When a business owner is considering the possible sale of their company, one of the first questions he or she is probably going to ask is who wants to buy it?

There are typically two types of possible buyers in an M&A transaction. The first type of buyer is financial sponsors usually called private equity firms. These firms look to make acquisitions as financial investments. The second type of buyer is strategic buyers who look to make an acquisition of a business that is a potential fit into their current operations or enables them to achieve strategic goals.

The financial buyers generally are more concerned with the valuation and risk of an acquisition compared to strategic buyers. The financial buyers care much more about the target company’s current and projected financials and are generally in constant contact with financial advisers and intermediaries looking for possible acquisition candidates to pursue. By definition, financial buyers are very value conscious.

Strategic buyers are generally looking for companies that can fit into their own operations and, other than the obvious candidates, can be more difficult to identify. Strategic buyers or just “strategics” usually are competitors, suppliers or other companies that operate in the seller’s industry or related industries. The advantage of these types of buyers is that they tend to operate a similar a business so it may be easier for them to understand the seller’s operations, motives for selling, and possible risks.

Depending on an owner’s motives for selling and his or her desire for involvement post-closing, either type of buyer may be appropriate. Having an experienced M&A adviser to identify, contact, negotiate, and structure a transaction with these buyers is essential in order to ensure the most value for the business and the best terms to make sure that the owner is properly compensated and, if wanted, a desirable role with the company after the acquisition is complete.

As the chart below shows, M&A activity has expanded rather dramatically over the last five years. We expect this trend to continue, but not forever!

Are you prepared for the next bear market?

We all know that the world’s economies are cyclical. The current bull market has been going for about 5.5 years versus an average of 4 years. Given this simple fact, it’s important to focus on your M&A goals and strategies. To be clear, we do not believe that the next bear market is imminent. We do; however, believe in being ahead of the curve.
Now is a good time to start a transaction that will either close by year-end or early next year. Too many entrepreneurs and companies procrastinate only to find it’s too late to maximize value or miss valuable opportunities. The question is, given the current strength of the M&A market, why wait to pursue a transaction?

The chart below shows the first six months of M&A activity for both 2013 and 2014. In all geographies, the volume, year over year, has increased.

The gradual improvement in the world’s economies is driving this increase in M&A activity and pushing multiples up. For example, across all industry sectors, the Enterprise Value to Revenues multiple, has increased from 1.17x in 2012 to 1.26x in 2013 to 1.50x in 2014.

Versailles Group is pleased to announce that it was awarded the Financial Adviser of the Year Award for the sale of Photon Technology International Inc. to Horiba Ltd.

Here is the link to the actual Press Release from Yahoo Finance.

The text of the Press Release is listed below for your convenience.

BOSTON, July 15, 2014 — Versailles Group, Ltd. (www.versaillesgroup.com) announced today that it was awarded the Financial Adviser of the Year Award for the sale of Photon Technology International Inc. (www.pti-nj.com), to Horiba Ltd. (www.horiba.com) (TSE:6856). Versailles Group acted as the exclusive financial advisor to Photon Technology International Inc. Terms were not disclosed. The transaction closed on Feb. 10.
The award was granted by UK-based AI Global Media, Acquisition International Magazine and DealFlow Source. Voted for by a global network of expert M&A professionals, advisers, clients, peers, and industry insiders, the award celebrates excellence in all areas of M&A.

The winner of this award was determined by three factors. First, voting forms were distributed to Acquisition International Magazine’s dedicated base of 53,000+ subscribers and over 150,000 individuals in its in-house database. Second, Acquisition International does substantial in-house research. Third, Acquisition International asks nominees to supply supporting documentation which they feel may cement their nominations. All of this information is used to make a determination as to which firm will receive the Financial Adviser of the Year Award.

About Versailles Group
Versailles Group, a 27-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures, advised Photon Technology International Inc.’s shareholders on the transaction. Versailles Group works with companies in the U.S., Europe, Canada, Asia, and South America.

About Acquisition International Magazine
Acquisition International is a monthly magazine published by AI Global Media Ltd., a publishing house that specializes in corporate finance news and reporting. AI works alongside leading industry analysts to ensure it publishes the most up to date figures and analysis. Acquisition International has a global circulation, which brings together all parties involved in deal making. In an increasingly global deal market Acquisition International Magazine is uniquely positioned to reach the deal makers that matter.

Worldwide M&A activity is continuing at a rapid pace this year for a number of reasons including the availability of credit, the robust liquidity of large companies and private equity firms, and the continued improvement in the economy.

By sector, Financials, Healthcare, and Consumer Discretionary transactions accounted for over half of the M&A transaction value. If one examines M&A transactions by the number of transactions, 66 percent of the transactions were completed in the Financial, Consumer Discretionary, and Industrials sectors.

The following pie chart and table show M&A activity by sector.

M&A activity was very strong in Q1; in fact, the M&A market this past quarter was more active than any quarter in the last several years. April and May continued this trend with a high level of activity in terms of both deal value and the number of transactions.

This heightened activity is driving multiples up as depicted in the chart below, which shows the percentage increase in TEV/Revenue multiples by industry from the last 12 months to the last 90 days.

Why do deal multiples matter? If you’re a seller, you’ll receive more value for your company. If you’re a buyer, you’ll end up paying more. Therefore, it’s an opportune time for sellers to put their company on the market. Similarly, buyers should consider a transaction before the multiples increase further.

