Media Buyers

  • Over the past few years, we have provided regular analysis of the maritime and offshore industry mergers and acquisitions (M&A) markets. But what goes into those decisions and transactions? This quarter, an overview of the basics of mergers and acquisitions – the players, the process and the terminology – will simplify the language of M&A. 

    Buyers
    In simple terms, there are really two types of buyers in the M&A world: Financial Buyers and Strategic Buyers.  A ‘strategic’ is generally a larger company with operations that are similar to those of the ‘target’ company, and the acquisition is intended to capitalize on the synergies between the two entities. The prototypical financial buyer is a private equity group, which is likely to buy and hold the target for some period of time before pursuing another sale or IPO.
    Strategic buyers tend to employ internal ‘corporate development’ staff members to seek out, evaluate and execute transactions. Acquisitions are funded both through cash on hand as well as credit lines and other debt instruments, and publicly-traded companies have the additional advantage of offering company shares as transaction currency. Two examples of prolific public company acquirers in the maritime and offshore industries are Kirby Corporation (NYSE: KEX), and more recently Teledyne Technologies (NYSE: TDY). Kirby made a number of strategic acquisitions in the liquid tug and barge transport market, particularly between 2010 and 2012, while Teledyne has added a number of strategic subsea technology holdings since 2013 including Bowtech and Bolt Technology.
    Financial buyers come in many different forms, but the most common type is called a “Private Equity Group.” PE groups are formally established investment firms with a full-time staff and committed capital from several investors, with a mandate to seek out and acquire companies. Most often, a private equity group will acquire “platform” companies, followed by smaller “add-on” acquisitions of companies that complement the platform. After a period of time, perhaps five years or so, the fund will pursue a follow-on transaction with the (hopefully) larger and more profitable portfolio company.  This transaction will return capital and profits to the fund and its investors and may be in the form of a fully company sale, a recapitalization through borrowing against profits, or in rare cases, an initial public offering (IPO) on a stock exchange.
    Private equity investors have proliferated in the past couple of decades and there are now thousands of firms in the U.S. which vary widely in terms of fund size, staffing and formal commitment of capital.  According to the private equity database provider PitchBook, there are more than 17,000 formally-established private buyout and venture funds in the United States – this doesn’t include thousands of “angel” investors and small, highly-focused acquisition funds.

    Sellers
    For every buyer in an M&A transaction, there must be a seller. Companies enter the M&A market from a number of ownership structures including closely held family businesses, divisions and subsidiaries of larger companies, and of course from the portfolios of private equity firms. Perhaps even more diverse than types of sellers in the market is the variety of motivations and goals of owners entering into M&A transactions.
    Owners of smaller, closely-held companies will often contemplate a transaction for many years prior to reaching a decision to pursue a transaction, but very few actually develop a formal transition plan for their company. This dynamic is often a result of the same entrepreneurial qualities that made the owner successful in the first place: he or she is too consumed with managing a successful business every day, and may not be too biased toward giving up control to others. Sometimes owners are pushed toward a transaction process due to outside forces, such as health issues, divorce or lack of a clear successor when retirement becomes imminent.
    Larger corporate and financial sellers tend to be more calculating in their decisions to go to market with a business entity. Corporations may divest subsidiaries and divisions that no longer fit within their strategic plan, and the capital raised in a sale process can be redeployed for a higher long-term return.  In the case of private equity sellers, the impetus to go to market is ideally driven by the fund’s investment goals and desired holding period, though outside market forces may sometimes dictate the timing of a sale. Alternatively, in an economic climate such as today with favorable debt terms, owners of cash-flowing companies may prefer to recapitalize rather than sell outright, thus taking cash “out” of the business and shifting some risk to one or more lenders.

