Opening your business is the single most important event in a company’s timeline. Deciding to sell your business is usually the second most important event, so it is valuable to understand who can help you in the process.
We are recovering, but things are still slow. Many of you are starting to replenish your teams – holes created from the deep cuts you needed to make to survive, while waiting for the market to come back. Lots of you are talking up market share gains, gross profit increases and efficiency gains. A few of you are even getting back to expanding your business by opening a new location or via the selective acquisition target. All very commendable activities, but how about: Beginning with the end in mind.
Anchor Peabody, LLC (“AP”), a building industry-focused private investment and advisory firm offering equity capital, mergers and acquisitions advisory and debt advisory, announced Harold Stanton and Paul Haefcke will join the firm’s advisory board. The announcement marks the beginning of an increased presence for Anchor Peabody in the wood products manufacturing and specialty distribution segments.
New York, NY (Mach 19, 2012) – Jason Fraler, a former building products executive and co-founder of Building Industry Partners, LLC announced the launch of Anchor Peabody, LLC (“AP”) a building industry-focused merchant banking firm offering private equity capital, mergers and acquisitions advisory and debt advisory to the building and construction industry. Along with the launch AP announced Tony DeCarlo, a well-respected member of the building community and former CEO of Lumbermens Merchandising Corporation, will join Anchor Peabody’s advisory board. AP will leverage its experience and longstanding relationships across the financial and operating community to advise building industry firms in their most critical decisions.
In recent conversations with owners and executives the “Value Proposition” topic has become one that always gains a volatile response. We are excited to share a few of the ideas and concepts giving the edge to companies that are aggressively expanding distance from their competition. At the very least, we hope you ask yourself, “Why would I buy from me given the competitive options?” What is a Value Proposition? As explained by Investopedia – “Companies use this statement to target customers who will benefit most from using the company's products, and this helps maintain an economic moat. The ideal value proposition is concise and appeals to the customer's strongest decision-making drivers. Companies pay a high price when customers lose sight of the company's value proposition.” In essence, the economic proposition for your company to differentiate from its competition.
FOR IMMEDIATE RELEASE December 21, 2011 MEAD LUMBER AGREES TO ACQUIRE CHEYENNE-BASED TRUSS CRAFT, A DIVISION OF DAKOTA CRAFT, INC. Columbus, NE – December 21, 2011 – Dakota Craft, Inc. (“Dakota Craft”) has announced the signing of a purchase agreement with Mead Lumber Company (“Mead”) for its Truss Craft division, which began operations in Cheyenne, Wyoming in 1999. Mead intends to acquire the operations of Truss Craft and retain all of its employees, which serves the southeastern Wyoming building community. This acquisition will give Mead a leading market share in Wyoming. Dakota Craft will use the proceeds of the transaction to build its balance sheet amidst the continuing housing downturn and refocus on other initiatives. The transaction is expected to be completed by January 31, 2012.
Here's a great stat for you: In the 1920s, there were more housing starts than there are today. And there were only 100 million people in the country then. This is why I tell people we have a once-in-a-lifetime opportunity for investment in the building industry. Even if we get back to the average, things are going to be a heck of a lot better than they are today.
Reading news about the building industry these days is kind of like driving past a car wreck: you can’t help but look and you know what you are about to see can’t be good. Think of this article as a “vacation” from the norm. I’m a contrarian at heart – when the business was rocking and rolling back in ’05 & ’06, I was generally concerned. Friends I had known my whole life - many who you wouldn’t be comfortable loaning your car to - had open access to cheap money and were making money in the real estate market hand over fist. Phrases such as “You can’t lose!” or “I can’t see this ever stopping!” were commonplace. I love these childhood friends, dearly. Sophisticated investors they are not. "Run" was the thought that popped my mind. Of course, not many of us did. Then the music stopped. As it turned out, we could have served ourselves well by listening to a good piece of advice: “When people are greedy, be fearful.” – Warren Buffett The pendulum started swinging the other way. And wow, did it swing far. Probably too far.
In the deal business, we don’t speak about net income often as we analyze businesses. This includes discussions with lenders, investors, companies we review as an investment, companies we represent as advisors, etc. Net income, or its alias: “the bottom line”, is largely considered useless until we really start to pencil out a business's cash flow, post-close. The Internal Revenue Service puts this number to use and let’s be honest – they’re important to make happy. And yes, if you are getting a dividend, net income is the number which matters a lot to you. However when selling a business or acquiring a business, or speaking with a lender about your debt, and/or you are attempting to diagnose the health of a business – the focus should be on EBITDA, first.
There is a subtle shift towards specialization going on in building products distribution, and very few are paying attention – ProSales Magazine’s latest article, aside. Ultimately, specialist distributors are generally more successful with all customer segments because they specialize in one product category and leverage certain competitive advantages as “specialists” vs. their traditional “generalist” Prodealer and DIY retail competitors.