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  • Thursday, February 06, 2014 10:38 AM | Paul L. Kush (Administrator)
    on February 6, 2014 by Billy Fink

    Geography can be a highly reliable predictor of deal activity. For example, Quartz recently learned that VCs unsurprisingly love California (aka Silicon Valley). The entrepreneur-heavy state collected $14.8 billion worth of VC backing in 2013. Massachusetts and New York came in a distant second and third, with $3.0 billion and $2.9 billion, respectively.

    But mid-market M&A is much less dependent on these entrepreneurial havens. PE firms, strategics, and other financial sponsors can be much more diverse in their geographic focus. So where are these deal professionals actually pursuing deals?

    The below map is a display of investor interest by state in 2013:

    To build the map, we analyzed over 50,000 pursuits from the Axial Network undefined and in which state the pursued company was located. Each pursuit represents an investor seeking more information about a given opportunity.

    While the northeast was a clear center of activity, California, Texas, and Florida were the three most active states in 2013. New York and Illinois rounded out the top 5. Correspondingly, these five states also saw the highest dealflow in 2013. At the bottom of the list were West Virginia, South Dakota, and Hawaii.

    Some states undefined like Pennsylvania, Arizona, Utah, and Colorado undefined had a surprisingly high amount of pursuits. While oil & gas deals helped drive some of the activity in Pennsylvania and Utah, industry activity in the other states was more mixed. Arizona, for example, saw strong investor interest in Aerospace & Defense, Software, and Health Care opportunities.

    Year to date, 2014 is mirroring 2013. In just these first few weeks, California, Florida, and Texas have already established themselves again as clear centers for investor interest. The higher degree of pursuits and interest in these states should mean closed deals in the regions before the first day of summer.

  • Wednesday, February 05, 2014 11:26 AM | Paul L. Kush (Administrator)
    In the event you are specializing in a specific trade sector, here is a link to research free publications for the industry of interest.  Many successful brokers do specialization and find it advantageous to advertise in trade publications they specialize in. 


  • Wednesday, February 05, 2014 8:41 AM | Paul L. Kush (Administrator)

    PitchBook will release on Feb. 12 its inaugural PE & VC Global League Table Report, featuring the most active investors, lenders, advisors and law firms in the private equity and venture capital spaces in 2013. The rankings will be broken down into several categories, such as deal location, industry and deal type, to name a few.

    Today we’re providing a preview of 2013′s top PE investors globally (by deal count) in a selection of industries.

    This page is an excerpt of PitchBook's upcoming 2013 League Table Report, and the data may be subject to change prior to its publication.

    This page is an excerpt of PitchBook’s upcoming 2013 League Table Report, and the data may be subject to change prior to its publication.

    I’ll leave the title of most active PE dealmaker worldwide last year a mystery for now, and instead focus on some of the most active firms in the most popular industries for private equity investing. Each major industry had a different investor take the top spot in 2013, unlike in the VC space. Audax Group was far and away the most prolific PE investor in the B2B industry last year, closing 14 deals. Lloyds Development Capital and The Carlyle Group came in second with 11 investments each.

    Apollo Global Management and Catterton Partners tied with eight deals each to lead the B2C league table. Apollo had a couple of high-profile B2C investments in 2013undefinedits $2.4 billion buyout of McGraw-Hill Education and a relatively small, but widely discussed, $60 million equity investment in Beats to build a spin-off company. The Carlyle Group, which finished tied for third in the B2C rankings with six deals, also made a major bet on Beats with its own $500 million growth round in September 2013.

    Meanwhile, KKR led in healthcare with nine deals and Riverstone Holdings took the top spot in the energy sector with 13 completed private equity deals. Riverstone bested Denham Capital Management, which came in second at 10 energy deals.

    Stay tuned over the next week for more league table previews as we finish up our final 2013 rankings for publication.

  • Tuesday, February 04, 2014 10:28 PM | Paul L. Kush (Administrator)

    Mergers, Acquisitions, Recapitalization

    William A. Price, Attorney at Law, wprice@growthlaw.com|| 800-630-4780

    SEC No Action Letter on M&A Brokers

    by growthlaw1

    The Securities and Exchange Commission has issued a no-action letter which reaffirms that merger and acquisitions brokers do not have to register as broker-dealers where control of a privately held business transfers hands as a result of their efforts. The letter is available at:


    Practice tip: M&A includes facilitation of “mergers, acquisitions, business sales, and business combinations.” It does not include deals where the M&A broker can bind a party to the transaction; or the the M&A broker directly or indirectly, or through any affiliate, provides financing for the deal; or the M&A broker handles or has custody, control, or possession of client funds involved in the M&A transaction or other securities transaction for others; or the transaction involves a public offering of securities. 

