\u2019re going to take care of their clients. And were going to pay a really fair price, and not pay a premium.\u201d One executive who sees the pricing market as fairly balanced is Jim Sheffield, CEO of UBEO Business Services. He believes most buyers are willing to pay roughly the same price; in fact, he says many of his own company\u2019s deals have been competitive. For Sheffield, culture and not price is the optimum dealer maker or breaker. \u201cIt\u2019s really about what culture they believe in, what team they want to join,\u201d he said. \u201cThese owners love their employees, so even if some of them are going to leave right away or a year after the deal is done, they still very much care about who their employees are going to work for.\u201d<\/p>\n","protected":false},"author":166,"featured_media":45407,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1650,82,87,1638],"tags":[3487,545,3510],"_links":{"self":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/45406"}],"collection":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/users\/166"}],"replies":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/comments?post=45406"}],"version-history":[{"count":2,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/45406\/revisions"}],"predecessor-version":[{"id":45412,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/45406\/revisions\/45412"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media\/45407"}],"wp:attachment":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media?parent=45406"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/categories?post=45406"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/tags?post=45406"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}