M&A activity in the first quarter of 2014 was quite strong. The value of transactions announced in the first quarter exceeded both 2012's and 2013’s first quarter. The value of announced transactions in the first quarter of 2014 also exceeded the last quarter of 2013, which is very dramatic as the fourth quarter is usually the busiest quarter of the year for M&A.

They say that April showers bring May flowers. M&A is similar! Devising a strategy and working hard to insure the proper execution always results in a superior transaction. I’ve been doing M&A for over 30 years and have helped a large number of corporations and entrepreneurs achieve excellent results whether they are buying or selling a business. One of the key ingredients is careful thought to insure that the strategy and tactics will achieve the desired result.

With regard to building shareholder value, business owners and companies frequently ask themselves:

Is this the best time to sell my company or a part of my company?

Is this the best time to buy a company or part of a company?

The charts below demonstrate from both a value perspective and the number of M&A transactions announced that now is the time to pursue these strategies.

The dramatic run-up of both deal value and number of transactions announced in Q1 2014 versus Q1 2013 is very evident, despite the fact there are still 15 working days left in March.

Versailles Group is pleased to announce that Photon Technology International Inc., an electro-optical systems and components manufacturer with offices in the U.S., Canada, U.K., and Germany, has been sold to Horiba Ltd., a world leader in analytical and measurement systems that is headquartered in Kyoto, Japan. Versailles Group represented Photon Technology International.

The text of the Press Release is listed below for your convenience.

BOSTON, Feb. 12, 2014 -- Versailles Group, Ltd. (www.versaillesgroup.com) announced today that Photon Technology International Inc. (www.pti-nj.com), with operations in the U.S., Canada, Germany, and U.K., has been acquired by Horiba Ltd. (www.horiba.com) (TSE:6856). Versailles Group acted as exclusive financial advisor to Photon Technology International Inc. Terms were not disclosed. The transaction closed on Feb. 10.

Versailles Group, a 27-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures, advised Photon Technology International Inc.'s shareholders on the transaction. Versailles Group works with companies in the U.S., Europe, Canada, Asia, and South America.

Founded in 1983, Photon Technology International Inc. ("PTI") is a leader in electro-optical systems and components technology. The company's light based systems are used in laboratories for research, healthcare, industrial processes, quality control, biomedical, environmental science, and many other applications. PTI pioneered a line of proprietary and / or patented optical building blocks which form the basis of all light-based instrumentation. The company sells these building blocks as standalone units and uses these building blocks to develop its open architecture fluorescence systems. PTI is the world leader in microscopy based fluorometers, especially for ion imaging, in part due to a long-standing research and development collaboration with a prestigious laboratory in the Faculty of Medicine and Dentistry of the University of Western Ontario in Ontario, Canada.

"The acquisition of PTI fulfilled the primary shareholders' desire for a liquidity event. It also provides a path for the majority owner to retire in the next few years" said Donald Grava, Versailles Group's founder and president. By utilizing Versailles Group's worldwide approach to finding the right buyer, PTI was sold to Japan-based Horiba. This will enable PTI the ability to sell its products via Horiba's worldwide sales organization. Furthermore, it provides Horiba access to PTI's fluorescence spectroscopy products, and PTI's low cost production capabilities in Canada.

Headquartered in Kyoto, Japan, Horiba Ltd. is the world leader in analytical and measurement systems in the fields of engine emissions, scientific analysis, industrial and process control, environment monitoring, semi-conductor process control, healthcare, and biotechnology. Founded in 1945, Horiba is a global company that has offices in Asia, Europe, North America, and South America. The company is publically traded on the Tokyo Stock Exchange and has annual revenues of approximately ¥118 billion.

There are many misconceptions about international mergers, acquisitions, and divestitures.

The five biggest myths are:

That cross border transactions are not worth the effort.

Cross border transactions can be very productive and profitable whether you’re on the buy or sell side – depending on the opportunity. Many companies like to expand into new markets and do well; for example, Illinois Tool Works, the multi-billion dollar US company has made over 30 acquisitions in Brazil alone. Obviously, they have the vision and resources to complete these deals and would have stopped long ago if they were unprofitable.

That foreign buyers always pay more when acquiring a company.

Foreign buyers sometimes pay more for an acquisition in a different country to buy their way into a market. But, that’s not always the case. Many foreign buyers are careful buyers and only pay for value.

That a cross border transactions will take an impossibly long time.

Cross border transactions can take extra time as sometimes due diligence will be slowed down by the need to translate documents, to obtain the necessary approvals, understand local customs, etc. However, for an organized buyer these extra steps only add a modest amount of time, not the unreasonably long time that many envision.

That foreign buyers or sellers are impossible to work with.

Many people believe that foreign buyers or sellers are difficult to work with. There is absolutely no truth to that. People are people and that’s the same around the world. The percentage of people that are difficult to work with is probably the same in every country. That’s a simple fact of life. And, many foreigners doing international mergers and acquisitions are actually a pleasure to work with.

That foreign sellers always try to cheat the buyers.

Foreign sellers, despite some beliefs to the contrary, are not out to cheat the buyers of their companies. Many countries use different accounting conventions, which do not mean the accounting data has been “cooked.” Frequently, buyers think that whatever is happening in the transaction is directed towards them. Most of the time, it’s just that the buyer doesn’t understand the local customs.

As with any transaction, foreign or domestic, the key to success is thorough due diligence.