Gayle Dickerson & Andrew Sallway. Partners, Financial Advisory Grant Thornton Australia Limited. Overview

Transcription

1 Gayle Dickerson & Andrew Sallway Partners, Financial Advisory Grant Thornton Australia Limited Overview

2 3 ways businesses responded to the GFC Expand and taken advantage of the conditions to strengthen market share and profitability Simply marking time/underperforming Exited the market either via sale or insolvency Where does their future lie?

3 2012 Grant Thornton UK LLP. All rights reserved.

4 The Approach The context Overview Owner managed business is the largest sector in the Australian economy Average age of business: 34 years These businesses employ more than 50% of Australia's workforce Issues % of owners +65 years old: 25% (12% in 2010) 62% do not have formal board of directors Of the 38% that do have boards, 82% do not have non-family nonexecs

5 Two phased approach Critical point Rehabilitation Growth How? External Economy Alternate lenders Overseas investment Government Private Equity Customers Internal Strategy Financial People & Culture Processes Lenderview The Banker's View of the World Businesses should prepare themselves for stagnant economic conditions in the next 12 months Funding is available for businesses with a solid business case A strong management team is the key to success in difficult market conditions There are opportunities for innovative and agile businesses Businesses that do not embrace change may experience financial difficulty

6 Alternative Capital Hedge Funds based in Asia Institutional money Super/Pension Looking for greater returns have a greater risk appetite Will provide "stretched senior debt" Typically provide bridging finance to an event in 2-3 years Corporate Lending Landscape Major Domestic Banks Foreign-owned Bank Subsidiaries Investec Bank (Australia) Beirut Hellenic Bank Suncorp -Metway ING Bank Bank of China (Australia) Macquarie Bank Bendigo and Adelaide Bank Westpac NAB HSBC Bank Australia Rabobank Australia Arab Bank Australia Bank of Queensland CBA ANZ Citigroup Bank of Cyprus Australia Apollo Varde Pacific Alliance Group Oaktree Davidson Kemper Goldman Sachs Blackstone KKR Centrebridge Mt Kellet Alternative Credit Opportunity Funds

7 Number of deals Current M&A Trends: Dealtracker Growth Sectors Driving Confidence M&A Quarterly trends Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Deal volumes - 16% higher than the last period covered Deal volume Average no. of deals (182) Notable increase in larger deals in the latter part of this period 60% of the top 10 deals occurring in the six months to 30 June 2014

8 Deals by size Transaction size range Current Dealtracker number of deals Current Dealtracker % of total Second Dealtracker number of Deals Second Dealtracker % of total Greater than $1 billion 13 1% 14 1% $500 - $999.9 million 15 1% 16 2% $100 - $499.9 million 63 5% 89 9% Less than $100 million % % Undisclosed 620* 53% % Total 1, % 1, % *The majority of deals with undisclosed deal values are likely to have deal values of less than A$100 million. Total deals by sector, Current vs Prior period Utilities Telecommunication Services Energy Consumer Staples Healthcare Materials Financials Information Technology Consumer Discretionary Industrials Number of deals 216 Corporates remained the more active buyers with 96% of acquirers being classified as Corporate M&A deals and 4% as Investment Manager ("IM") deals. There is strong overseas acquirer interest in Australian businesses with at least 26% of transaction having an overseas buyer Current Dealtracker number of deals Second Dealtracker number of Deals

9 Size of business transaction multiples Revenue Range Number of deals Current Dealtracker median EV/EBITDA multiples Second Dealtracker median EV/EBITDA multiples First Dealtracker median EV/EBITDA multiples Less than $20 million x 4.9x 6.1x Between $20 million to $50 million x 6.1x 6.5x Between $50 million to $100 million x 7.0x 7.9x Between $100 million to $200 million x 8.7x 7.5x Between $200 million to $500 million x 7.0x 8.7x Over $500 million 9 7.1x 8.9x 9.8x Median (overall) 7.3x 7.5x 7.5x Total 105 Our analysis once again showed that while size is definitely one determinant of value, the key determinant is the growth prospects of the target Very high valuation multiples were achieved where the growth prospects of the target were strong Acquisition Strategies

