Is Industry 4.0 the New DotCom Boom?

Posted on April 3, 2017

Fear stalks the land.  The Robot Apocalypse is nigh, destined to steal our jobs and our future.  Worse yet the machines are made elsewhere (Germany, Japan, even China) and America is being left behind in the race for manufacturing prowess.

We’ve heard this story before.  In the late 1980s, the U. S. computer memory industry had been decimated by Japanese and Korean competition.  To the Cassandras, this meant that the U.S. had forever lost the global economic race and was destined to become a second-rate power.

Nothing could have been further from the truth.  The prerequisites for U.S. global dominance of the technology world were already in place.  Within a few years, U.S. prowess in personal computers, microprocessors, and digital networking would lead to a capital investment boom and a stock market bubble not experienced since the 1920s.  Stock market fluctuations notwithstanding, the global growth of the Internet has not abated since.

For all its impact, the Internet has touched only a relatively small portion of human existence, focused primarily on media, entertainment, telecom and more recently retailing and finance.  The larger world in which we live, the world of things and physical interactions has, until now, been only lightly touched.  But that is going to change – and change in a huge way.

Imagine Amazon on Steroids

The world of digital automation is at the same stage as the internet in 1993, when the Mosaic browser was introduced and we first discovered the wonders of the World Wide Web.  The technologies are in place for a boom that will transform the global economy and, in the process, create new opportunities for better jobs and better lives.  And once again the U.S. is asserting its leadership role in developing the critical technologies.

Today Amazon utilizes highly advanced predictive analytics and automation tools that plan … read the rest

INTERVIEW WITH AXIAL CEO PETER LEHRMAN

Posted on November 10, 2014

We recently interviewed Peter Lehrman, CEO of Axial, one of the most energetic and innovative companies providing advanced technology solutions to M&A and corporate finance professionals operating in the middle market. Speaking from the “Roosevelt Room” in Axial’s headquarters in the Flatiron District, Peter covers a good deal of ground and I highly recommend you listen.

We began with a discussion of the current M&A market and Peter shared with us some highlights of Axial’s recent Concord event in New York: a packed crowd listened to various Axial members and panelist experts on the middle market, but for some of them the main event took place outside the lecture hall.

Highlighting this heightened market activity, Peter shared some of Axial’s internal data showing a rapid rise in new deal submissions. In September over 1000 new deals were submitted to the Axial site, compared with a recent average of 750 submissions a month.  Just-released data shows that October submissions grew again to more than 1200.  No word yet on whether this will bridge the imbalance between buyers and sellers.

Axial recently completed an $11 million capital round with Comcast Ventures. Peter envisions this capital helping Axial become the go-to meeting place for all participants in middle market M&A.  Their target community includes private and public companies as well as the professionals who advise them with regard to strategic relationships and transactions.

Although Peter was reluctant to share too much about his new product pipeline, he did share Axial’s vision for the role of technology in our industry.  He firmly rejected the idea that robots and intelligent systems will replace smart and creative deal professionals in the M&A industry.  Instead, he believes new systems and apps will make M&A professionals more effective by eliminating many of the more burdensome administrative tasks we now endure. My

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A Whiff of Inflation – M&A Valuations Lead the Way

Posted on July 17, 2014

(Originally Published on Axial Forum)

Since the 1970s, many of us have feared the threat of inflation looming just around the corner. Within the past year, economists and central bankers have led us to believe the inflation dragon has been permanently relegated to a dark hole, never to rain fire on the kingdom of men. We’re told that deflation is the real threat and that governments can continually run large deficits without reawakening the dragon. Recently, reality has intervened, however, to remind us that economists and central bankers aren’t infallible. U. S. Core CPI and global consumer prices have taken a sharp turn upward.

While this rate of price increase will have profound implications for business owners if it continues, that’s a story for another day.

Our story here affects these entrepreneurs more directly. Inflation comes as no surprise to those of us in the M&A business. We have watched for some time as the M&A market reheated and deal valuations reached levels not seen since 2007 – the peak of the financial bubble. We now have strong confirmation that this trend is not reserved solely for the megadeals on CNBC.

 

For larger deals that confirmation comes from Pitchbook which reported last week that, for the first half of 2014, average deal valuations reached an all time high of 11.5 times EBITDA.