    The M&A Process
    Regardless of the type of business ownership, most sophisticated sellers in the middle market will seek out knowledgeable advisors to help guide them through the long and challenging M&A process.  Investment banks provide services to owners, from evaluating the company’s market value to laying out exit options and running a full M&A “auction,” which despite the name is typically a tightly-controlled and confidential market process with a targeted list of potential buyers. For companies that aren’t quite suited for the large, recognizable wall street firms, there are many smaller “lower middle market” investment banks in the U.S. that tend to have strong experience in certain market niches.  The lower middle market has many definitions, but a common range might include businesses with market values of around $10 million to $200 million.
    Often, a business owner will engage advisors to explore exit options a year or more before going to market. During this early phase, owners will get a sense for the expected range of value that the company will bring in the market and evaluate whether a full sale, recapitalization or other ownership transfer best fit his or her goals. If a company sale is the chosen path, a process begins which takes an average of six to nine months though it can certainly extend beyond that time frame and in some cases can be expedited quite a bit. In simple terms, the seller and M&A advisor will build an agreed-upon list of potential buyers for the company, often a mix of strategic and financial buyers. The deal team assembles a very comprehensive confidential memorandum or “book” that is designed to detail everything a potential buyer would need to know in order to formulate a valuation.
    The seller’s M&A advisors reach out to the buyer list with a basic, anonymous description of the opportunity and interested parties sign a non-disclosure agreement in order to gain access to the book.  At this point, an involved process begins in which buyers and sellers exchange information, meet and negotiate letters of interest and work toward detailed offers for the company.  Offers on the same business may vary widely in terms of total value and especially deal structure, so the deal team negotiates with the top few prospective buyers and eventually enters a period of “due diligence” with the chosen buyer. Due diligence runs an average of about 60 days, during which time the buyer and their team of advisors closely examine the business, legal and accounting details of the target company, and draft the final purchase documents.

    Company Valuation
    Company values are determined through intricate review of company financials and hundreds of other documents, but in the end there must be a compelling investment thesis for a buyer to complete the transaction. Final company valuation reflects the confidence that a buyer has that an acquisition will contribute to future company earnings or return to private equity investors. It’s worth noting that the value resulting from an M&A transaction is the true “market value” of the company, in contrast with values that might result from a formal, written valuation. Specialized firms provide formal valuations for purposes such as stock option valuation, litigation and estate planning, among many others.
    In the world of middle market mergers and acquisitions, company valuations are most often expressed in terms of a multiple of earnings. Typically, financial reports in the U.S. will refer to a company’s multiple of ‘EBITDA’ (Earnings Before Interest, Taxes, Depreciation and Amortization) as a measure of M&A deal value. In simple terms, EBITDA is a measure of cash generated by a company and excludes financial items such as taxes and deductions that can vary widely. By way of example, Braemar Shipping Services acquired ACM Shipping Group in 2014 for $87.8 million, which reflected a 12.2X multiple of the target company’s approximately $7.2 million of EBITDA over the preceding 12 month period.
    Multiples of EBITDA and other deal metrics are far from perfect and by their nature they mask important differences between companies as well as variations in deal structure. However, these multiples provide a common framework from which to begin a discussion of the marketplace for private companies. 
    The market for mergers and acquisitions of private, middle market companies is highly-developed and requires some study to grasp the many facets and terms involved.  Buyer types and deal structures vary almost as widely as the target companies themselves, to say nothing of the diversity of business owners and their motivations. Though financial publications attempt to simplify the market and categorize deals by assigning multiples, the world of M&A is really composed of thousands of individual stories, each of which is resolved through a rigorous and in the case of closely-held businesses, a very personal process.

     

    (As published in the 1Q 2015 edition of Maritime Professional - www.maritimeprofessional.com)

     

  • IndustrialSoup. Inc. has established MarineSoup.com to provide an independent marketplace for buyers and sellers of virtually all raw material, finished goods, parts, and services required by the marine industry.Scott Parfitt, president of Industrial- Soup, Inc, emphasized several points about the

  • Anixter Bros., Inc., Skokie, 111., has published a new telecommunications catalog: "A Buyers Guide of Products for Business Communications." The buyers guide features a full line of business communications products for every facet of industry and commerce that uses telecommunications products for

  • Flender Werft christened it new floating drydock with a nominal lifting capacity for ships up to 20,000 tons dwt (max. 23,000 dwt). The company said that the unit will replace the shipyard's largest dock (16,000 tons), which is reportedly being sought by a buyer in Dunkerque, France. This expansion

  • Tacoma Boatbuilding Co., Tacoma, Wash., announced it is offering $20 million of 10% percent convertible subordinated debentures due 2001 through an underwriting group managed by Bear, Stearns & Co. The debentures are convertible into Tacoma Boatbuilding common stock at $20% per share. Proceeds

