A Buyer’s Viewpoint

Posted on July 19, 2016

Source: Milwaikee Journal Sentinel

Written By: Steve Jagler

David Westgate is going shopping this summer — not for new flip-flops, Hawaiian shirts, deck furniture or even glasses with little umbrellas. Westgate is scouring the market to buy a manufacturing company, preferably one based in Wisconsin.

Westgate is partnering on this venture with Saw Mill Capital of Briarcliff Manor, N.Y., and Falcon Investment Advisors of Boston.

The trio has a proven track record. Saw Mill acquired Milwaukee-based Jason Inc. in 2000 and hired Westgate to be Jason’s chief executive officer in 2004. Falcon brought additional investments to Jason in 2010. By the time the private equity firms sold Jason in 2014, it had become a thriving, diversified global manufacturing company.

Now they want to do it again. Westgate, a Michigan native, left Jason after the company was sold, but he still lives in Elm Grove.

Westgate, Saw Mill and Falcon are trying to identify a manufacturer with annual revenues of $400 million to $1 billion that has underachieved, has a promising “up side” and could be poised to grow with new management, strategy and capital.

“What I’m looking for is another Jason,” Westgate said. “I have a very strong preference for a Wisconsin company.”

Why Wisconsin?

“The work ethic of the people. The Midwestern values. That sense of accountability that people have. What you see is what you get,” Westgate said.

So, what can a company owner do to make a firm more attractive to a financial or strategic buyer? I asked Westgate to provide his advice for C-Level executives eager to make their company more attractive acquisition targets.

Have A Compelling Business Strategy

“Historical financial and growth metrics are great, but that is already done. What steps are required to position your company as the leader in its space? Do you have technical, product or leadership gaps? Do you have the right footprint and operational excellence to serve the market?

“If you are thinking of exiting your business in three to five years, what will make it a hot property for strategic or financial acquirers?”

Have A Strong Leadership Team And Systems In Place

“Investors are buying into the management team as much as the business itself. Is your current team capable of executing the strategy in addition to their day job? If you have difficult personnel decisions to make, now is the time.

“Invest in a strong leadership team that is not based upon any one individual. Have robust business systems that operate without personalities and are metric-driven, not opinion-based. Track the metrics that are key to the success of the business and demonstrate improvements.”

Have A Culture Of Continuous Improvement

“Create a culture throughout the organization of shared values, beliefs and vision. Ensure ALL employees embrace it. It is the glue that holds the organization together.”

See Yourself As Your Customers Do

“How important are you to your customers? Do you have a unique edge in technology, service or relationships that creates ‘stickiness?’ Are you truly the best-in-class supplier? Look at yourself through your customers’ eyes and create a balanced score card.”

Know Your Markets

“Position yourself to participate in growing markets, if possible. If you are in a cyclical market, know where you are in the cycle and adjust accordingly. Time investments to achieve maximum results in cycle.”

Achieve Growth

“Demonstrate multiple avenues to grow. Whether the growth comes from greater (market) share with existing clients, new clients, new products, new geographies or acquisitions … the single biggest value driver in a business is predictable, profitable growth.”

Demonstrate Strong Financial Performance

“Make your numbers! Improvements in top and bottom line on a year-over-year basis are essential to maximize value.

“A track record of doing what you say you will do instills a buyer’s confidence in the future projections. Like it or not, the financials are the score card which we are all judged against.”

Show Your Passion

“Last, but not least: Show excitement and passion for all aspects of your business. It tends to be contagious. If you are not passionate and do not love your business, why would an investor?”

Actually, Westgate has one more final thought. When he walks the factory floor of a prospective acquisition target, he closely watches how the staff reacts to the CEO who’s leading the tour. He looks into their eyes: Do they know who the CEO is? Do they make eye contact with him or her? Do they seem engaged and empowered? Do they seem fearful or resentful? Do they seem happy?

The wrong answer to any of those questions would pose a red flag to Westgate and his partners. So, treat your people like you would like to be treated.

Steve Jagler is the business editor of the Milwaukee Journal Sentinel. for more click here 

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