ACQUISITION TARGETS-HOW MUCH MONEY DO YOU WANT

By Tom Cobery
In July 22, 2015

In this posting I continue the discussion of issues that an acquiring company needs to address to get a better understanding of the potential acquisition target-before a deal is finalized. I pulled much of this content from an article written for The International Reprographic Association (IRga) newsletter, where I discussed a few of the issues and presented my thoughts.

One of the more difficult issues facing a prospective purchaser is trying to determine how realistic a seller’s expectations are. Many sellers are basing their expectations on word-of-mouth comments from fellow owners who have sold, which in many cases is more bravado than fact. If a seller has had a professional valuation prepared, the seller is usually willing to share that with you, e.g. “This is what the valuation stated, but I think it is low.” At least you have an idea that the seller is somewhat realistic. This prevents wasted time dealing with a person who has an inflated value in mind.

There are numerous ways to value a potential acquisition and the most common by far is a multiple of EBITDA (earnings before interest, income taxes, depreciation and amortization). The EBITDA is then adjusted for items such as tax planning costs, personal perks, non-related business expenses, etc. This gives you an Adjusted EBITDA which is then multiplied by an industry multiple to determine the overall range of value. Multiples vary by industry, label converters are seeing multiples in the 5 to 7 time range, with commercial printers looking at 2 to 4 times. The multiple ranges vary as relates to quality of customers, profitability, innovative products, and markets served to name a few.

It is important to determine if you are dealing with a realistic seller. Much time can be lost if the seller is unrealistic.

If you want to chat, give me a call at 201-523-6326 or Email me at tcobery@epicomm.org.

Tom Cobery

Dealing with the day-to-day needs of running a busy printing operation often leaves company leaders little time to plan for the future of their enterprises on their own. Tom works with chief executive officers and senior management executives in the Tag and Label Industry to develop growth opportunities through strategic transactions, new markets, or new service opportunities. Available for consulting on individual projects, he can also be engaged to serve as an Advisory Partner, helping executives guide their company into the future, serving as an impartial sounding board for ideas, and working with them to set the right course for continued growth and greater profitability. Tom’s personal experience as a Tag and Label Industry company president and chief executive officer, plus his extensive networking with other industry executives through his volunteer leadership activities with the Tag and Label Manufacturers Institute (TLMI) give him a unique perspective on the tough issues today’s company leaders face in this specialized segment. Companies engaging Tom will find his insight and independent advice an invaluable asset in helping them achieve their growth and profitability goals. More than a consultant, Tom Cobery wants to be your trusted Advisory Partner.

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