    This means that the rules for private offerings of securities under Regulation D (recently revised by the JOBS Act to allow public announcements of private offerings limited to accredited investors) will apply, but the usual lawyers, company officers or broker-dealers effectuating the sales, and others involved in disclosures and sales need to manage these, not the M&A broker.

  • Friday, January 31, 2014 3:41 PM | Paul L. Kush (Administrator)

    Top Mid-Market Deals Completed in 2013 by Industry

    In transactions worth $1 billion or less, the most active sub-sectors in 2013 were real estate; business services; oil and gas; prepackaged software; and hotels and casinos

    Target Industry Number of
    Value ($millions)
    Real Estate; Mortgage Bankers and Brokers 369 42,230.4
    Business Services 188 17,879.0
    Oil and Gas; Petroleum Refining 124 24,203.8
    Prepackaged Software 110 12,013.9
    Hotels and Casinos 99 10,538.7
    Commercial Banks, Bank Holding Companies 87 6,510.6
    Drugs 76 14,771.9
    Measuring, Medical, Photo Equipment; Clocks 75 11,280.8
    Health Services 74 6,805.6
    Investment & Commodity Firms/Dealers/Exch. 63 12,267.4
    Electronic and Electrical Equipment 59 7,257.9
    Electric, Gas, and Water Distribution 55 11,837.9
    Metal and Metal Products 48 7,299.1
    Transportation and Shipping (except air) 46 3,472.0
    Chemicals and Allied Products 40 6,121.7
    Mining 39 2,816.1
    Food and Kindred Products 38 5,062.9
    Telecommunications 35 4,863.7
    Radio and Television Broadcasting Stations 31 3,798.2
    Insurance 30 6,772.0
    Machinery 30 4,421.1
    Wholesale Trade-Durable Goods 28 6,102.2
    Credit Institutions 27 3,762.4
    Miscellaneous Retail Trade 26 1,862.7
    Construction Firms 22 2,035.1
    Printing, Publishing, and Allied Services 19 1,561.1
    Amusement and Recreation Services 18 1,464.0
    Wholesale Trade-Nondurable Goods 18 1,228.9
    Transportation Equipment 18 1,051.8
    Computer and Office Equipment 15 3,868.5
    Rubber and Miscellaneous Plastic Products 15 3,471.5
    Textile and Apparel Products 15 2,419.9
    Wood Products, Furniture, and Fixtures 15 1,289.0
    Communications Equipment 14 3,532.9
    Retail Trade-Eating and Drinking Places 14 640.8
    Aerospace and Aircraft 13 2,114.4
    Miscellaneous Manufacturing 12 3,031.9
    Agriculture, Forestry, and Fishing 12 2,853.1
    Motion Picture Production and Distribution 12 916.4
    Paper and Allied Products 11 1,984.9
    Air Transportation and Shipping 11 1,961.8
    Repair Services 10 1,015.9
    Social Services 10 835.4
    Advertising Services 9 1,215.5
    Sanitary Services 9 1,050.9
    Retail Trade-Food Stores 9 785.2
    Savings and Loans, Mutual Savings Banks 8 838.0
    Leather and Leather Products 6 777.2
    Personal Services 6 222.1
    Retail Trade-General Merchandise & Apparel 5 1,111.2
    Stone, Clay, Glass, and Concrete Products 4 1,568.9
    Educational Services 4 333.9
    Tobacco Products 3 701.2
    Soaps, Cosmetics and Personal-Care Products 3 672.8
    Public Administration 3 284.8
    Retail Trade-Home Furnishings 1 180.0
    Miscellaneous Services 1 4.4
    Source: Thomson Reuters    

    For more information on related topics, visit the following:

  • Friday, January 31, 2014 3:35 PM | Paul L. Kush (Administrator)
    Deal volume for 2013 proved to be the second lowest in 10 years, above only post-collapse 2009

    Despite many favorable conditions in 2013, M&A never took off in the middle market the way dealmakers hoped. While the last three months of the year generated a lot of activity, they didn't make up for the previous nine months. Deal volume for the year proved to be the second lowest in 10 years, above only post-collapse 2009.

