Report from the Capital summit at ISE 2016

Investors and entrepreneurs gathered to discuss opportunities and approaches to mergers and acquisitions at the event held during ISE 2016.

The second annual ISE Capital Summit brought together AV and IT industry entrepreneurs, corporate executives and financial professionals and business experts from the world of investment, mergers, and acquisitions.  Introduced and moderated jointly by John Stiernberg, president of Stiernberg Consulting and John Bowen, managing partner of MediaBridge Capital Advisors, an experienced panel discussed a wide range of investment-related issues in an event that provided ample opportunities for buyers and sellers, venture capitalists and entrepreneurs to meet and engage.  

ISE 2015 hosted the first Capital Summit, which ran on similar lines and was an immediate success.  This event built on last year’s iteration and developed the previous themes to encompass a wider discussion of the opportunities open to both entrepreneurs and investors alike.  

The programme outlined the intention of providing knowledge and support to organisations on both sides of the financial equation: offering advice to would-be sellers on what investors look for in a company, how to find suitable advisers and alliance partners, how to present an opportunity to investors and the crucial steps of negotiation.  For investors, it provided overviews of potential strategies and outlined examples of successful mergers and acquisitions and guidance on the best approach to take in building a balanced portfolio of assets to ensure long-term survival and growth in an increasingly volatile world.

The event was split into three sections, the first provided a platform for the panellists to outline their views on the global and AV-IT specific market conditions; the second covered the wide variety of approaches adopted by different organisations to mergers and acquisitions; the third identified the key factors that entrepreneurs should focus on in order to maximise the value and successfully dispose of their cherished businesses.

Global and AV-IT industry market outlook

The panellists began by considering the world’s economic position and the consequent effect on global socio-economic conditions; and in particular, how it affects companies in the AV and IT sectors.  Panellists were in general agreement that whilst the global market is somewhat volatile, the local economic situation within individual geographies varies widely and the disparate nature of industries makes it difficult to analyse with any accuracy.  The AV and IT markets are special cases within the normal manufacturing spread, as they are currently transitioning from a hardware base to a cloud-based service industry in the large part.  The general feeling amongst the panel is that today, global organisations in the technology sector are best served by a balanced portfolio of product and service types with wide representation across the more stable geographies.  

Even with an acknowledged uncertainty in the business environment, particularly within the private sector, Shure’s Brian Woodland noted that: “Whilst Europe is a ‘soft’ market, with low growth and static production levels, there is cause for optimism and there is always room for novel products to develop and flourish. Shure, for example, is constantly looking out for opportunities to tap into the start-up community, particularly companies that are active in similar technology domains.”  

Axel Coustere, from The Hub Exchange, endorsed this sentiment, with a comment on the potential for dynamic and creative companies to associate with larger organisations: “Big companies need to stay in touch with the latest technologies so are keen to invest in pilot schemes and incubation programmes, which allows agile, small companies to develop products and solutions and grow as a consequence.  

“Business models are changing, technology is core, fragmented businesses can group together and this can be facilitated by established venture capitalists with experience in the industry, underpinned by financial investment,” commented Axel Coustere.

M&A approaches

Whilst every mergers and acquisitions project is different, many organisations have a long-term strategy to expand their product portfolio or generate new revenue streams through this avenue.  This was considered in the second section of the summit.  The ideal relationship is a one-to-one purchaser vendor one, in which the potential acquirer has sufficient time to investigate the operations, finances and culture of the ‘acquiree’.  

However this situation is rarely achieved; instead a ‘beauty parade’ often ensues with several buyers considering the same target firm, resulting in multiple iterations of the buying and selling process and individual prospectus documents required for each instance; highlighting the pros and cons of each possible relationship and the potential mutual gain. This is a role that is often undertaken by and between advisors on both sides.

Barco’s Wim Buyens noted that: “The process requires deep analysis, looking at why a company is suited to acquisition, assessing the corporate culture and the management team and assessing whether it is a good match.  Subsequently, a plan needs to be developed to integrate the operations of both organisations; one that doesn’t stifle or inhibit the culture and creative activities of the acquired company, since that is what was attractive in the first place, but stimulates and nourishes growth.”

From the point of view of purchasers, David Leverett explained that: “Following a well-laid out roadmap that targets specific companies eliminates risk and mistakes.  The acquisition process requires several steps: analysis, due-diligence, negotiation and an integration plan.  There is no general rule, but each project can take some time, although typically six months or so is a reasonable period.  Despite that, there are possibilities for opportunistic acquisitions when a company operating outside the strategic plan presents themselves at the right time.”  

Advice to entrepreneurs

The final section of the event focused on the selling process, and specifically the plan that should be followed to simplify the sales process and maximise the value at sale time.  It was aimed at the several entrepreneurs and company owners in the audience.

The overriding sentiment was that it takes longer and involves more work by the seller than would usually be anticipated, or desired by managers of businesses.  This can be disruptive if not planned or managed.  The panellists offered their advice, borne from long experience of many successful projects over several years, if not decades.  

The key message to would be sellers is to engage early and prepare well, ideally over as long a period as possible.  Buyers and their legal teams shirk engagements with owners who demand rapid closure.  As John Bowen, MediaBridge Capital Advisors, pointed out: “There are always overwhelming delays with lawyers and advisers.” He suggested that although acquisitions have been completed in as little as nine weeks or so, the pressure on all parties makes it an extremely difficult process and one that can easily result in failure if not strictly managed and if the desire and dedication of the participants is not present.  

Neil MacTaggart concurred: “Because the process always takes longer than expected, it is preferable to engage early with investors and to prepare over a long period.  The additional work will be disruptive to the day-to-day activities of the business which can paralyse its operation and even damage it: leaving an organisation that is less attractive to the purchaser.”

Buyens added to this by outlining the way that the interests of purchasers vary: “A potential seller should do their homework.  Work out how to fit into the purchaser’s ecosystem and pitch their offering at that individual organisation.”   Neil MacTaggart agreed and explained that each interested purchaser has their own reasons for considering the target company: it might be to gain a channel to market, acquire a complementary product or skilled management team or to gain access to a core technology that fits in with their own strategic plans and roadmap.

In all instances, the buyer is attracted to a company because of its culture as well as its products or sales channels, and it is important that this is not stifled after acquisition.  One of the most effective ways to ensure this is to maintain the status quo by allowing the acquired company to continue operating as before with slow and managed integration into the parent.  In the majority of cases therefore, owners and management teams must therefore expect to continue for some time in their current roles; continuing to sustain that culture before exiting.

Another successful event, this year’s Capital Summit offered advice, guidance and insight into all aspects of the merger and acquisition process and has divulged valuable information to both types of proponents.  The most valuable elements of that message are that there is considerable scope to partner with other organisations to mutual benefit, but the road to success is long and strewn with obstacles; it is therefore crucial that every participant prepares thoroughly and honestly and is ready for a drawn out process and rocky ride.  The result is usually worth the effort.

The panel
The panel consisted of experienced financiers, strategic advisers and entrepreneurs who had already acquired or developed and exited successful companies.  

Wim Buyens, senior vice president, entertainment and corporate at Barco 
Hans Swinnen, chairman, board of directors at Audioprof Group International, 
David Leverett,  director of global strategy, Harman International
Brian Woodland, senior director of business development, Shure Incorporated 
Neil MacTaggart, director at Media Asset Capital 
Axel Coustere, partner, The Hub Exchange

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