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Do you get to wear a hoodie on Wall Street?
Posted: Wed, 16 May 2012 19:23:56 +0000
Last week, there was a heated debate in the M&A blogosphere about, of all things, Mark Zuckerberg’s iconic hoodie.
He wore the suddenly-controversial hoodie to a meeting with potential investors on Wall Street, prompting Wedbush Securities’ Michael Pachter to call him out on Bloomberg TV. “He’s actually showing investors he doesn’t care that much; he’s going to be him,” said Pachter. “He’s bringing investors in as a new constituency right now, and I think he’s got to show them the respect that they deserve because he’s asking them for their money.”
Some commentators agreed with Pachter; others mocked him. My own thought was that Zuckerberg can wear whatever he wants – but why was that my knee-jerk response? More broadly, how do we choose what to wear to the workplace, and why?
To represent your personal brand
You know that guy at work who always wears a bowtie? Or there’s an interior designer I know who always wears a button-down shirt and a skinny tie. No matter your job, we’re all in the business of selling ourselves and our skills, and creating a signature look is a part of that.
Like Steve Jobs’ trademark black turtleneck, Zuckerberg’s hoodie is part of his identity. It’s a valuable marketing tool, as it mirrors the style of the casual twenty-somethings who are Facebook’s core demographic, giving Facebook a relatable human face so that it doesn’t look like a heartless mega-corporation. It is so central to the image of Facebook and its young CEO that when one of his hoodies was revealed to be an employees-only edition, the media buzz was such that one Facebook employee was able to auction hers on eBay – hers, not Zuckerberg’s! – for a cool $2,550.
Zuckerberg was being Zuckerberg(TM), and there’s a lot of value in maintaining that identity. Unlike Pachter, I don’t think that means “he doesn’t care that much.” After all, we’re talking about a guy who wore jeans when he met the leader of the free world. (Obama’s take? “My name is Barack Obama, and I’m the guy that got Mark to wear a jacket and tie.”)
To make a good impression
We see a person’s attire before we have a chance to get to know them, so our initial judgments are based exclusively on their appearance. You may be far and away the best candidate, but if you show up to a job interview in pajamas, you’re going to be perceived as clueless, lazy, and not serious about the job. As for Zuckerberg, everyone knows who he is, so there is simply no need for him to make a good first impression.
Once we’ve got the job, we continue to dress in much the same fashion as our co-workers. Part of this is the normal human desire to be part of a group and to fit in; part of is because you do want to show that you care about your work, and respect your boss and your company.
And that’s the part of Pachter’s comment that irritated me. “He’s got to show them the respect that they deserve because he’s asking them for their money.” Well, no, he doesn’t. Zuckerberg isn’t having any trouble finding capital; they’re currently set to raise $13.6 billion in the IPO. Zuckerberg is going to walk away with at least $846 million, so he hardly has anything to prove.
So no, I don’t think Zuckerberg had any reason to depart from his normal style of attire for meetings on Wall Street. It was a culture clash, but he was staying true to his persona, and he doesn’t have any compelling reason to conform to Wall Street standards.
That being said, it’s still important to know what the dress codes and expectations are when you start interacting in a new environment. For help navigating the etiquette of a main-street banking transaction, I suggest hiring a professional financial services firm – and of course, I’d recommend Allegiance Capital. You’ll notice that we’re all wearing suits in our profile pictures – but then, we’re not Mark Zuckerberg.
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Tricks of the Trade: Getting a Premium Price for your Company, Part One
Posted: Thu, 03 May 2012 19:10:37 +0000
Small business owners are experts at running a company, but they generally don’t have a lot of experience in selling one. On the other hand, the buyer has usually done this many times before!
If you want to get a premium price and a successfully closed transaction, it’s critical to get educated about the process. At Allegiance, there are four things we make sure every seller we represent understands. Here’s the first one:
Never Tell a Buyer your “Asking Price”
Some sellers think that starting negotiations with a strong statement about their financial expectations will show they are assertive. The truth is, there is no upside to naming a figure at the beginning of this process. The reason is simple: it’s never going to be the right number. It’s always going to be either too high or too low.
