Transactions
Material Management Group (MMG)
Providing judgment and perspective in preemptive negotiations ...
“I know I can rely on Mertz for thorough analysis and judgment. They focus on value from both an economic and strategic perspective. The result is a higher price for the seller and greater value for the buyer.”
– Steve Anderson, President of Witech Corporation, a private equity investor in MMG
“If I had to sell MMG again, I certainly would use Mertz. They guided us through the sale process and provided us with the expertise we needed to sell to a larger corporation. In addition, Mertz's participation let Bossard know how valuable we were in meeting their strategic goals.”
– Jim Fitzpatrick, Vice President Operations of MMG, a former MMG owner
Situation
MMG provides manufacturing customers with comprehensive inventory management systems to manage a large number of “C” parts (high-volume, low-cost components of a manufactured product). Founded in 1989, MMG grew rapidly to annual sales of $26 million and approximately 100 employees at the time of the sale.
The owners of MMG were aware of consolidation in the distribution industry. Ownership also believed that MMG’s inventory management system provided a competitive advantage and was a valuable asset for combining with other distributors to form a single entity. The owners, however, did not wish to invest in acquisitions and elected to sell MMG to a party capable of, and interested in, aggressive organic growth and acquisition opportunities.
Scope of Mertz’s role
Mertz advised MMG in preparing offering materials and participating in negotiations with the buyer. Most important, Mertz helped the buyer understand the strategic value of the MMG information management system.
If a fair price could be obtained, MMG’s owners preferred a sale to Bossard, an international fastening technology distributor based in Zug, Switzerland. In the event these discussions did not go as planned, Mertz was prepared to market the business to selected strategic buyers. Mertz had offering materials, valuation perspectives, discounted cash flow projections and a customized database of industry buyers and strategic private equity groups ready.
Bossard entered into preemptive negotiations, with the understanding that full marketing would be on hold as long as discussions kept moving forward. This preemptive approach quickly resulted in a successful transaction at an attractive price. The process avoided exposing MMG to other buyers, and competitors; it also saved time and expense for buyer and seller.
The ownership accomplished their objectives and the primary shareholders remained active with MMG after the sale.
Mertz’s value add
Thorough analysis of the company’s strategic attractiveness to the buyer and effective communication of MMG’s competitive advantages justified a higher valuation for MMG. By helping MMG navigate through the dynamics of the sale process, Mertz guided the individual owners through the sale. Mertz developed valuation perspectives and marketing options, and provided the insight and negotiating leverage needed for a successful single-party transaction.