10 Acquisition Strategies Business & Growth Strategies Align M&A Strategy M&A Framework Due Diligence Post Acquisition Integration M&A Industry Update Takeaways Deal volumes are down to 2001/2002 levels although recent activity levels have increased Inbound activity from overseas buyers remains key particularly in acquiring Australian IP Capital Markets have increased valuations over last 12 months which is not being reflected in private treaty transactions as yet (multiples still depressed) On-going uncertainty and operational focus leading to ever more prolonged transaction periods ( 9 to 12 months more the norm) Private Equity participants remain active and the top tier performers have raised capital however the quantum of participants and therefore available funds to deploy has decreased Completion of election, increased business and consumer confidence levels and de-leveraged corporates suggest an improvement in M&A activity levels over the next few years

11 Factors influencing value Operating returns Track record of growth Growing / attractive market Compelling value proposition Sustainability will all these factors remain under a different ownership structure? HIGHLY VALUABLE BUSINESS Relative strength of all these factors versus the competition? Unique Assets / IP Proven business model Strategic market position Strong management & systems Adapting to a changing environment customer exit

12 Two phased approach Critical point Rehabilitation Growth How? External Economy Alternate lenders Overseas investment Government Private Equity Customers Internal Strategy Financial People & Culture Processes Internal approach

13 Internal approach People Process Strategy Financial Internal approach Strategy What would we like to see? Clear ambition Achieving its goals Aware of what others are doing What do we often see? Muddled strategy Strategic goals don t match personal KPI's "If you fail to identify and analyse the obstacles, you don t have a strategy. Instead, you have either a stretch goal, a budget, or a list of things you wish would happen."

14 Internal approach Financial What would we like to see? 3-way integrated forecast Defined approach in relation to financing Defined financial KPI's "Budget: a mathematical confirmation of your suspicions." What do we often see? Untimely reporting Lack of accountability Inefficiencies Internal approach Process What would we like to see? Documented systems and processes Business improvement culture Investment/strategy: technology and infrastructure What do we often see? Multiple inconsistent systems that don t talk Strong strategic, operational and financial processes Poor corporate governance "Good things only happen when planned; bad things happen on their own."

15 Internal approach People What would we like to see? Succession planning Strong culture and values Diversity and inclusion Talent mapping "Leadership is the capacity to translate vision into reality." What do we often see? Low morale High turnover Lack of agreed KPI's Limited communication Internal approach

16 Tools Business Insights Model Helping CEO's spend time "on" the business vs. time "in" the business Key takeaways 1. Customers "Simply marking time" Rehabilitate and return to growth Challenge your customers earlier on their strategy, risks and internal/external approach Encourage them to take time to think "out" of the business 2. Help Management ask themselves better questions 3. Help change mindsets

17 Contact us Financial Advisory Sydney Debt Advisory and Restructuring Paul Billingham National Managing Partner Advisory & Strategic Growth T E paul.billingham@au.gt.com Said Jahani Head of Financial Advisory, Sydney T E said.jahani@au.gt.com Trevor Pogroske Partner T E trevor.pogroske@au.gt.com Gayle Dickerson Partner T E gayle.dickerson@au.gt.com Andrew Sallway Partner T E andrew.sallway@au.gt.com Greg Keith Managing Partner Sydney T E greg.keith@au.gt.com Corporate Finance Paul Gooley National Head of Corporate Finance T E paul.gooley@au.gt.com Neil Cooke Partner T E neil.cooke@au.gt.com Andrea De Cian Partner T E andrea.decian@au.gt.com Holly Stiles Partner T E holly.stiles@au.gt.com Tim Goodman Associate Director T E timothy.goodman@au.gt.com Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia. Liability limited by a scheme approved under Professional Standards legislation.

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