  • One of the first extended service programs for marine transmissions has been introduced by ZF of North America, Inc., Lincolnshire, 111. ZF, a worldwide manufacturer of major power train components, offers a Buyer Assurance Plan that pays 100 percent parts and labor for any original or like replacemen

  • Conference told shipowners are being given "extraordinarily generous" credit terms for bunkers. The average bunker stem in today's shipping industry is around 700 tons per ship with a current value— at $85 per ton— of some $60,000. On an average fleet size of fourteen ships, a shipowner would make

  • As Exports Climb to All-Time High After a decline during the recession years, U.S. exporters today are pleased with the record-breaking value of overseas shipments. At the same time, they are learning to cope with shipping cargo that can be far different than the types of goods sold in the past. Looking

  • Tenneco's Newport News Shipbuilding, Newport News, Va., has announced the election of Daniel F. Galvin as vice president of material acquisition and G. Guy Via as vice president of ship repair. Mr. Galvin is responsible for purchasing the company's raw materials, parts and services, which last year

  • For the past three years the C. Luhring shipyard in Brake, West Germany, has been working on the development of an oil recovery vessel based on a split-hull design (see October 1, 1979 issue of MR/EN). The unique vessel is really a simple ship that is divided at its center line. At the stern, both

  • Shiport China 2004, the 4th International Ship Building, Port and Marine Technology and Transportation Equipment Exhibition for China, is scheduled for June 22-25, 2004 at the Dalian Xinghai Convention & Exhibition Centre. Dalian. Anticipated to draw more than 30,000 quality buyers, the event will

  • www.OceanConnect.com As credit has long been an issue in bunker transactions in the marine industry, one of the industry's leading e-commerce prov iders has created a proposed solution. Over the past four months, OceanConnect.corn's customers repeatedly asked if OceanConnect.com could provide real-time

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    April 2019 - Marine Technology Reporter page: 47

    2019 Media Kit EDITORIAL CALENDAR 2019 Market Feature ProfileTechnical FeatureProduct Feature Ad Close: Dec 21Ad Close: Jan 22 Ad Close: Feb 21 JAN/FEBFEBRUARYMARCH Underwater Vehicle Annual Oceanographic Instrumentation: Measurement, Process & Analysis Subsea Defense Ocean Business 2019 Technology

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    May 2019 - Marine Technology Reporter page: 62

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    May 2019 - Marine Technology Reporter page: 4

    , Au- The publisher assumes no respon- Vice President, Sales and Marketing gust, and December by New Wave sibility for any misprints or claims Rob Howard Media, 118 E. 25th St., New York, or actions taken by advertisers. www.marinetechnologynews.com howard@marinelink.com NY 10010-1062. Periodicals Post-

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    A AUTONOMY: PUT TO THE TEST Keith Henderson Keith Henderson has been a contributor to New Wave Media publications for a number of years. Since 2001, he has been active in the Unmanned Surface Vessel business and is currently a Manager at Robosys Automation. Put to the test: Autonomous Navigation lobal

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    INLAND OPERATOR PROFILE Kirby’s Secret Sauce Credit: KIRBY CORP Another year; another major ? eet takeover by Kirby Corporation. But the leader of the inland tank-barge sector is not growing for growth’s sake: a deeper look at the numbers shows a disciplined strategy at work. By Greg Miller irby is de?

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    INSIGHTS seen, and there’s no telling where the trade talks will go with More than $200 million has been invested in your re- gion’s agricultural product barge transfer infrastruc- China, but we think 2019 will be a good year for trade overall. ture facilities since 2005. How much of that occurred at

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    BUNKERS MANAGEMENT Fifty Shades of Preparedness for IMO 2020 hen January 1, 2020, arrives and the global 0.5% sul- ter of this year, as low-sulphur bunkering will commence around fur cap comes into force, it will trigger the biggest :/ +4+ # + # + !" W and most sudden change the shipping industry

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    a combined ?eet of over 2,000 +1 603 556 7479 was Executive Director of the Miami River vessels. For more information, go to Copyright © 2019 New Wave Media. Marine Group and Captain of the Port of www.shiptech.com 24739308 Maritime Logistics Professional (ISSN ) is published bi-monthly (6 times per