enhancing value (linkedin)
TRANSCRIPT
Enhancing Company Value
Stuart M. Moss
Managing Director
Presentation to the Food Processing Suppliers Association Annual Conference
© 2014 FMV Capital Markets, Inc.© 2014 FMV Capital Markets, Inc.
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Introduction
Businesses $10 - $100 MM
Value-enhancing strategies
Business valuation
Acquisitions & divestitures (M&A)
Focus
Food processors
Food machinery suppliers
Ingredient suppliers
ProcessExpo exhibitors
Industry Involvement
MISAMeat Industry Suppliers Alliance
Equipment suppliers
Ingredients suppliers
Consumables suppliers
Service suppliers
Suppliers
Private business owners
Corporate executives
Division Management
Consultants
Roles
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Topics
Developing Value-Enhancing Strategies
Tangible Benefits of Enhancing Value
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Operational Benefits of Enhancing Value
1st -- Stronger Competitive Position
• Industry continues to evolve
• Customer changes
• Competitor’s moves
• Industry “winners” will:
• Devote more resources to organic growth
• Be more attractive to acquisition/alliance targets
• Maintain an operational cushion to survive
unexpected bumps
2nd -- Easier Access to Capital
• Remains inexpensive
• More accessible for stronger companies
• To fund growth
• To further improve competitive position
• To manage bumps
42%
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Transitional Benefits of Enhancing Value
Every private business owner will eventually exit their company
• Hand over to Family
• Sell to outsiders
Objective of owners anticipating a family transition
• Implement value-enhancing strategies
• Establish the strongest possible competitive position
Absentee Ownership
Sale / Gift to Family
Strongest Competitive Position
The odds are against a successful family transition
• 70% of family businesses do not survive the 2nd generation
• 88% do not survive the 3rd generation
© 2014 FMV Capital Markets, Inc.© 2014 FMV Capital Markets, Inc.
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Transitional Benefits of Enhancing Value (cont.)
Various ways to transition businesses outside family
Enhancing value enables owners to dictate terms
• Whether objective is operational or transitional benefits
• More control over where and when to transition
Highest Business Valuation
Different objective for current ownership
• Implement value-enhancing strategies
• Create the highest short-term business valuation
Sale to Third Party
MBO or ESOP
Licensing or Strategic Partnership
Restructuring / Bankruptcy
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When to Enhance Value
Be PreparedYour Timing vs. Market Timing
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Low Customer & Vendor Concentration
Consistent Financial Performance Competitive
Differentiation
Revenue & Growth > Industry Average
OperationalEfficiency
Strong Financial Performance
Protected IP
No Legal or Environmental Issues
Experienced Management Team
Solid Business Systems
Value-Enhancing Strategies
Strategies should focus on Value Drivers impacting a company’s
ability to realize its Operational or Transitional benefits
Operational Value-DriversOperational Value-Drivers Structural Value-DriversStructural Value-Drivers
Robust Business Intelligence System
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Contents
Developing Value-Enhancing Strategies
Tangible Benefits of Enhancing Value
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Case Study: Processed Meat Industry
Increasing Consumer Demand
• Growing, aging population
• Modest economic recovery
• Increasing demand for:
Convenience foods
Ethnic foods
C
AG
R
Pressure on Food Processors
• Food safety
• Raw material prices
• Price & delivery demands
Consumption Growth 2013-18 (U.S.)
Food Processor Imperatives
• Create new value-added products
• Address operating challenges:
Internal efficiency vs. co-packing flexibility
Retaining skilled workers
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Case Study: Processed Meat Industry (cont.)
Opportunity for Meat Industry Suppliers
• Empathize with customers
• Address unmet needs
Changing Competitive Landscape
• Current suppliers broadening offerings
R&D
Acquisition or Teaming
• Threat of new processing equipment entrants
Meat segment growing 2x overall industry
Largest market is USA $
Bill
ion
s
18%
Meat Industry Supplier Imperative
• Develop value-enhancing strategies
• Focus on key value drivers
• Utilize most appropriate strategic frameworks
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Strategic Frameworks
Supplier Power: Low
-Easy availability of raw materials-Fragmented raw material supplier base
Competitive Intensity: Medium
+Concentration of equipment suppliers+Significant investment in worldwide capabilities to improve technology & increase revenues+High exit barriers-Attractive industry growth-Strategic alliances exist
New Entry Threat: Medium
-High capital requirement-Established relationships with Large & Mid-Sized processors+Possible expansion from other food equipment segments
Buyer Power: Medium
-Far more buyers than equipment suppliers+Large buyers = 30-50% of lines+Competitive & customer pressures raise buyers’ equipment requirements
Threat of Substitutes: Low
-Manual processes less viable-Cheap knock-offs not acceptable to processors+Used equipment available
Industry Attractiveness framework for equipment manufacturers
currently outside processed meat industry
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Strategic Frameworks (cont.)
Mapping framework for describing how broadly existing suppliers
compete (scope of supply, food segments, geographies)
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Purchase Criteria
Priorities Customer Segment A Relative Ranking
1st Machine uptime Comparable
2nd First pass quality Better
3rd Machine throughput Worse
44h Life cycle cost Better
5th Ease of operation Comparable
6th Field service support Worse
Strategic Frameworks (cont.)
Differentiation framework comparing how well relevant suppliers meet
the key purchase criteria within various customer segments
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Strategic Frameworks (cont.)
Competitive AdvantageCompetitive Advantage
Competitive Advantage framework to determine what internal processes,
IP, or capabilities can create and sustain key differentiators
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Wrap Up
Consider Variety of Strategic Frameworks
Prepare to Take Advantage of Opportunities
Enhancing Value Creates Tangible Benefits
“Control your own
destiny, or someone else will.”
Jack Welch
Stuart M. Moss
Office: 949-759-4499
Mobile: 714-412-0880