CompositesWorld
Issue link: https://cw.epubxp.com/i/576646
OCTOBER 2015 6 CompositesWorld PAST, PRESENT & FUTURE » Investors throughout the world have a positive perception of the composites industry. Tey see growth opportunities across many sectors – aerospace, automotive, wind energy, pressure vessels, oil and gas, rail and mass transport. Overall, margins and return on investment are attractive, especially compared to many other manufacturing segments. And they like the choice that the diverse composites business models ofer, with diferent mixes of capital and margin intensities throughout the supply chain, to match their investment strategies and portfolios. Relatively young and fragmented, the industry attracts partic- ular attention from three discrete investment communities: • Mid-market fnancial investors who seek strong growth opportunities in the manufacturing sector; • Trade buyers who want to diversify into a higher growth market; • Industry players looking to expand into new markets, broaden their product portfolio or consolidate. As attractive as they might be, owners and shareholders who are looking to sell to one of these groups must not neglect the following all-important tasks of preparation if they are to be successful. Planning and timing are key. Toward those objectives, we have developed a comprehensive fve-step process: 1) Efective positioning and presentation; 2) Intelligent research; 3) Identifcation, selection and approach to the right buyers; 4) Creation and management of a competitive process; 5) Avoidance of legal, regulatory and tax pitfalls. Troughout, there are always requirements for diligence with your planning, awareness of your timing of each action, and an overall approach that concentrates on the end result. Selling your business, Part 1: The best price with the best deal 1. Efective positioning and presentation Defne your goals. First, clarify your commercial and your personal objectives. Have you decided on a timeframe? It is rigid or fexible? What about succession planning? Will your children take over the enterprise, or the present management team, or new blood, or a mixture? Will you really leave entirely or will you seek further involvement, possibly over a defned period? Tis scenario assumes there's one owner, or a majority share- holding, with others willing and able to tag along with the sale. But most often, businesses have a raft of active, and not-so-active, shareholders, with a distinct lack of alignment between their wishes, hopes and ideas. A lack of orientation makes the business difcult to sell, and certainly hinders external investment. When a business starts up, the funding — from friends, angels and other sources — and the shareholding and shareholder agreements are often informal, varying in their terms and condi- tions, and may include other considerations, promises and assur- ances. Te priority at start-up is to get the cash, from wherever and whoever shows a willingness to invest. At FMG, we fnd that the result is a not unusual mix of investor goals and personal agendas, and a resulting lack of commonality. Shareholder alignment is essential but can be a bit like herding cats. Nevertheless, it must be dealt with at the earliest opportunity and in place before any exit option is considered or planned. Ten a number of questions must be answered: Who is your likely buyer? For most medium-sized businesses, a buyer comes in two guises: • Financial investor. Usually a private equity group or potentially a 'family ofce,' their fundamental interest is the fnancial return on their investment. They look for Date Target Buyer/Investors Share bought Value (million) Target EBITDA (million) Target sales (million) Multiple Description of multiple July 2015 Cytec (US) Solvay (Belgium) 100% $6,400 – US$2,000 14.7 (stated) 3.2 EV/EBITDA EV/sales July 2015 TenCate (The Netherlands) Consortium led by Gilde Buy Out Partners (The Netherlands) 100% €675 €84.6 – 8.0 EV/EBITDA March 2015 CPI Binani (US) Core Molding Technologies (US) 100% US$15 – US$20 0.8 EV/sales Sept. 2013 Zoltek (US) Toray (Japan) 100% US$587 US$30 – 19.6 EV/EBITDA May 2013 PECO Inc. (US) Astronics Corporation (US) 100% US$136 – US$78 1.8 EV/sales April 2013 Aldila Inc. (US) Mitsubishi Rayon Co. Ltd. (Japan) 100% US$25 – US$50.6 0.5 EV/sales Dec. 2012 Glasforms Inc. (US) PolyOne Corp. (US) 100% US$34 – US$50 0.7 EV/sales July 2012 Umeco (UK) Cytec (US) 100% US$411 US$40.9 – 10.0 EV/EBITDA Table 1 A selection of recent acquisitions in the composites industry, illustrating the target company's valuation multiple. Source | Future Materials Group Research