Enhancing Value

16
Enhancing Company Value Stuart M. Moss Managing Director Presentation to the Food Processing Suppliers Association Annual Conference

Transcript of Enhancing Value

Page 1: Enhancing Value

Enhancing Company Value

Stuart M. Moss

Managing Director

Presentation to the Food Processing Suppliers Association Annual Conference

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© 2014 FMV Capital Markets, Inc. 2

Introduction

Businesses $10 - $100 MM

Value-enhancing strategies

Business valuation

Acquisitions & divestitures (M&A)

Focus

Food processors

Food machinery suppliers

Ingredient suppliers

ProcessExpo exhibitors

Industry Involvement

MISAMeat Industry Suppliers Alliance

Equipment suppliers

Ingredients suppliers

Consumables suppliers

Service suppliers

Suppliers

Private business owners

Corporate executives

Division Management

Consultants

Roles

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Topics

Developing Value-Enhancing Strategies

Tangible Benefits of Enhancing Value

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Operational Benefits of Enhancing Value

1st -- Stronger Competitive Position

• Industry continues to evolve

• Customer changes

• Competitor’s moves

• Industry “winners” will:

• Devote more resources to organic growth

• Be more attractive to acquisition/alliance targets

• Maintain an operational cushion to survive

unexpected bumps

2nd -- Easier Access to Capital

• Remains inexpensive

• More accessible for stronger companies

• To fund growth

• To further improve competitive position

• To manage bumps

42%

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Transitional Benefits of Enhancing Value

Every private business owner will eventually exit their company

• Hand over to Family

• Sell to outsiders

Objective of owners anticipating a family transition

• Implement value-enhancing strategies

• Establish the strongest possible competitive position

Absentee Ownership

Sale / Gift to Family

Strongest Competitive Position

The odds are against a successful family transition

• 70% of family businesses do not survive the 2nd generation

• 88% do not survive the 3rd generation

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Transitional Benefits of Enhancing Value (cont.)

Various ways to transition businesses outside family

Enhancing value enables owners to dictate terms

• Whether objective is operational or transitional benefits

• More control over where and when to transition

Highest Business Valuation

Different objective for current ownership

• Implement value-enhancing strategies

• Create the highest short-term business valuation

Sale to Third Party

MBO or ESOP

Licensing or Strategic Partnership

Restructuring / Bankruptcy

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When to Enhance Value

Be PreparedYour Timing vs. Market Timing

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Low Customer & Vendor Concentration

Consistent Financial Performance Competitive

Differentiation

Revenue & Growth > Industry Average

OperationalEfficiency

Strong Financial Performance

Protected IP

No Legal or Environmental Issues

Experienced Management Team

Solid Business Systems

Value-Enhancing Strategies

Strategies should focus on Value Drivers impacting a company’s

ability to realize its Operational or Transitional benefits

Operational Value-DriversOperational Value-Drivers Structural Value-DriversStructural Value-Drivers

Robust Business Intelligence System

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Contents

Developing Value-Enhancing Strategies

Tangible Benefits of Enhancing Value

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Case Study: Processed Meat Industry

Increasing Consumer Demand

• Growing, aging population

• Modest economic recovery

• Increasing demand for:

Convenience foods

Ethnic foods

C

AG

R

Pressure on Food Processors

• Food safety

• Raw material prices

• Price & delivery demands

Consumption Growth 2013-18 (U.S.)

Food Processor Imperatives

• Create new value-added products

• Address operating challenges:

Internal efficiency vs. co-packing flexibility

Retaining skilled workers

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Case Study: Processed Meat Industry (cont.)

Opportunity for Meat Industry Suppliers

• Empathize with customers

• Address unmet needs

Changing Competitive Landscape

• Current suppliers broadening offerings

R&D

Acquisition or Teaming

• Threat of new processing equipment entrants

Meat segment growing 2x overall industry

Largest market is USA $

Bill

ion

s

18%

Meat Industry Supplier Imperative

• Develop value-enhancing strategies

• Focus on key value drivers

• Utilize most appropriate strategic frameworks

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Strategic Frameworks

Supplier Power: Low

-Easy availability of raw materials-Fragmented raw material supplier base

Competitive Intensity: Medium

+Concentration of equipment suppliers+Significant investment in worldwide capabilities to improve technology & increase revenues+High exit barriers-Attractive industry growth-Strategic alliances exist

New Entry Threat: Medium

-High capital requirement-Established relationships with Large & Mid-Sized processors+Possible expansion from other food equipment segments

Buyer Power: Medium

-Far more buyers than equipment suppliers+Large buyers = 30-50% of lines+Competitive & customer pressures raise buyers’ equipment requirements

Threat of Substitutes: Low

-Manual processes less viable-Cheap knock-offs not acceptable to processors+Used equipment available

Industry Attractiveness framework for equipment manufacturers

currently outside processed meat industry

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Strategic Frameworks (cont.)

Mapping framework for describing how broadly existing suppliers

compete (scope of supply, food segments, geographies)

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Purchase Criteria

Priorities Customer Segment A Relative Ranking

1st Machine uptime Comparable

2nd First pass quality Better

3rd Machine throughput Worse

44h Life cycle cost Better

5th Ease of operation Comparable

6th Field service support Worse

Strategic Frameworks (cont.)

Differentiation framework comparing how well relevant suppliers

meet the key purchase criteria within various customer segments

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Strategic Frameworks (cont.)

Competitive AdvantageCompetitive Advantage

Competitive Advantage framework to determine what internal processes,

IP, or capabilities can create and sustain key differentiators

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Wrap Up

Consider Variety of Strategic Frameworks

Prepare to Take Advantage of Opportunities

Enhancing Value Creates Tangible Benefits

“Control your own

destiny, or someone else will.”

Jack Welch

Stuart M. Moss

[email protected]

Office: 949-759-4499

Mobile: 714-412-0880