Mergers and Acquisitions Explained – Rick Schwartz [RR 668]

carmcapriotto · August 20, 2021

As co-founder of Schwartz Advisors, Managing Partner Rick Schwartz specializes in working with clients on strategic planning, growth, performance improvement and M&A strategy related to the motor vehicle aftermarket. Rick is a recognized leader in the aftermarket and has a critical eye for what it takes to drive value. He is the lead Schwartz Advisors partner in support of projects with private equity firms, boards of directors and management teams. Rick is a Trustee of the University of the Aftermarket Foundation and a member of the Auto Care Association Board of Directors. He is a recipient of the prestigious Northwood University Automotive Aftermarket Management Education Award. Prior to starting Schwartz Advisors, Rick held various senior level positions at Nestle, Macy’s and The Upper Deck Company. Rick received an MBA from the University of Southern California Marshall School of Business and a BA in International Relations from USC. Key Talking Points

What is going on in overall M&A – not just the aftermarket- Many of the investment bankers are reporting record deal flow. A few key factors driving the abundance of M&A deals- catch up to deals that were put on hold in 2020. Excess “dry powder” (cash)- financial buyers (private equity firms & family offices) had an abundance of capital ready to deploy last year. Potential tax changes- the change in political administrations in the U.S. has caused concern among business owners that the capital gains tax will increase substantially upon exit. Low-interest rates- easier for buyers to finance acquisitions
The aftermarket has slow steady growth- making it appealing to private equity
Business owner- opportunity to cash out and next owner could do a lot to recruit, market, and grow.
Why are some family-owned businesses selling? Timing – it is time to exit, (not related to the economy), competition, diversify personal investments and net worth, concern about changes in the tax code
How long will the current M&A activity keep up? Looks like M&A activity will remain very active through the end of this year and into early 2022, perhaps longer. Big changes in tax laws could slow down M&A, but will Congress pass big changes?
What is driving M&A in the service sector, from a buyer’s perspective? What are buyers looking for? Growth beyond simple organic growth (i.e., growth beyond same-store sales growth). Acquire businesses before competitors. Buy distribution.
No matter who is selling what preparation is necessary? Even if you are not thinking about selling, be prepared: Documentation in order: 3 years financials, 5 years is better, copies of all contracts/leases. Have your estate plan in order. Hire advisors who can help- hire a lawyer who knows how to do M&A – might not be your regular business lawyer (and don’t bring in a lawyer who might be experienced in other areas but not M&A). Talk to your CPA.

Link mentioned for AAPEX Award Nominations HERE.

Carm interview with Rick's dad, Mort Schwartz in episode 332 HERE.

Thanks to Rick Schwartz for his contribution to the aftermarket’s premier podcast.
Link to the ‘BOOKS‘ page, highlighting all books discussed in the podcast library HERE. Leaders are readers.
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