UHY Advisors M&A Strategies in the Current Market June 5, 2020 A commitment to deliver superior client service anywhere you need us. Private & Confidential
Introduction The UHY Team Corey Massella Jeremy Falendysz Brandon Beauregard Managing Director Director Senior Analyst Private and Confidential 2
Introduction The “New Normal” ▪ COVID-19 has upended traditional business models, requiring lean personnel teams and efficient remote working conditions to navigate this crisis. Stress levels remain high as businesses begin navigating the complexities of a “new normal” ▪ Now more than ever, owners should complete a self-analysis of themselves and their businesses. It’s just as important for owners to understand their own decision making. Standing at the top means the most responsibility, and is often an lonely position. Ask yourself these key questions: ▪ Are you in survival mode? ▪ High stress scenarios can cause tunnel vision and thoughts revolving around urgent needs now, rather than thinking long-term ▪ Is your ability to make decisions clouded? ▪ Often a business is your baby and, for most, a vital part of your net worth ▪ Business is personal , as it supports your life, kids, and family Private and Confidential 3
Introduction The “New Normal” ▪ Maslow’s Hierarchy of Needs refers to the classes of desires people face, from the simplistic need for security and health to the complexity of creativity and innovation. Owners need to analyze their current state and affirm all their underlying needs are met before considering their business’ direction ▪ Once you have determined your base needs are met, you can begin to analyze your business with an open mind. Here are some of the questions this presentation can help answer: ▪ Should you pour more money into your business to help it outlast this crisis? ▪ Are you mentally and emotionally prepared to continue your business? Or are you tired and looking to exit? ▪ Are there opportunities out there? What options are available? ▪ Based on past experience in the auto industry, strong companies with viable business models can find opportunities, consolidations and available talent ▪ Before you make these decisions, you should evaluate your Business Viability Private and Confidential 4
How can I evaluate my business foundation for the future? What is my competition up to? When should I ask an expert? Can I really expect to sell my company in a market like this? What is the value impact to auto suppliers due to the recent pandemic? Is acquisition financing available to fund a corporate acquisition today? What are the next steps in considering either a sale or acquisition? Private and Confidential 5
Evaluating Your Business Foundation for the Future Assessing Your Business Foundation ▪ Before buying a home, you would have a home inspection completed to ensure there are no underlying issues that could impact the purchase ▪ If someone was to buy your business, would they find it has a strong foundation? Private and Confidential 6
Evaluating Your Business Foundation for the Future Assessing Your Business Foundation ▪ Evaluating your business for the future starts with understanding the pillars of your success, and using that information to make vital decisions to generate the best outcome. As such, it is vital for business owners at all levels to assess their business viability, competitive analysis, income and M&A strategy ▪ All of these are highly subjective and dependent upon the auto sub-sector you serve. It also allows owners to reflect on their strengths and weaknesses in the market, as opposed to those of their auto peers Private and Confidential 7
Evaluating Your Business Foundation for the Future What is Business Viability? ▪ Business Viability is the likelihood of a business’ success and ability to deliver business objectives (i.e. generating wealth) ▪ Business viability is often assessed through what is known as the Pillars of Business Viability Model, a benchmark framework to identify components and decisions necessary for a business to survive and thrive in their industry market. The model breaks down into 6 core pillars of viability: Private and Confidential 8
Evaluating Your Business Foundation for the Future Market and Technical Viability ▪ Market Viability is the measurable market demand or receptivity to the automotive products and services you provide to your respective auto customers. Certain data can often be obtained from outside market analysts, if it is not readily available Consider: ▪ Market environment (e.g. size, sustainability, target market) ▪ Competitors ▪ Similar auto peers / product offerings / service offerings ▪ Pricing ▪ Technical Viability is the ability of your business to deliver your primary products and services. It is important to consider both the tangible and intangible attributes you deliver Consider: ▪ Range of products and services provided ▪ Availability and quality of products and services provided ▪ Geographies served vs. location of target auto customers Private and Confidential 9
Evaluating Your Business Foundation for the Future Business Model and Management Model Viability ▪ Business Model Viability refers to the actual business in terms of the way you deliver products and services to your target market. It is important to analyze the vulnerabilities of your service offerings and identify what makes them unique Consider: ▪ Uniqueness of the model in terms of competitive advantages ▪ Ability of competitors to replicate your product and service offerings ▪ Ability to model and adjust to others with minimal effort ▪ Ability to generate wealth ▪ Management Model Viability deals with the day-to-day management of the business and employees and how efficient the process is Consider: ▪ Identification of key professionals ▪ Employee recruitment and retention ▪ Management of intellectual property ▪ Suitable organization structure Private and Confidential 10
Evaluating Your Business Foundation for the Future Economic and Exit Strategy Viability ▪ Economic and Financial Viability addresses the direct and indirect costs of the business to assess its profitability Consider: ▪ Overhead and cost model as compared to peers ▪ Risks ▪ Break-even point ▪ Ability to generate economic value ▪ Exit Strategy Viability is an important part of both understanding the current value of your business and how this may fluctuate in the future, and can pinpoint important details to address Consider how to: ▪ Maximize wealth upon exit (and what you can do TODAY to impact exit value LATER) ▪ Identify potential buyers, investors/partners, and/or strategies ▪ Create capital assets ▪ Plan your ultimate exit strategy (it is NEVER TOO EARLY to begin this exercise!) Private and Confidential 11
How can I evaluate my business foundation for the future? What is my competition up to? When should I ask an expert? Can I really expect to sell my company in a market like this? What is the value impact to auto suppliers due to the recent pandemic? Is acquisition financing available to fund a corporate acquisition today? What are the next steps in considering either a sale or acquisition? Private and Confidential 12
What is my competition up to? ▪ Now that your business has been analyzed to understand its strengths and weaknesses , it’s important to do the same for your auto peers / competitors ▪ Good business owners recognize where their competition excels and falls short in order to identify strategies to promote their own ▪ This process is known as Competitive Analysis Private and Confidential 13
What is my competition up to? Questions to ask yourself ▪ Who are my current competitors in the auto supply value chain? ▪ Market share? ▪ Success rate? ▪ In what market(s) are my current competitors? ▪ Niche? ▪ Mass production? ▪ Customer type? ▪ Are my competitors growing or scaling back? ▪ Why? ▪ How does this effect my business? ▪ How is my company distinguished from my competitors? ▪ Competitor weaknesses to dominate? ▪ Competitors strengths to overcome? ▪ What will I do if my competitors drop out? ▪ How will you take advantage? ▪ What will change about your business model? ▪ Who will take their place? ▪ Who would be a good partner? ▪ Other businesses to acquire as add-ons for my existing customers? ▪ Which companies complement my services? Vice versa? Private and Confidential 14
How can I evaluate my business foundation for the future? What is my competition up to? When should I ask an expert? Can I really expect to sell my company in a market like this? What is the value impact to auto suppliers due to the recent pandemic? Is acquisition financing available to fund a corporate acquisition today? What are the next steps in considering either a sale or acquisition? Private and Confidential 15
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