    The beginning of the year was particularly frustrating, coming on the heels of an active fourth quarter of 2012, which had been accelerated by tax considerations. January suffered by comparison, and M&A practitioners hoped the year would pick up. But instead, it was just the beginning of the slump. Ultimately, January turned out to be one of the better months. A slight uptick in closed deals occurred in July, giving rise to optimism that the second half of the year would improve. But August and September didn't continue the momentum. The year peaked in October, which saw 251 mid-market transactions close. And the last two months of the year were respectable, but far from spectacular.

    There were some bright spots. Real estate topped the list of most active sectors with 369 completed transactions. The mid-market deals in the industry included TPG Capital's $108.6 million investment in Chinese real estate developer Xinyuan Real Estate Co. Ltd. (NYSE: XIN) in September. Many deals featured residences aimed at seniors, taking advantage of the country's aging population. American Realty Capital Healthcare Trust Inc., Griffin Real Estate Management and Health Care REIT Inc. (NYSE: HCN) continued to be land-grabbers in the space.

    Software, a sub-sector of technology, media and telecommunications, also saw a lot of activity, with 110 completed middle-market transactions. In some cases, the targets found suitors overseas: Aurora Networks Inc., a Santa Clara, Calif.- based company, agreed to be sold to Pace plc of Saltaire, England, for $323 million in October. Day 1 Studios LLC, a Chicago-based software developer, agreed to be bought by Wargaming.net of Belarus, Ukraine, for $20 million in February. Another sub-sector that flourished was the hotel and casino industry. With 99 deals closed, middle-market companies are expanding into new territorities, such as New York, Texas, Illinois and Florida, as more states consider gaming expansion proposals.

    Overall, the fourth quarter proved the most active one of 2013, delivering 638 completed deals. Ever optimistic, dealmakers predict the momentum will continue and that middle-market M&A will thrive in 2014.

    Editor's Note:

    To measure activity in the middle market, Mergers & Acquisitions looks at transactions that fulfill several requirements: Deals must have a value of roughly $1 billion or less; they must be completed (not just announced) within the timeframe designated; and they must include at least one U.S. company in the role of buyer and/or seller.

    Excluded from our charts are: recapitalizations; self-tenders; ex-change offers; repurchases; stake purchases; and transactions with undisclosed values buyers or sellers. We have applied this criteria to all charts in this story, including the league tables that rank investment banks and law firms. Our data provider is Thomson Reuters.

    10 Years of Mid-Market M&A By Volume

    10 Years of Mid-Market M&A By Value

    10 Years of Mid-Market Cross-Border Deals with U.S. Targets By Volume

    10 Years of Mid-Market Cross-Border Deals with U.S. Targets By Value

    10 Years of Mid-Market Cross-Border Deals with Non-U.S. Targets By Volume

    10 Years of Mid-Market Cross-Border Deals with Non-U.S. Targets By Value

    10 Years of Mid-Market Leveraged Buyouts By Volume

    10 Years of Mid-Market Leveraged Buyouts By Value

    Top Mid-Market Deals Completed in 2013 By Value

    Top Mid-Market Deals Completed in 2013 by Industry

    Most Active Mid-Market Investment Bankers by Volume

    Most Active Mid-Market Investment Bankers by Value

    Most Active Mid-Market Law Firms by Volume

    Most Active Mid-Market Law Firms by Value

    For more information on related topics, visit the following:
  • Wednesday, January 29, 2014 6:31 PM | Paul L. Kush (Administrator)

    “In March 2013, I wrote that we should see record valuations in 2013 undefined and, in fact, we did,” said John Slater of FOCUS Bankers.

    Indeed, the high valuations of late have been noteworthy. However, while valuations have been on the rise, certain companies undefined especially the high-quality ones undefined have benefited from bubble-like valuations. As Slater explained, “The very good companies are routinely seeing north of 10x EBITDA.”

    The reason for the exponential rise is the overarching focus on returns. While better companies have always been able to fetch better multiples, the desire to make up lost yield has driven investors to offer higher and higher valuations.

    “The market bifurcated itself in 2008 and 2009,” Rick Schmitt of AccuVal explained. “On the one hand, businesses which have a solid business plan that is scalable model and/or produce a product with limited distribution, and less competition are more highly desired. In this type of company private equity funds can take these business, put in additional capital, and quickly grows sales and profits.”

