Successful Succession Planning Is the Future of Your Business Secure?

Transcription

1 Successful Succession Planning Is the Future of Your Business Secure? Peter Schaefer, New Direction Partners Shift_018 Packaging and Print Innovation Asia May 2, 2018

2 What Will We Cover on Succession Planning? 2

3 What Will We Cover on Succession Planning? 3

4 What Will We Cover on Succession Planning? 4

5 What Will We Cover on Succession Planning? 5

6 What Will We Cover on Succession Planning? 6

7 Agenda When What How Today s Environment Summary Questions and Answers 7

8 Agenda When What How Today s Environment Summary Questions and Answers 8

9 How Do We Get From Point A to B? Point A Today Retirement (or Whatever You Choose to do Next) 9

10 How Do We Get From Point A to B? Point A Point B Today Retirement (or Whatever You Choose to do Next) 10

11 Timetable Prepare Begin Process Close + Transition Today Retirement (or Whatever You Choose to do Next) 11

12 Timetable 6-24 months Prepare Begin Process Close + Transition Today Retirement (or Whatever You Choose to do Next) 12

13 Timetable 9-12 months 6-24 months Prepare Begin Process Close + Transition Today Retirement (or Whatever You Choose to do Next) 13

14 Timetable 0 36 months 9-12 months 6-24 months Prepare Begin Process Close + Transition Today Retirement (or Whatever You Choose to do Next) 14

15 Timetable 0 36 months 9-12 months 6-24 months Prepare Begin Process Close + Transition months Today Retirement (or Whatever You Choose to do Next) 15

16 Agenda When What ONE SIZE DOESN T FIT ALL How Today s Environment Summary Questions and Answers 16

17 What One Size Doesn t Fit All Different Objectives Diversification. Retirement. Next generation has other aspirations. Business is difficult and I am tired. Next career is calling. Etc. Etc. 17

18 What Can I Do With My Business? Sell; Give it away to charity; Gift it to family; Sell it to a key employee(s); Merge; Dissolve; Sell it to family; and Sell It to the employees (ESOP).

19 What Can I Do With My Business? Sell; Give it away to charity; Gift it to family; Sell it to a key employee(s); Merge; Dissolve; Sell it to family; and Sell It to the employees (ESOP). Or, perhaps a combination of the above.

20 Agenda When What How PUT TOGETHER A PLAN Today s Environment Summary Questions and Answers 20

21 The Plan You Need A Plan Two Parts 1. Replacement Plan the process of identifying the candidates and replacing the owner as a leader of the firm. 2. Exit Plan the process of identifying the options and replacing the owner as a shareholder of the firm. 21

22 Replacement Planning 1. Identify key leadership criteria. 2. Find future leaders and motivate them. 3. Create a sense of responsibility within the organization. 4. Align succession planning with the corporate culture. 5. Measure results and reinforce desired behaviors. 22

23 Replacement Planning You May Ask: 1. Why do I need to identify a replacement if I plan on selling the business? 2. What if I don t have an in-house replacement? 23

24 Exit Planning Two Central Questions 1. Do you know what you want to do after you are no longer involved in day-to-day operations? 2. Do you have the resources to do what you aspire to do after the sale? 24

25 How To Handle It Get the timing right. Get the planning done. Give the next group the best chances of success as possible. Take responsibility IT IS YOUR JOB! 25

26 Agenda When What How Today s Environment WHAT IS YOUR COMPANY WORTH TODAY, AND HOW DO YOU BUILD VALUE? Summary Questions and Answers 26

27 How Do You Value Your Business? Multiple of Earnings; or Liquidation Value (value of net assets) + Book of Business (Goodwill); or Liquidation Value. 27

28 What Drives Value It is a combination of Quantitative and Qualitative Factors Quantitative Factors Drive Multiple Estimate. Qualitative Factors Modify Multiple Estimate, plus or minus. 28

29 Earnings Based - How is value determined? In the United States, the earnings examined by buyers is referred to as EBITDA. EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) Sales $12,000,000 Adjusted Pretax Income $ 800,000 Add: Interest Expense $ 200,000 Add: Depreciation $ 1,000,000 Adjusted EBITDA $ 2,000,000 29

