Private Company M&A Zeroes In On Certain Fields,
Says An Investment Banker.

Merger and acquisitions are intensifying among midsize companies, particularly in the packaging, office-products and aerospace-components areas, says DAK Corporate Investors, Rochelle Park, NJ, an investment banker that specializes in privately held businesses. Much of the consolidation is driven by customers desire to deal with fewer suppliers, says Alan J. Scharfstein, president. DAK, which surveyed 780 closely held firms with sales ranging from $5 million to $50 million, says those doing the buying are competitors and companies wishing to add product lines, as well as investors and merchant bankers. Nearly 30% of sellers said competition or a change in customer base was a major reason for selling. More than 40% of todays sellers are 45 to 65 years old; a decade ago, 65% of sellers were 65 or older, DAK says.

Smaller Group Takeovers Rising
By William Lewis in New York

Takeover activity is intensifying among smaller US companies driven by customer demand for a reduction in supplers, according to a new analysis. Merger and acquisition (M&A) activity is increasing, especially among companies with sales of $5m - $50m in the packaging and office product industries. The study by DAK Corporate Investors, an investment bank, also identifies defense, aerospace, contract manufacturing and printing as industries undergoing rapid consolidation by small companies. Takeover volumes are at record levels in the US but studies have indicated most activity has been among large publicly quoted companies. DAK's study indicates the M&A boom is also affecting smaller privately owned companies. This consolidation activity had been largely overlooked because most companies being acquired were too small to show up for companies tracking merger and acquisition activity, said Alan Scharfstein, DAK president. Much consolidation among smaller companies " is being driven by customer demand for supplier reduction. By buying everything from one or two sources instead of six a large company can gain significant savings". Smaller companies were being squeezed and looking for merger partners. DAK's study of 780 companies affected by M&A activity in the past year found a small number trying to become multi-plant and multi-technology groups by buying up other small companies and expanding product lines. DAK said smaller companies were being targeted by strategic buyers, including companies seeking to broaden their product lines, and financial buyers seeking investment return. In defense and aerospace, consolidation was moving from prime contractors to subcontractors.

OWNERS MAKE PLANS TO EXIT LAUGHING
Selling Strategies Help Entrepreneurs Profit,
Leave Behind Healthy Businesses
By Cara S. Tager

"When a company just shuts its doors, its because it hasn't focused on what it takes to hand it over to someone or get it ready for sale, says John Huston, an investment banker with DAK Corporate Investors Inc., an investment banking firm in Rochelle Park, NJ, that gets small businesses ready for sale. "A well thought-out exit strategy will secure the greatest value for the business owner." But pursuing such a strategy is a time-consuming effort that can distract from day-to-day operations. "Once business owners make the decision to sell, they still have to keep their foot on the accelerator and devote their energies to running the business," says Mr. Huston. Otherwise, sales can taper off, which may devalue the business or, worse yet, jeopardize its sale together.
For many small business owners, grooming a strong manager is a first step in preparing for departure. Although managers may not have the cash to buy the business outright, lack of capital usually doesn't eliminate them as potential buyers. If employees have the entrepreneurial spirit, say experts, they are generally motivated enough to get financing. "Because a manager knows the business, the owner doesn't run the risk of the business being returned to him as a skeleton of its former self," says Stephen N. Solarsh principal of the Manhattan business and real estate consulting company that bears his name "The seller wants to sell the business only once."

Putting Your Company On The Block
Edited By Amy Dunkin

In addition to guiding you, a professional advisor can help negotiate the deal - a task most entrepreneurs aren't trained to do. "People think they can negotiate alone, but its hard, and often a mistake," says Bob Weisman, vice-president for operations at Hillside (NJ)-based May Tag & Label, maker of adhesive computer labels. Because of growing competition, he sold out in October to Fortune Brands with the aid of DAK Corp., a Rochelle Park (NJ) firm that helps sell businesses.