A figure that’s too low turns on low-quality buyers who will try to “steal” the company. These buyers know you’ve undervalued your company, and they see that as a demonstrated lack of sophistication on your part. Additionally, they know they can negotiate an even lower number. A seller who gives a low asking price is just leaving money on the table.
A figure that’s too high turns off high-quality buyers. If the number is too high, sophisticated buyers won’t take you seriously. These buyers just walk away, usually for good – and they may have been the one who would give you the best deal. A low-quality buyer is only interested in getting the most for their money; a high-quality buyer is interested in understanding the seller’s priorities, making sure the cultures will be a good fit, and successfully closing a well-crafted transaction.
Finally, naming any number at the beginning of this process sets the maximum value you could receive. Even if your company is worth more to the right buyer, you just set an upper limit on your profits!
Selling your company is one of the biggest events in your life, and getting educated is essential to leveling the playing field between you and the prospective buyers you’ll be talking to. Talk to your financial advisors about the most successful way to approach this process. And stay tuned for our next tip: making buyers compete.
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Allegiance Capital’s David Lonsdale on the lower middle market at ACG InterGrowth 2012
Posted: Tue, 01 May 2012 20:56:14 +0000
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How to Determine My Company’s Valuation
Posted: Thu, 26 Apr 2012 19:00:57 +0000
Most of the time, privately held businesses are valued as a multiple of EBITDA (earnings before interest, taxes, depreciation and amortization.) EBITDA is used rather than net income because it more closely reflects the cash flow generated by a business, irrespective of its capital structure. Occasionally a company will be valued as a multiple of revenue, but this is usually reserved for very high growth technology companies.
The difficult part for sellers is understanding what drives the multiple. Middle market deals generally fall into a range of multiples from 3-4x on the low side to 8-10x on the high side. So why does one business sell for 4x while another goes for 8x? Here are some of the factors which drive multiples:
- Supply and Demand
Companies in attractive, high demand industries will command a higher multiple than those in more basic or out-of-favor sectors. Today, healthcare and high tech are two examples of high demand sectors which are generating very attractive multiples. The supply side also matters. If there are plenty of well managed, profitable companies on the market (i.e. oversupply), prices will generally be lower. On the flip side, if there are lots of buyers chasing too few deals, multiples will go up. - Growth
Despite the focus on the last 12 months of earnings, purchasers are buying the future. What matters to a buyer is not what your company earned last year, it’s what your company can earn in the future. Thus, businesses with high potential growth rates will sell for higher multiples than slower growth companies. - Risk
Risk plays a role in every financial decision. We all know that safer assets like U.S. Treasuries (just go along with me here, please!) have lower rates of return than high risk investments, like junk bonds. The more risk a buyer is willing to accept, the higher the return he will demand. Said another way, a buyer is going to offer less for a company he perceives as having a lot of risk.
Risk can come in many forms. It may be related to a customer concentration issue, or something like technology risk. Perhaps there is the risk of product obsolescence or the threat of new competitors. - Volatility
Volatility is closely related to risk. If a company’s earnings are highly variable (such as companies related to commodities like oil and gas production or metals) the valuation may be lower because of the unpredictable nature of earnings. This is why buyers love companies with recurring revenue streams and long-term contracts with customers, they represent predictable earnings. - Strategic Value and Synergies
A strategic buyer will often pay more for a business if they believe the combination has many synergies as well as the opportunity for cost reductions. These buyers may also bid up a deal if they wish to keep the target company from being acquired by a competitor. - Intellectual Property
Businesses with intellectual property (patents, trademarks, licenses, etc.) can be worth more to a buyer than a similar company without intellectual property. Buyers will also pay more for companies with proprietary products and processes.