30 How do we maximize value? EBITDA $2,000,000 $2,000,000 $2,000,000 EBITDA Multiple % Increase 25% 20% Enterprise Value $8,000,000 $10,000,000 $12,000,000 Less: Net Debt $3,000,000 $3,000,000 $3,000,000 Equity Value $5,000,000 $7,000,000 $9,000,000 % Increase 40% 29% 30

31 How do we maximize value? EBITDA $2,000,000 $2,000,000 $2,000,000 EBITDA Multiple % Increase 25% 20% Enterprise Value $8,000,000 $10,000,000 $12,000,000 Less: Net Debt $3,000,000 $3,000,000 $3,000,000 Equity Value $5,000,000 $7,000,000 $9,000,000 % Increase 40% 29% The power of the multiple! 31

32 What warrants higher multiples? Quantitative Trend demonstrating revenue growth. Qualitative Identifiable, defensible specialties. Earnings growth. Growing customer loyalty. EBITDA margins of 12% or more. Non-union workforce. No account concentration above 20%. Energetic and capable management. Critical mass within your segment. Seller willing to stay. Healthy balance sheet. No significant cap. expenditure needs. 32

33 Premium Segments Printing Large Format Retail POP Program vs. Transactional Web-to-Print Conventional Direct Mail Customized Direct Marketing Digital Data Analytics/Creative Packaging Flexible Packaging Labels Pharmaceutical Packaging Folding Cartons Corrugated 33

34 Asset Market Valuations Purchasing a firm's sales and selected assets. Consists of three elements: 1. Net Working Capital at book value realization usually warranted; plus 2. Production Equipment either purchased by buyer or realized post closing by seller; plus 3. Commission on Retained Sales for 2 to 5 years at 3% to 7%. Actual terms are what seller can negotiate. 34

35 Maximizing Value Timing Demonstrate your ability to grow; Have your debt at a manageable level; and Midway through technology investment cycle. Run a process create demand and enhance value. 35

36 Benefits of Knowing Value Even if not a Seller Confirms that your decisions and actions are creating value. Enables all to understand which decisions and actions initially reduce value. Someday you may be a seller and you ought to be prepared

37 Agenda When What How Today s Environment Summary LESSONS LEARNED Questions and Answers 37

38 Lessons Learned Firm Preparation Phase Start NOW! Clean up real estate. Clean up multi-employer union plans. Appoint a successor / replacement. Maximize value get your EBITDA up and your Debt down. Manage large investments in equipment and technology. Fix it now don t leave it to the next owner. Clean up voting control be watchful of different objectives. Value your business every year. 38

39 Lessons Learned Sale Process Phase Hire an advisor; Reward key managers; and Only involve key managers. Have fun! Transition Phase 39

40 Questions? Peter Schaefer, New Direction Partners P.O. Box 496 Valley Forge, PA Tel: (610)

41 Peter Schaefer Peter Schaefer is a Partner with New Direction Partners. Peter is an experienced dealmaker with twenty years of investment banking and valuation experience. He has closed more than one hundred transactions in virtually every segment of the printing and packaging industries as well as the sale of a $75 million helicopter company and a $10 million bread manufacturer. In addition, Peter has performed hundreds of valuations for ESOPs, estate and gift tax planning and strategic planning purposes. Other recent transactions have included the sale of Midnight Oil to Oak Hill Partners, Popular Ink to Highlander Partners, Classic Graphics to Imagine! Print Solutions, the divestiture of Transcontinental s Rastar division to Sun Litho, the sale of Meisel to R.R. Donnelley, the sale of Vectra Corporation to Taylor Corporation, the sale of Express Label to Cenveo, the purchase of Journal Communications IPC Print Services by Walsworth Publishing, and the purchase of National Graphic Supply by Pitman. Prior to New Direction Partners, Peter worked for fifteen years at Compass Capital Partners having served most recently as its President. Prior to that, he worked in the investment banking departments of KPMG Peat Marwick and Coopers & Lybrand. He received a BS in Economics and Political Science from Trinity College and an MBA from Villanova University. He is a Candidate Member of the American Society of Appraisers and is a member of the printing industry s prestigious NAPL Soderstrom and PIA Ben Franklin Societies and has served on several Advisory Boards within the printing/packaging industries. Peter is married to Kathleen and they have six children. 41

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