    This ability to quickly scale the business with little additional work is appealing to any GP concerned about his IRR. As John Carvalho of Stone Oak Capital explained, “PE firms are willing to really overpay for a business that fits their model because they know they can make the returns on the back end. Since there is so much concern about yield, a business that can deliver solid returns is worth a high price.”

    Schmitt continued, “On the other hand, there is still a broad base of companies that are over-leveraged and struggling with significant competition. Those companies have not seen the same increases in valuation multiples because there is some basic deficiency with the company.” Since these companies require significant overhaul, and are less certain to deliver solid IRR, financial sponsors are not willing to pay as much. Schmitt believes these companies can still be bought for 5-7x EBITDA.

    As long as investors are seeking high IRR, they will be willing to pay high valuations. Although these premium valuations are already at near-record levels, they could continue rising in 2014 if…

    …capital remains cheap and interest rates stay low

    One of the most critical factors buoying high valuations has been cheap cash. “There is a twofold factor driving valuations,” explained Schmitt. “One is the low cost of debt which has been stable and broadly available and the banks’ aggressive desire to grow their commercial loan portfolios has been beneficial to the M&A market.” He continued, “The second is the high supply of money available to buyers. The money for leveraging good companies is coming cheap and there is a lot of competition in order to fund deals. When you see WACC being influenced by the lower cost of debt, it helps to justify high multiples.” Given that PE firms now have $1 trillion in dry powder, paying high price tags is easier.

    However, any changes to interest rates could rapidly deflate valuations. As Slater remarked, “once interest rates go up, valuations will fall.” But, that won’t likely happen this year. “Right now,” explained Slater, “the predominance of analysis says that we are in a deflationary period and interest rates will probably stay somewhere near where they are.”

    Schmitt agreed, “Many of the banks we work with are projecting that interest rates will remain stagnant for 2014.”

    …stocks continue to rise

    Although the stock market has dipped in the past several days, the general growth over the past year has helped encourage higher valuations. As Schmitt explained, “The investment world looks to the publicly traded marketplace to guide them for what is anticipated for growth in industries and the relative market returns. With the increased indices in the S&P and NASDAQ, the buyers have a guideline supporting higher multiples for the M&A market.” As the stock market continues to rise, comparables will also rise as well, helping to naturally raise valuations.

     …strategics come out to play

    Despite their cash-laden balance sheets, strategics have been relatively inactive recently. “The part that we don’t yet understand is why there isn’t greater demand from strategics,” explained Slater. “In a slow growth economy, these strategic acquirers need acquisitions to grow, and it doesn’t make sense that they are not more active.”

    Corporate development offices may look to capitalize on the extra cash by acquisitions that immediately add to the bottom line. While the results of our Corporate Development Survey revealed that 43% of corporate acquisitions are driven by accretion or synergies, the recent rise in stock prices may also spur many companies to make acquisitions simply on the basis of multiple arbitrage.

    As Carl Shapiro mentioned in his New York Times article, “…deals occur when corporate profits are high and the stock market is feeling bullish: corporate executives seem unable to resist going on a shopping spree when their stock is soaring and they have lots of cash on hand.”

  • Wednesday, January 29, 2014 10:47 AM | Paul L. Kush (Administrator)

    Why EBITDA is Not Cash Flow

    There is often a misconception that EBITDA is synonymous with cash flow. While most seasoned deal professionals are careful to remember the distinction, some company owners (or entry-level analysts) can benefit from a friendly reminder.

    The EBITDA metric gained prominence with the arrival of the LBO industry in the 1980’s, as buyout firms used it to estimate how much debt a company could take on, a key component of the LBO strategy. While EBITDA has become standard in company valuation – purchase prices and loan covenants are often quoted as multiples of EBITDA – the metric is not uniformly defined under GAAP standards and its calculation varies from company to company. This variation can lead to disparities and misunderstandings about the true cash-generative abilities of a business.

    EBITDA does not take into account any capital expenditures, working capital requirements, current debt payments, taxes, or other fixed costs which analysts and buyers should not ignore. The cash needed to finance these obligations is a reality if the business wishes to grow, defend its position, and maintain its operating profitability.

    Here are three costs that are not included in the EBITDA calculation, and their omission tends to overstate operating cash flows:

    Capital Expenditures

    Certain industries like heavy manufacturing, shipping, aviation, telecom, clean technology and oil and gas require heavy ongoing or up front investments in equipment. EBITDA does not take into account capex, the line item that represents these significant investments in plant and equipment. Ignoring capital expenses to inflate EBITDA by $3.8B precipitated the bankruptcy of WorldCom. Essentially, the company capitalized operating expenses, allowing them to be depreciated over time, thus decreasing operating expenses and boosting EBITDA.