While any or all of these factors can impact the value of a particular business, it is important to keep in mind that there are also intangible factors that impact value, such as cultural fit. Every situation is unique. That’s why it is so important to work with an investment banker who will take the time to understand what makes your company valuable to buyers in order to get the highest possible price.
- Supply and Demand
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Is There Life After Selling My Company?
Posted: Thu, 19 Apr 2012 18:58:28 +0000
What does an entrepreneur do after he sells? First, selling a business is not necessarily what an entrepreneur thinks it is. Sellers are often associated with the company and materially benefit as part of a re-invigorated management team. Generally you can group the outcomes into three groups, but it is actually a spectrum where a little creativity can create a best case scenario for the entrepreneur. This is a very compelling reason to hire a good M&A advisor when selling your company. Let’s take the three general alternatives in order of complexity:
- Retire to a life of leisure – pick up a hobby or you will drive your husband/wife “crazy”. The reality is, retirement is not as good as it sounds. Many entrepreneurs’ personal identity is that of the company, leaving them feeling loss or dissatisfied a year or two after they have sold.
- Do it again – Generally, a buyer will ask you to stick around as a consultant for a couple of years. Most of the work is in the first six months. Use the consulting contract as an incubation period for your next venture. Invest some of the proceeds from the sale of your old company in the new venture (I would suggest 20%, which allows for three swings at a new venture while preserving 50% of your proceeds for your retirement and heirs. This is the first step to becoming a serial entrepreneur.
- Take it to the next-level – An often unknown opportunity for the entrepreneur is to stay on as part of an expanded management team and grow the business. We recommend an entrepreneur sells a significant stake before relinquishing control. The entrepreneur should be rewarded for the value he has created, but not put his net worth at risk for new partners and management. They need to have sufficient skin in the game for the arrangement to really work. Often in a sale to a financial investor, the entrepreneur can take 80% of the value he created off the table, bring in new partners to revitalize the business, and get a “second bite” that is often close to the size of the first transaction.
The math works. Generally the first two swings, if unsuccessful, are not complete losses and will return 10% of your proceeds.
If you are considering a significant transaction, we encourage you to talk to your trusted advisors… Allegiance Capital Corporation (self promotion!), your wealth manager and/or your attorney. Know your options and have a thoughtful, fulfilling plan in place. Serial entrepreneur has a nice ring to it.
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Why Private Label Manufacturers Are an Attractive Investment Opportunity
Posted: Thu, 12 Apr 2012 08:40:14 +0000
As one might expect, consumer demand for less expensive private label products has been on the rise and retailers have responded by offering their own private label brands. Not only have food retailers seen higher demand for store brand products in the past four years, but so have department stores, electronics stores and office supply retailers. Examples of successful private label brands include: Safeway’s o-Organics, Best Buy’s Insignia and Nordstrom’s BP. However, the trend has not reached its peak. Investors should be looking out for growth opportunities in private label manufacturing.
Between late 2007 and early 2008, the time frame in which most observers believed that the “Great Recession” began in the United States, name brand products captured 79.5% of retail market share while store brand products held the remaining 20.5%. By the beginning of 2009, the market share for store brand products had risen two full percentage points – a major jump in just one year – and this new 22.5% market share for private label products has held fairly steady in the three years that followed. As The Nielsen Company said in a March 2012 report, “the not-so-Great Recession turned into a windfall for private label,” as consumers paid closer attention to the value of store brands and retailers responded.
What does this mean for potential investors? While private label producers have come a long way toward meeting the increasing demand for store brand food products, surveys show that the large majority of consumers hope that stores will widen the range and selection of private label products on their shelves – particularly in health & beauty products. Furthermore, surveys show that after consumers move to a private label brand, a large majority of those consumers plan to stick with the new brand, even when the economy improves and their spending power rises. For these reasons, my recommendation to financial and strategic buyers is to take a look at private label manufacturers… the sooner the better.
