Maximizing Value in the Complex M&A Market

NEW YORK, Dec. 7, 2012 (GLOBE NEWSWIRE) -- With M&A deal activity up strongly in 2012, according to industry sources, one investment banking and strategic advisory firm is helping potential buyers and sellers of fashion businesses get the most value out of their transaction.

Speaking recently to members of the American Apparel & Footwear Association in New York City, Andrew Postal, Managing Partner at MMG-Marketing Management Group Inc., said that a sustainable business with a runway for growth is key to maximizing the enterprise value in a sale, and that a seller can expect to work three to five years in an "earn-out" to realize the full proceeds.

The success of an apparel industry transaction depends on many factors, Mr. Postal said, among them, "How you prepare your client."

The first question buyers and sellers should be asking is, "Does this business model have sustainability. Is there a trajectory for continued growth, or has the business peaked," said Mr. Postal.

Mr. Postal said MMG's experience and deep fashion industry knowledge help to prepare potential sellers for the soul-baring work of the due diligence process. Part of this preparation is done by giving an owner and the management team insightful, time-tested templates for what will be needed.

"It's a very difficult process," he added. "What is each party bringing to the table, and what are the expectations post-closing."

"We know the marketplace and generally understand what the buyers are looking for," Mr. Postal said. "You need to expose your client to those questions before they're asked."

"You have to have a team that will help you," he advises potential sellers. "Somebody has to find the landmines. MMG will invest the time even before we're hired to make sure the deal can be executed," states Mr. Postal.

Key areas to examine in the early stages of a transaction:

  • Strategic Rationale – What does the buyer bring to the table other than cash?
  • Compatibility – Are the corporate cultures compatible?
  • Buyer's Financial Capabilities – Does the buyer have the financial wherewithal to fund the purchase and finance the operations?
  • Seller's Post Closing Role – What authority will the seller have in the successor organization to control what once was his? Is the seller capable of being an "employee"?

M&A is largely an art form that requires the investment banker to manage client expectations, coordinate the activities of a team of professionals (including lawyers, accountants, tax advisors, etc), maintain a rhythm to the deal and bring a high level of objectivity to the process so that all egos are kept in check and the transaction is not jeopardized by emotions.

Indications are that 2013 will see an uptick in M&A activity particularly in the middle-market fashion consumer world.

CONTACT: Janet Bartucci The Dilenschneider Group 212 992-0900

Source: Marketing Management Group, Inc.