Industrial Engineering and Consulting Firm
M&A / Strategic Advisory
Client: The leading corrosion control engineering and consulting firm in the United States, focused on providing corrosion evaluations, corrosion control and cathodic protection design services, structural assessments, and data systems management, among other services. Clients include water & waste-water, oil & gas, transit, solar & wind firm, and local, municipal and regional governmental entities.
The Problem: Client was approached by, and given informal offers of partnership/acquisition, and needed to conduct an internal strategic alternative evaluation to assess options, and possibly explore M&A transaction. Client had not previously hired an investment banker for the traditional 6-9 month internal preparation period for formal entry into the M&A markets.
The Solution: Serve as the Client’s strategic adviser and conduct an internal preparation and strategic alternatives, the goal of which is to execute a value-maximizing solution for the shareholders. Result was to combine with a larger integrated engineering services entity, which had 16x the Client’s EBITDA, 21x the Client’s employees, and which sought to enter the corrosion control market.
Key Solutions / Deal Highlights
The Problem: Client was approached by, and given informal offers of partnership/acquisition, and needed to conduct an internal strategic alternative evaluation to assess options, and possibly explore M&A transaction. Client had not previously hired an investment banker for the traditional 6-9 month internal preparation period for formal entry into the M&A markets.
The Solution: Serve as the Client’s strategic adviser and conduct an internal preparation and strategic alternatives, the goal of which is to execute a value-maximizing solution for the shareholders. Result was to combine with a larger integrated engineering services entity, which had 16x the Client’s EBITDA, 21x the Client’s employees, and which sought to enter the corrosion control market.
Key Solutions / Deal Highlights
- Immediately connected with interested M&A parties, arranged face-to-face meetings, and converted initial expressions of interest into reverse due diligence
- Established credibility basis with interested Client parties (credibility of process, credibility of negotiation, credibility of due diligence process and credibility of problem solving during negotiations) and slowed down the overall process to create space for required Client-focused diligence
- Conducted rapid and time-compressed internal M&A preparation process, which mirrors the due diligence processes that a JV partner or M&A acquirer would conduct during any 2nd level interest, but within a confidential shroud within Client company
- Repositioned, created and/or tightened existing internal business processes, including accounting and bookkeeping, human resource utilization recording and tracking, invoicing, A/R and A/P management, pipeline management, legal and contract processes, and general liability management.
- Conducted internal analysis from perspective of buyer for key valuation items, including growth prospects, customer concentration, profit by customer-product-employee basis and contract runoff analysis
- Created dynamic valuation analysis model for Client, with appropriate value levers for use during negotiations with possible partners
- Advised Client on strategic issues relating to: the choice of partner; the negotiation, structuring and closing process; and specific structuring and tactical issues such as compensation schemes, earn-outs, EBITDA targets, equity structures.
- Negotiated LOI outlining deal terms with favored buyer, resulting in structural achievements such as: i) floating EBITDA valuation metric; ii) Client rollover equity contribution mechanic at non-inflated valuation; and iii) EBITDA re-definition to include over 10% of additional deal value.
- Managed all elements of M&A due diligence process, including financial, legal, accounting, insurance, human resources, contract, customer interviews, benefits, tax, subcontracts, A/Rs, A/Ps, bonuses, 401k plan, liability management, fixed assets, environmental issues and employment agreements.
- Created earn-out model to assess, negotiate and plan for 2 year payout period for portion of proceeds.
- Negotiated working capital adjustment and final EBITDA calculation mechanics.
- Managed deal structure/negotiation/legal process to achieve over 200% increase in ultimate valuation for Client, favorable tax treatment for roughly 66% of proceeds favorable multi-year ongoing employment contract, and an effective 80% increase in the multiple paid.