Addressing The Challenge
Valitas has developed an effective, field-tested target origination process and has the purpose-built resources to execute it smoothly by integrating it with our clients’ existing internal acquisition processes. We accelerate our clients’ acquisition plans by generating additional targets that they would not otherwise identify. We do this in a way that is not only complementary to our clients’ internal capabilities, but that leverages their internal resources to make them more productive.
How Do Acquirers Best Leverage Their Internal Capabilities?
The two most challenging aspects of developing an internal competency in business acquisitions are sourcing acquisitions and integrating them. Applying external, purpose-built resources to the sourcing effort can generate a greater and more consistent flow of proprietary acquisitions, while freeing up internal resources for integration planning and execution. Significant time, resources, and skill are required to execute a comprehensive acquisition sourcing strategy and the strategic needs often change over time. A comprehensive sourcing strategy includes:
- Researching and identifying targets that advance the company’s strategic objectives
- Approaching targets in a professional manner and maintaining a reliable, consistent follow-up program
- Developing and executing a qualification protocol, including a preliminary financial assessment, that confirms the most relevant information to ensure the efficient use of due diligence resources on qualified targets
- Maintaining momentum with and sequencing multiple targets while negotiating or conducting due diligence with other targets
- Managing document and information flow with multiple targets, including follow-up on information requests and execution of agreements
How Valitas Adds Value
Our AP surfaces a greater number of passive sellers that make strategic sense at reasonable valuations. This accelerates cultivation of a proprietary acquisition pipeline. Our broad expertise and significant resources are applied to a process that is complementary to our clients’ existing acquisition strategies. We manage all stages of vendor interaction, particularly the early stages, thereby allowing our clients to focus their internal resources where they add the greatest value, business strategy and integration.
Effective Process and Depth of Resources
Oftentimes, the response we receive from a vendor is neither “yes”, nor is it “no”. The response is often, “not now”. Valitas maintains contact with these vendors as called for by the circumstances. If a business owner wants us to follow up in the summer three years from now, we have the systems in place to ensure that happens. It is this professional, systematic coverage, monitoring and follow-up that give our clients the edge in identifying and engaging acquisition targets.
Valitas has a full team on each AP with each member specializing in different aspects of the program. Our team has done many of these APs. We have continually enhanced the process, making improvements based on careful, continuous, empirical evaluation. We’ve devoted significant investment in custom systems for target databases and contact management. These projects are resource-intensive and we limit the number of APs we execute concurrently to ensure a high level of service and responsiveness.
When Valitas commits to pursue a defined target list on a client’s behalf, any targets within that defined universe are exclusive to that client during the course of our engagement. We do not take on more than one client in a given industry at any given time.
Expertise in Managing Vendor Dynamics
When positioning a proposal with a potential vendor, approach expertise is crucial. As seasoned business sale advisors, we appreciate the human aspects of negotiations and have the experience to anticipate and assuage their concerns. We carefully assess the shareholder structure of the target and determine how any shareholders active in the operation of the business will impact our negotiation strategy.
Importantly, we act as a buffer between our client and the vendor, ultimately building vendor trust. Our experience and skill in advising business owners on selling their businesses allows us to liaise effectively between our client and the vendor(s), including managing information flow. The dialogue we cultivate enables us to take the lead on qualifying targets before our clients expend their time and effort.
Complementary to Existing Efforts
We understand the importance of strategic fit in the context of our clients’ overall corporate objectives. We invest significant time and energy to understand our clients’ goals and their resulting acquisition criteria. This ensures that our clients do not waste management time on targets that don’t fit.
Our process allows our clients to focus internal M&A resources where they add the greatest value. Our expertise is in converting names on a list into actionable opportunities. We enhance coverage of a given target list by cultivating it into qualified targets; motivated sellers with reasonable valuation expectations. Only after the qualification of the target and following the vendor's consent to disclose information does our client spend time on the acquisition target. Additionally, our management of information gathering, preliminary financial modeling, preparation of letters of intent and support with due diligence, negotiations and documentation frees significant management time for our clients to focus on business due diligence, negotiation, target transition and integration planning.
In a proactive process, regardless of how many actionable targets are in the pipeline, our client controls the process. Only those targets that the client approves are approached. Hence, there is no interference in any existing dialogue with other targets. Our approach yields less risk of spending time and money assessing and negotiating and yet failing to close, as is often the outcome in auctions.
M&A Advisory Expertise
Because of our extensive acquisition experience both as advisors and as private equity principals. We employ the assessment techniques used by the most sophisticated investment banks and private equity funds. Some techniques include: EPS Accretion/Dilution Analysis, Unlevered IRR, Discounted Cash Flow (DCF), credit capacity, dynamic analysis of projected credit ratios and interaction with covenants, Economic Value Added (EVA) analysis, synergy and integration risk analyses. We also maintain close relationships with capital providers and have a clear unbiased view as to current conditions in a variety of capital markets. We are also well equipped to assist with financing strategy and execution of the financing plan.