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.

If you’re considering hiring a middle market investment bank to either buy or sell a business, it’s important to check the firm out carefully. Successful transactions don’t just happen. To obtain the best result, transactions have to be managed carefully by seasoned professionals.

Middle market investment banks should have both domestic and international reach. That’s important for both buy and sell side transactions in M&A. On the buy side, one shouldn’t miss the chance to view every possible target in the defined geography. On the sell side, it’s important that the seller not miss another possible buyer, who might have offered better terms and more consideration, just because they’re outside of the territory that is most familiar to a particular firm. In other words, one should hire a firm that can truly cover the world. There are always opportunities if one knows how to find them.

It’s also important for middle market investment banks to have the ability to create excellent documentation. Those documents will be the first thing that the potential target or buyer will see about your company. As they say, “first impression counts!” If you take a moment to examine the documents that the prospective investment bank sent you, it’s a giant clue as to how they present their clients.

Another important element to check is the firm’s ability to structure and negotiate difficult transactions. The best way to ferret out this information is to ask about a complex transaction. Another way is to look at the firm’s “tombstones.” Are they all transactions between well-known buyers and sellers or are some of them cross-border and between companies that aren’t so obvious?

Staffing on any advisory engagement is important. How long have the principals of the firm been employed by that particular middle market investment bank? What is their experience level? What are the chances that they will leave the firm mid-transaction? There have been many cases of clients being impressed with the individual handling their project, only to find that they took a better position across town. And, understandably, the transaction stays with the firm, not the individual. As we say, buyer beware.

To summarize, check out your middle market investment bank's experience level, years in business, credentials of the staff and ability to present well.

A little due diligence goes a long way to insuring a successful transaction.

As you will see from the chart below, worldwide, middle market M&A activity has been steady for the last three years despite numerous worldwide economic ups and downs.

Given the improving economic climate and the strong fundamentals supporting M&A, we believe that M&A transactions will increase in 2014.

When hiring a boutique investment bank, it’s important to focus on three main areas:

How long has the firm been in business?

Often times, many boutique investment banks are in existence because the founder or founders are between positions at larger firms. Therefore, if the firm you are considering has been in business for less than five years, it begs the important question: Is this a part-time occupation or a serious business? Most sellers only have one company to sell, so it’s important that the advisor be serious and not in between lucrative positions. If the firm that you are considering has been in business for more than 10 or 20 years, you’re probably safe.

Who will work on the proposed transaction?

The staffing for the engagement is important. How much M&A experience do they have? How long have they been with the firm? Are they likely to leave the firm in the middle of your transaction? Experience is important as M&A transactions are never mundane. There are always twists and turns from all of the parties involved. A successful M&A transaction occurs when a series of challenges are solved fast enough to keep both buyer and seller engaged.

What are the capabilities of the boutique investment bank?

What types of deals has the firm completed to date? Do they have international capabilities, not necessarily international offices? In other words, have they completed cross-border transactions? Many firms claim to have that capability, but it’s limited to completing transactions to or from their home country. True cross border capabilities include the ability to complete transactions completely outside the firm’s home country. International capabilities are more important now than ever before. The world has gotten smaller and it’s expensive to miss opportunities just because they’re outside of your geography.

photo credit: kenteegardin

Many buyers or sellers wonder if they need a boutique investment bank versus a large full service firm. If what you need is a successful M&A transaction, you’re typically better off with a firm that derives all or most of its revenue from M&A. That means you’ll receive the best and most attention.

Typically, boutique firms are more nimble and able to react faster than larger full service firms. Therefore, they’re much better at completing middle market transactions where the number of buyers or targets is quite large. Boutiques are adept at operating in this environment. Boutiques are also good at giving the entrepreneur or corporate client that hasn’t completed a number of transactions the necessary advice to “walk” them through a complex maze of finding the right buyer or seller, presenting the transaction, helping guide due diligence, structuring a transaction that will be mutually agreeable, and negotiating a Definitive Agreement. All of these steps involve lots of intricacies that need to be managed efficiently and effectively. To conclude, for most middle market transactions a boutique investment bank will probably provide the highest level of service and the best possible outcome for either a buy or sell side assignment.

Middle market transactions are sometimes the most difficult to complete for several reasons. Many times, either the buyer or seller doesn’t have any experience in completing M&A transactions. This isn’t necessarily bad; however, they sometimes find the process confusing or frustrating. Therefore, it’s important to ask the following five questions before engaging a middle market investment bank to work on your transaction:

Who will work on the transaction?

Many middle market investment banks delegate important transactions to junior staff. Therefore, it’s important to make sure that the senior level bankers will take an active role in your transaction.

What is the “reach” of the middle market investment bank, both domestic and international?

Does the middle market investment bank have the ability to identify and contact buyers or sellers around the world? The world has gotten smaller and there are many opportunities in countries that were previously overlooked by the traditional investment bankers. That’s one of the reasons why many of the “old-line” firms are no longer in business.

What is the firm’s philosophy in terms of finding the right target or buyer?

Is the firm capable of thinking outside the box to identify unique buyers or sellers for your transaction? Too many firms have a myopic view of who the buyer or seller should be. The problem with that is that the client loses the potential to close a very lucrative transaction.

How long has the firm been in business and are they qualified?

