While strategics and corp dev offices are expected to be the most active acquirers in 2013, many of their deal sourcing and valuation strategies remain shrouded in mystery. How do they primarily source deals? What are the average deal multiples? Who owns the valuation models? To learn the answers to these types of questions, we conducted a survey aimed at developing a better understanding of corporate development best practices.
In addition to the survey, we hosted a panel discussion to capture the more intangible aspects of corp dev deal practices. Last Wednesday, Werner Kaufmann of BASF, Jim Young of Legrand, David Zolot of Iconix, and Brian Buchert of Church & Dwight gathered with other Axial Members to discuss their respective strategies, insights, and value-adds.
Here are a few things we learned from the panel and survey:
- The Importance of Proactive Sourcing: 69% of survey respondents indicated that their primary deal sourcing efforts were focused on pursuing targets directly, instead of through intermediaries or other channels. Both Jim Young and David Zolot echoed this sentiment by explaining the importance of personal relationships in closing successful deals.
- The Value of a Brand: David Zolot and Brian Buchert emphasized the importance of brand in their acquisition strategy. Zolot explained that Iconix only pursues very established brands — their portfolio includes Umbro, Rocawear, Ed Hardy, etc — and Buchert emphasized the importance of a brand that can dominate a market. Interestingly, only 10% of survey respondents indicated brand as the primary driver for their acquisition.
- Deal Multiples: In the survey, the majority (57%) of corporate development offices have an average deal multiple between 4x-6x EBITDA.
- North American Activity Disjointed from Europe: Jim Young, Director of Corporate Development at Legrand North America, offered unique insight into M&A activity under the umbrella of a European company. He explained that, despite the continuing distress in Europe, he is encouraged to continue activity in North America to ensure competitiveness in the market.