Merger conference draws strong crowd
By Staff -- Industrial Distribution, 4/1/1999
Dallas--The first Industrial MRO Industry Mergers and Acquisitions Forum at the Le Meridien Hotel drew more than 100 distributors, manufacturers, and investment banking representatives, as well as industry experts involved in the acquisition process.The conference, co-chaired by Adam Fein of the Pembroke Consulting Group and Mitch Jacobson, president of MSC Industrial Supply, focused on the rapid consolidation taking place in the marketplace, identified the major deal makers, detailed opportunities and problems to overcome in making an acquisition, and specified acquisition criteria. In addition, presentations were made concerning the legal and accounting issues to be considered before and after a deal takes place.
Fein and Jeffrey S. Germanotta of the Robert Baird Co. opened the meeting by describing why merger activity is accelerating. They pointed out that mergers are being pushed by favorable economic conditions, low cost bank credit, abundance of capital from financial buyers and improving conditions in public equity markets. Fein also pointed out that in the last six years wholesale distribution has gained sales volume in the channel and is a growing part of the economy, while integrated supply agreements and national contracts are also on the rise.
Jacobson detailed the tremendous growth his company has achieved since it rose from a small regional player to a publicly traded national company. He said that seven years ago his company had $125 million in sales. Through acquisitions and internal growth, sales at MSC reached nearly $600 million last year. In examining a branch-based target for acquisition, MSC looks for companies with a similar culture, with outstanding management in place, and those that serve a growing market with product line compatibility.
Jim Thompson, CEO of the Vallen Corp., named several areas that acquirers use for determining valuations of potential acquisitions. They included a comparison to other related transactions, size of interest, income potential, growth and risk, multiples, and discounted cash flow. "The key to any acquisition is that it has to be a good fit with your company," Thompson said.
At the end of the conference, ID magazine and Brown Brothers Harriman sponsored a roundtable discussion on mergers. The results will be featured in the June issue of ID.
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