It’s important to make sure that you’re dealing with a firm that has been in business for at least 10 to 20 years to make sure that they are capable of completing your transaction. There have been plenty of cases where the firm’s principals have jumped to a larger company and abandoned their clients. Also, is the firm registered, either directly or directly with FINRA (Financial Industry Regulatory Authority), the self-regulatory organization that oversees the industry? If the firm is registered, the principals will also be registered, which means that they have completed at least two qualifying exams, which are administered by FINRA.

Is the middle market investment bank capable of completing cross border transactions?

Given how the world has shrunk, cross border transaction capabilities are imperative. Opportunities are no longer confined to one’s home country and most of the time, the best deals are with companies on the other side of the world. Therefore, it’s important that your middle market investment bank have experience with international transactions. It’s easy to determine if they have this capability by checking out their tombstones.

In conclusion, it’s important to have a firm with well-experienced staff, credentials, experience, and longevity to make sure that your all-important transaction is completed successfully and in a reasonable time period.

Middle market investment banking provides some unique challenges for both buyer and seller.

Most importantly, the number of buyers or sellers available to do a transaction, relative to the very large deals that dominate the headlines, is huge. Many people underestimate how many possible targets or buyers there are to complete their transaction. It’s one of the reasons why an M&A advisor is even more important for a middle market transaction.

Another major distinction of middle market investment banking is that most of the entrepreneurs have never purchased or sold a business before. For many of these individuals, pursuing a transaction may be difficult to understand. M&A can be a complex maze. For example, it’s important how and when certain information is released, when and what type of Non-Disclosure Agreement is used, and how to structure a transaction that is fair to both parties.

The value of a middle market investment banking transaction is always a hot topic among both buyer and seller. Many entrepreneurs have devoted themselves to building their business so they’re not familiar with terms like EBITDA or multiples. There are many stories about this misunderstanding, for example, one entrepreneur was telling everyone that the EBITDA multiple was dictated by the company’s zip code. Nothing could be further from the truth, but this poignant comment is a clue that M&A is a highly specialized field. Another entrepreneur noted that they wanted to sell their business for x million based on his retirement needs, the necessity of paying for their grandchildren’s college educations, etc. Those were all admirable goals, but had nothing to do with the value of the business.

Negotiating a transaction is an art, not a science. To be successful, both parties, on either side of a transaction, need to focus on win-win negotiating. That usually produces the best outcome for both parties. As most middle market business owners do not have significant M&A negotiating experience, there are frequently many transactions that fail. Most of them could have had a positive outcome, but the parties did not find a solution fast enough to keep the transaction moving forward.

To summarize, middle market investment banking is different than very large company investment banking. First of all, most of the time, it’s the individuals’ own money that is at stake. Large companies have millions of shareholders and a mistake on an M&A transaction won’t carry the consequences of a bad transaction for an individual. In most cases, the success of a middle market transaction could be insured by engaging professional investment bankers who know how to navigate the complex M&A maze, can guide the negotiations, and have the requisite experience to structure a mutually acceptable transaction.

We are half way through the fourth quarter and M&A activity looks fairly normal for this time of year. Typically, there is a huge surge of transactions that are announced or closed in December of each year. Many times, there are tax considerations that are driving a closing before year end. In other cases, buyers and sellers have other objectives that they want or need to fulfill before year end.

I founded Versailles Group over 26 years ago to assist entrepreneurs and corporations close the very best M&A transactions possible. 28+ years ago, that was a concept. Today, it’s a reality. We’ve helped individuals and companies on five continents. In many cases, we’ve done multiple transactions for the same individuals or companies. The results reflect our passion for completing exceptional transactions.
The key to successful M&A is to begin exploring how a transaction might help fulfill your goals sooner rather than later so that there’s time to do it efficiently and effectively. Corporates typically pursue acquisitions or divestitures in the normal course of business and are well-acquainted with the process and possible outcomes. On the other hand, most entrepreneurs only do one or two transactions in their lifetime. For both corporates and entrepreneurs, it’s important that transactions be done well. That’s our forte!

November is an excellent time to consider your 2014 M&A goals. M&A is a very effective means of divesting an unprofitable business or divesting a business in order to diversify your portfolio. Many people wait too long before selling and find that the extra years of ownership didn’t add any value. On the buy-side, an acquisition can provide a route to new markets, provide additional product offerings, help diversify, etc.

In the third quarter, M&A activity in the US and Canada increased dramatically, exceeding both 2012 and 2011 activity levels. Europe has also seen a resurgence of M&A activity despite some very difficult economic conditions. M&A activity is also up in Asia / Pacific, Africa / Middle East and in Latin America; however, Latin America hasn’t seen as much of an increase as the other geographies.

The question that this raises is why is M&A activity increasing? There are many reasons for this, including strong fundamentals, e.g., cheap and available capital, but also the simple fact that companies find M&A to be a very attractive way to build or defend shareholder value. Clearly, it’s faster and more advantageous for a company to acquire another business, people, products, equipment, customers, etc. than to build it from scratch. That’s an opportunity for both buyer and seller.

The fourth quarter is an excellent time to begin exploring the acquisition or divestiture of a business to build or protect shareholder wealth in the coming year. I founded Versailles Group almost 27 years ago as I’m passionate about helping management and/or owners grow or divest their businesses to enhance shareholder wealth.