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M&A Case Study: Allegiance Capital Corp Client CEO Kevin Tupy of Z Wireless
Posted: Thu, 05 Apr 2012 18:17:01 +0000
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Allegiance Capital Corporation Facilitates Majority Recapitalization for Glunt Industries
Posted: Tue, 27 Mar 2012 19:21:23 +0000
Allegiance Capital Corporation, a Dallas-based private investment bank specializing in the lower middle market, announced today that it has facilitated a majority recapitalization for its client, Glunt Industries, with investors Merit Capital Partners and FNB Capital Corporation.
Headquartered in Warren, OH, Glunt Industries is the domestic leader in remanufacturing and servicing equipment for U.S. steel and aluminum mills. Glunt Industries will continue to be led by Dennis Glunt and, with Merit Capital as its partner, will continue to pursue its growth objectives.
“Glunt Industries represents the highest level of service to the steel and aluminum mills throughout North America,” said Christopher Parisi, Managing Director at Allegiance Capital Corporation, and specialist in the steel industry. “The largest steel and aluminum industry players depend on Glunt Industries to help them keep their facilities running at maximum capacity and efficiency. It has truly been a joy to work with Dennis Glunt and his entire management team.”
Terms of the private transaction were not disclosed.
Allegiance Capital is currently involved in several engagements in manufacturing and distribution. To view a list of current deals, visit www.AllCapCorp.com. For information on selling a business, call 214.217.7750.
About Glunt Industries, Inc.
Based in Warren, OH, Glunt Industries reconditions, rebuilds, upgrades and extends the service life of critical steel and aluminum mill equipment to exacting tolerances. The company repairs and restores virtually all of the equipment that is used in the production of steel and aluminum, and can claim the world’s largest steel and aluminum producers as its customers. For more information about Glunt Industries, visit www.glunt.com.About Allegiance Capital Corporation
Allegiance Capital Corporation is an investment bank specializing in financing and selling businesses in the middle market. Allegiance Capital Corporation was recently named third on the list of 2011 Largest Investment Banking Firms in North Texas (Dallas Business Journal). Allegiance Capital Corporation has won multiple awards recognizing the value it delivers to clients. Examples include: 2009 Dealmaker of the Year (Dallas Business Journal), 2008 Boutique Investment Bank of the Year (M&A Advisor), and 2006 Investment Bank of the Year (Dallas Business Journal). Subscribe to the Capital Ideas blog by visiting: www.allcapcorp.com/blog. Follow Allegiance Capital Corporation on LinkedIn, Facebook, and Twitter:@ALLCAP. -
Allegiance Capital Corporation is a Gold Sponsor and Speaker at the PRESIDENT&CEO 2012 FOCUS on the Middle Market Executive Conference
Posted: Tue, 27 Mar 2012 19:19:15 +0000
Allegiance Capital Corporation, a Dallas-based private investment bank specializing in the lower middle market, is sponsoring the PRESIDENT&CEO FOCUS on the Middle Market Executive Conference. The one-day event will be held Monday, May 7, 2012 at The Fairmont Chicago.
David Lonsdale, President and Managing Director of Allegiance Capital Corporation, will present Finance and Operations, “The Dislocation of the General Economy and Middle Market M&A”, at 2:15 PM on Monday, May 7, 2012. Lonsdale leverages his experience as CEO successfully running international corporations and middle market companies. He has built and sold three companies funded by venture capital, and has extensive experience managing transactions in the middle market.
The PRESIDENT&CEO FOCUS on the Middle Market Executive Conference brings subject-matter experts together with middle market C-level executives to examine the obstacles facing middle market companies and discuss solutions designed specifically to help overcome those challenges to operate more efficiently in order to achieve growth across their enterprise and compete on a global basis with companies of all sizes. Other key presentation topics include: Technology, Growth and Wealth Management.