 

 Median EBITDA Multiples for Buyouts (H1 2014)
For smaller buyouts, the story is the same. Andy Greenberg, CEO of GF DATA®, is in a unique position to understand middle market M&A pricing trends. His company maintains a very comprehensive database of actual transaction values in the sub $250 million marketplace. In our recent interview, Andy shared his perspective confirming our belief that lower middle market M&A purchase multiples have reached historically high levels over the past 12 to 18
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2013 Deal Valuations Reach All Time Highs; What’s in Store for 2014?

Posted on February 3, 2014

  Last March we predicted that middle market business sale values in 2013 could reach all-time high levels. Recent data from Pitchbook confirms that was in fact the case.

Source: Pitchbook

Not only were prices in relation to earnings before interest and taxes (EBITDA) at an all-time high, leverage used in the transactions reached record levels as well. To some extent this reflects a skewing toward larger transactions, but unquestionably we are now back to levels not seen since the run-up to the 2008 financial crisis. History tells us that such heady price levels will not last forever.

So what is in store for 2014? Does weakness in global stock markets mean that the game is over? Or can we look forward to a sustained period of high valuations? Is the past is to be our guide, the current favorable trends in the M&A market have some time to run. We previously indicated that we felt market strength could run through 2014. Recently we have received confirmation of that through a uniquely qualified source.

IntraLinks is the global leader in virtual data rooms with a 30% worldwide market share. For the uninitiated a virtual data room is an online space in which due diligence documents can be securely placed during an M&A process to facilitate due diligence and other deal related activities. As a result IntraLinks has a unique perspective on the merger and acquisition marketplace. They see deals that are moving toward closing as much as six months before any public announcement of the transaction is made. IntraLinks has aggregated this proprietary business intelligence to read the rest

Mid-Year 2013 Middle Market M&A Review

Posted on August 26, 2013

Q4-2012 was a heady time for the M&A business and almost every observer of the industry expected 2013 to be the year the deals business broke out of its five year post financial crisis funk. Best laid plans and all that — the low level of deal activity that has occurred to date in 2013 has both surprised and disappointed most industry participants.  Yet there are signs that this could change.

During H1-2013, deal volume fell off significantly, reflecting a cleared pipeline after the year end burst.  Fortune reported that global M&A announcements for Q2-2013 were the slowest since Q3-2009.  The U. S. market fared comparatively better, with the dollar value of announced deals up 34% year to year in H1 2013.  European activity on the other hand collapsed 43% with the Euro crisis and continental recession still in full swing at the time.  Even the relatively high level of U. S. activity depended in great part on the announcement of two large deals (Heinz and Dell) at the beginning of the year.  Without those announcements the U. S. market would have appeared lackluster at best.

The middle market companies we represent depend on both strategic and private equity buyers for business exits.  Most M&A industry observers believe that bulging corporate coffers and slow, organic growth will eventually dictate a strong increase in strategic M&A activity.  With the exception of a few target sectors, particularly IT related businesses, this corporate gold rush has yet to materialize.  As a result, private equity will be a more important source of buyside demand, at least for the near future.

PitchBook publishes a comprehensive analysis of U. S. private equity activity. Their first-half summary tells the story:

“Dealmakers were optimistic heading into 2013, anticipating one of the most active years for private equity (PE) investment since the financial … read the rest

What Does the Fed’s Prediction of Increasing Growth Mean for Business Owners?

Posted on July 2, 2013

  (Click on Picture to Watch Video)

Last month Chairman Bernanke spoke and the markets reacted by dropping more than 5% in a few days.  Clearly he must have shared some very bad news for business owners.

Actually not!  Coming into the year many observers thought that the federal budget sequester would put the economy at risk of stalling at best and dropping back into recession at worst.  Instead the Fed now foresees annual economic growth at 2-2.5% this year, moving to as much as 3.5% by 2015.  And it’s the private sector that’s carrying the load, not government programs.

Let me say that again.  The Fed now believes that growth is going to accelerate over the next several years.  As a result the economy may not need so much artificial stimulus (QE) going forward.  The economy is no longer digging a hole; we’re back to building a foundation of real economic growth.

What does this mean for the deal business and for private companies considering M&A or corporate finance transactions?  Bottom line: there is going to be much more demand for capital to fund growth.  Unless the banks step up to the plate, which we believe is unlikely, this capital must come from private lenders and equity providers.