    “The biggest problem I encounter is an over or underestimation of capital expenses for asset-heavy companies such as trucking. Adding back all depreciation for a company like this without leaving an allowance for capex can grossly overestimate the available cash flow. However, not adding back any depreciation can underestimate the cash flow, especially if the company uses accelerated depreciation,” advises Axial Member Jaime Schell of Plethora Businesses. There have been more insidious cases of companies manipulating depreciation schedules to inflate EBITDA, such as Waste Management in the mid-nineties extending the useful lives of its garbage trucks and overstating their salvage value.

    Working Capital Adjustments

    Businesses need to invest revenue back into the company to keep expanding. EBITDA does not account for changes in working capital and the cash required to run the daily operating activities. Ignoring working capital requirements assumes that a business gets paid before it sells its products. Very few companies operate this way. Most businesses provide a service and get paid in arrears. Ideally a business collects up front for its services and pays in as much time as possible to remain as liquid as possible and to quickly reinvest cash into profitable investments like inventory purchases. This relationship between sources and uses of cash speaks to a company’s ability to take on more projects such as higher debt payments in the case of an LBO.

    While EBITDA is useful in that it allows for a back-of-the-envelope comparison of two companies with similar business models or in the same industry, a 2000 letter to Berkshire Hathaway shareholders written by Warren Buffet put EBITDA in its place: “References to EBITDA make us shudder…We’re very suspicious of accounting methodology that is vague or unclear, since too often that means management wishes to hide something.”

    David Simmons at Forbes magazine once called EBITDA the “device of choice to pep up earnings announcements.” It does not exist in a vacuum and is irrelevant on a standalone basis. It does help when comparing similar companies under time constraints, but is by no means a thorough valuation tool when making an important investment decision.

  • Tuesday, January 28, 2014 9:38 PM | Paul L. Kush (Administrator)



    Email your US Senators NOW!

    Your US Senators urgently need to hear from YOU that this bill is important to you, and to buyers and sellers of privately held businesses in your state.


    The Small Business Investors Alliance (SBIA) has been - and continues to be - very supportive of this legislation and has created the following hotlink to make it easy of you to email your US Senators with a prepared letter urging them to support S 1923.  Email your US Senators NOW!

    This letter has recently been updated to include:

    • An embedded link to our 1-page brief on HR 2274, and now S 1923, along with a copy of the text of the bill, and
    • Specific mention of IBBA and M&A Source as named co-sponsors of this important legislation.


    As ever, please don't hesitate to call/contact me, or one of my co-chairs, Jim Cornell (President, Praxiis Business Advisors, 716.675.6001 x223, cornelljim@aol.com), or Bob Gurrola (President, SUMMA Financial Group, 408.677.3012 direct, rgurrola@summallc.com), if you have any questions/suggestions, or if we can ever be of any assistance on this matter.



    Mike Ertel, BSEE, MSIA, CBI, M&AMI, CM&AA

    Co-Chair, AM&AA Licensure Task Force


    Managing Director, Broker

    Legacy M&A Advisors, LLC

    970 Lake Carillon Drive, Suite 300

    Saint Petersburg, FL  33716


    888.864.6610 O

    813.299.7862 C

    866.353.0382 F



    Securities transactions conducted through StillPoint Capital LLC, Member FINRA/SIPC


    Email your US Senators NOW!



  • Thursday, January 23, 2014 2:28 PM | Paul L. Kush (Administrator)
    Today in this highly competitive market place, PE firms are considering and engaging Business Development Professionals to supplement their deal flow.  BHarmony, LLC is comprised of a group of Nationwide Business Development Professionals providing serious buyers with a targeted solution to increase deal flow.  This is accomplished with their Advantage Program Model.  The program helps to distinguish firms by fostering brand name continuity while supporting long-term relationships in the seller marketplace.  Understanding that business development is not a one-time effort, but  the acceptance of a  "marathon" versus a "sprint" mentality is important. Timing, name recognition, relationship building, customizable campaigns and logistics, are the basics of the Advantage Program Model.  

    Why not take a moment to learn more about the Advantage Program.  
    Contact Paul L. Kush
    281.957.5145 Office
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