“This conference represents a great opportunity for owners of middle market companies to get up to speed on the world of M&A” David Lonsdale, President and Managing Director of Allegiance Capital Corporation said. “The market has changed so much in the last year that it is important for owners to really understand the options that they have today.”
The PRESIDENT&CEO FOCUS on the Middle Market Executive Conference will feature expert speakers from several high level companies and organizations to include: GE Capital, Deloitte, PROS Pricing and the National Center for Middle Market. View a full conference agenda at: http://www.focusonthemiddlemarket.com/
About Allegiance Capital Corporation
Allegiance Capital Corporation is an investment bank specializing in financing and selling businesses in the middle market. Allegiance Capital Corporation was recently named third on the list of 2011 Largest Investment Banking Firms in North Texas (Dallas Business Journal). Allegiance Capital Corporation has won multiple awards recognizing the value it delivers to clients. Examples include: 2009 Dealmaker of the Year (Dallas Business Journal), 2008 Boutique Investment Bank of the Year (M&A Advisor), and 2006 Investment Bank of the Year (Dallas Business Journal). Subscribe to the Capital Ideas blog by visiting: www.allcapcorp.com/blog. Follow Allegiance Capital Corporation on LinkedIn, Facebook, and Twitter:@ALLCAP. -
Mark Dyer Joins Allegiance Capital Corporation
Posted: Tue, 27 Mar 2012 19:16:39 +0000
Allegiance Capital Corporation, one of the largest private investment banks serving the lower middle market announced that Mark Dyer has joined its New York office to serve as the Managing Director.
“Allegiance Capital Corporation is extremely pleased to have Mr. Mark Dyer, an expert in the transportation industry, join the firm,” said David J. Mahmood, Founder and Chairman of Allegiance Capital. “His background and expertise in the trucking industry will allow Allegiance Capital to work with business owners in a more effective and efficient manner. Mr. Dyer, through his understanding of the industry, its operations, its requirements and needs will help Allegiance Capital as a private investment banking firm provide its services of financing, mergers and acquisitions and other capabilities.”
Before joining Allegiance Capital Corporation, Mark led the M & A, strategic partnership and national account management initiatives with Dynamex Inc., a North American transportation company based in Dallas. Prior to that, Mark was with the travel division of American Express, leading the acquisition and strategic partnership initiatives in North America and Western Europe, and was a Presidents Club award winner. Mark has also closed a number of M & A transactions for the MyTravel Group, based out of the U.K. and owned and sold a successful chain of retail wine locations that still flourishes today.
“The decision to join Allegiance Capital was based on the way they treat their clients – with honesty, integrity and respect” Mark said. “Allegiance Capital understands the challenges involved in selling a business, as many of their investment banking professionals started, owned and sold a business or businesses themselves. This provides Allegiance Capital unique insight into developing a proven process model, plus the expertise and empathy to deliver successful results. The firm has built a solid reputation for creating exceptional value for their clients in the middle market sector, and I am very pleased to be part of the Allegiance Capital team.”
Mark Dyer will be attending both the ECA (Express Carriers Association) convention April 10-12, 2012 as well as the MCAA’s (Messenger Courier Associate of America) 25th annual meeting/ convention May 2-5, 2012.
About Allegiance Capital Corporation
Allegiance Capital Corporation is an investment bank specializing in financing and selling businesses in the middle market. Allegiance Capital Corporation was recently named third on the list of 2011 Largest Investment Banking Firms in North Texas (Dallas Business Journal). Allegiance Capital Corporation has won multiple awards recognizing the value it delivers to clients. Examples include: 2009 Dealmaker of the Year (Dallas Business Journal), 2008 Boutique Investment Bank of the Year (M&A Advisor), and 2006 Investment Bank of the Year (Dallas Business Journal). Subscribe to the Capital Ideas blog by visiting: www.allcapcorp.com/blog. Follow Allegiance Capital Corporation on LinkedIn, Facebook, and Twitter:@ALLCAP.
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