The good news is that there is a great deal of financial market capital available to meet this need.  We just closed a mezzanine financing that gave us a good window into the market’s current appetite.  Over the past few years, major investors have made significant financial commitments to entities designed to fill the void left by banks which have abandoned their commercial lending franchise.  As a result today there are numerous private debt providers seeking opportunities to provide senior, hybrid and mezzanine capital to private companies.  Where equity capital is needed, private equity groups are … read the rest

Winds of Change: Banking

Posted on May 8, 2013

John Mason – Originally Published at Seeking Alpha – Reprinted with Authors Permission

Another Executive Leaves JPMorgan…” reads the headline of the business section in the New York Times. The question is, what is going on at JPMorgan Chase (JPM)?

The timing of this last leaving is raising questions. The latest major departure is Frank Bisignano, the co-chief operating officer. The questions are about the status of Jamie Dimon, Chairman and Chief Executive Officer of JPMorgan, the “persistent executive turnover,” and the up-coming board meeting where a debate is raging about whether or not Mr. Dimon should hold both top positions.

To me, there are two reasons for the recent departure events. First, Mr. Dimon is in control and he does not like what has happened inside JPMorgan over the past two years or so, with “the London Whale” and other events that have tarnished the “bravo” image of Mr. Dimon and his bank. The activity going on inside the bank remind me of a “turnaround” operation!’

But, there is a second reason for the things that are going on. Mr. Dimon is moving JPMorgan into the future.

If this is true, then this whole effort is to move JPMorgan into the future in the face of the “hostile” regulatory environment that exists, in the face of the changes that information technology are forcing on the banking industry, and the changing nature of the financial industry.

If I were Mr. Dimon, my feeling would be that the current regulatory environment “sucks”!

Being John Mason, my feeing is that the current regulatory environment “sucks”!

In either case, the basic feeling is that I really don’t want to run a bank. I want to run something different.

Second, whatever is being done in the financial industry, the future of commercial banking…of finance … read the rest

Will 2013 See Record Valuations for Middle Market Business Sales?

Posted on March 7, 2013

Business owners time their exits for many reasons: health, retirement planning, availability or lack of family successors, competition, technology change, and many more. Yet, overwhelmingly, the question we are most often asked as a financial advisor to entrepreneurial companies is: “What’s my business worth?”

All things being equal, a rational business owner will presumably choose to sell at a point of optimal value for his or her interest in the firm. For the reasons outlined below, we believe that the next eighteen months may see the highest pricing for good middle market companies in the thirty years I have been in the M&A advisory business.

Historically, the market for mergers and acquisitions is one of the most volatile on the globe. In our experience, the market is very cyclical with three to four years separating peaks and troughs and six or seven years to cover a full cycle. The last bull cycle for M&A peaked in 2006-2007 and the market trough was witnessed in 2009-2010. Moderate improvement was witnessed in 2011 and 2012, with Q4 2012 being particularly strong. 2012 was FOCUS’s best year since 2007.

Source: Barclays and Business Insider

2013 started with a bang with large announced deals for Dell, Heinz, and Virgin Media just to name a few. Many observers predict these are not isolated deals and 2013 will witness a resurgence in M&A activity. While the M&A market could be derailed by a major decline in the equity markets or further chaos in Washington, we believe the odds favor a strong market for sales of middle market companies through sometime in 2014. By then a correction will be overdue and the likelihood of a cyclical bear market in equities may become increasingly high. Generally, a serious decline in the stock markets leads to a precipitous fall in M&A activity.

The … read the rest

Categories: Business Acquisition, Business Sale, Entrepreneur, Focus Investment Banking, Focus LLC, Investment Banking, M&A, Mergers, Mergers and Acquisitions, Middle Market, Private Equity, Small Business

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Focus Principal Abe Garver on Bloomberg

Posted on October 15, 2012

Abe Garver, a Focus LLC Principal and a frequent contributor to Forbes, Seeking Alpha and other publications, was featured recently on Bloomberg TV with a big call on the Internet Retail Sector.  Abe is well know for his coverage of the sector and was one of the first commentators to focus on the impending imposition of state sales taxes on Internet retail transactions that were formerly tax free.

Click on photo above to view video.

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Categories: Abe Garver, Amazon, Bloomberg, Focus Investment Banking, Focus LLC, Internet Retail, IT Services, SaaS, Software, Uncategorized

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