For the dealer executive looking to place his/her business baby with the right buyer, there are ample options to select from. There are the high-roller, PE-backed companies (DEX Imaging, Flex Technology Group, UBEO Business Services) seeking to annex $10 million to $20 million (or above) performers. Then there are the mom-and-pop, family-run organizations with just a handful of employees and less than $5 million in annual revenue. They can find a home with dealers ranging from Kelley Connect to Doceo and Doing Better Business.
Sellers can whittle down the field in any number of ways by asking themselves questions such as:
- Will I stick around beyond the perfunctory transition process?
- Is the buyer going to maintain some, all or none of our employees?
- How will the company be branded locally? Can it keep its old identity?
- Does this buyer’s values dovetail with my own?
- Can I have stock in the venture?
These considerations and many more are the reason why sellers opt for certain buyers. The level of competition is geography-based, in most circumstances, with the exception of larger consolidators attempting to strengthen a given market. But how robust is the level of competition? In this week’s State of the Industry report on M&A, we asked out dealer panel to characterize the level of competition in their fishing pool.
Even with so many flavors and sizes of dealerships, dealers such as Doceo of York, Pennsylvania, have been able to close a strong volume of transactions. According to Jim Haney, chief marketing officer, the segment Doceo is most active in typically doesn’t draw a high volume of suitors.
“Competition in our target segment is relatively low,” he said. “Given the size of dealerships we pursue, we typically encounter only one or two other buyers in any given deal.”
That’s not the case with DEX Imaging of Tampa, Florida, one of the most prolific industry consolidators. Having stepped out from under the Staples umbrella, DEX may have more autonomy, but their targets are often hotly contested. Pairing up companies has never been a one-size-fits-all proposition, according to CEO Dan Doyle Jr.
“The competition is out there, they are all good dealers or PE firms,” he observed. “The seller should shop and decode who’s the best fit for the sale.”
It’s not that price is thrown completely out the window; after all, exiting owners want to see the fruits of their lifelong labor. But what is equally important, according to Eric McIntosh, senior vice president of WiZiX Technology Group in Roseville, California, is ensuring the firm’s future is secured.
“We’ve found that sellers place significant weight on finding the ‘best fit’ for their customers and employees when choosing a buyer,” McIntosh said. “This consideration often outweighs purely financial aspects in their decision-making process.”
While there is solid competition in sell-side banker processes, dealers such as Atlantic Tomorrow’s Office of New York City often get sellers referred to them. These referrals can come from former sellers who are still with Atlantic or other connections within its network, notes Jason Weiss, executive vice president and legal officer for the dealership.
It’s no surprise that Atlantic Tomorrow’s Office is a preferred M&A partner. “We know the market and valuations from our experience, so we can often unlock mutual value by minimizing transaction costs and time to close when outside of a formal process,” Weiss pointed out. “Most of our target sellers are skeptical of private equity and looking for more of a strategic buyer.”
