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Industrialists.
I coin the phrase 'bread-and-butter' alot in meetings. It means simplicity. Businesses that are essentially straight-forward; practical businesses which are easy to understand the real-world effect of it's operations.
Technology as a break-away industry is now old-fashioned thinking. As it develops, it will integrate more-and-more with 'bread-and-butter' companies. The most cutting-edge tech will be almost unnoticeable as it integrates further with life in general. The unnoticed will benefit the most, whilst technology on-its-own will become more and more volatile, with less reward for more risk. The markets disagree with that sentiment; but for how long?
Simplicity also means long-term for me. I like plain-looking businesses. Seemingly unglamourous, bread-and-butter operations hide P&Ls which tells a very different story. The slicker the website, the more boujie the reception room, usually the higher capital intensity and more active management approach; which typically is unattractive to us. That's a bit tongue-and-cheek, but ultimately practical opportunities in simple & time-tested business models with clear, measurable growth and targeted aims, is our guiding credo.
Finlay Sam. MD. 13/X/24
Team Profiles coming soon.
Our initial approach.
Direct and owner-to-owner is the most effective approach. We found this through years of trial and error. It is however an inevitable trade-off, that our initial contact is always out of the blue.
Ultimately we will ask for information at the front-end to see under the bonnet. It's not a guessing-game and anyone who's worth their salt in M&A will not make an offer before they are ready; with full financial disclosure and a well-rounded understanding of the firm and it's situation. The quicker the process at the front-end, covering as much as possible, the less barriers there will be in the closing stages and the more likely a deal actually transpires. This is why we ask for information and ask lots of questions as early as possible.
We will also want to set-up a face-to-face quickly too. We seek clarity from meetings. Meetings not only set the precedent for all the subsequent meetings and how the deal will likely go, but the relationship after a deal is done. To this end, they are important to us and can be very informative.
Making & Fulfilling Offers.
With the appropriate level of info, we will put out a headline figure.
We do not set arbitrary metrics for our offers. Calculations like EBIT/EBITDA are helpful benchmarks, but ultimately a two-dimensional approach on its own. Many blue-chip companies have trouble with acquisition projects because rules and protocols in place impede their ability to meet in the middle, and re-position themselves effectively as the deal evolves. The terms surrounding a deal are always more critical than the number itself.
We look at reasons for buying. One great piece of advice I had was simply - 'what are we actually buying?' Without goodwill, assets slip into becoming depreciating liabilities. Are we buying contracts, or unrealized goodwill? Are the assets valuable on their own merit, that can be easily liquidated? Is it a distress case, or are the owners looking to become ex-pats, or are there obvious new routes for the business to take? Are bad debts or personal debts attached to the business? Is there litigation at play? Does a Quality of Earnings Report show evenly-spread, diverse clients? Sometimes it doesn't matter if the company is not asset rich - a business that is scalable and not capital intensive, is usually better than an organisation which is cash poor, asset rich. Not always so straight-forward.
It is also always important to understand the reason for selling. Sometimes vendors will want a free valuation with no intention of actually proceeding. With understanding of motivations, we can put time and resources into a deal comfortably; we should never have to compensate for the other sides lack of enthusiasm. Takes two to tango.
Our offers are usually share-purchases; smaller asset-purchases are usually dealt with on subsidiary-level by management boards. We also separate acquisitions to safeguard them and Avmoric Infrastructure pertains to our M&A activity only.
Numbers are essentially a stress-test for a deal, but to find real-terms risks, you need to look at the situation practically. Owners can sometimes be delusional to put it bluntly (although not often) but usually folk understand that there is a point where a company cannot tolerate a certain level of debt. Creating offers can become quite complicated and extravagant; but ultimately there is no magic money, it all has to be paid for.
Deals can become second-rate when trying to be too scientific about it; going with your gut is fine so long as it is not contradicted, but supported by key financials and with full-disclosure. Valuations are rather subjective but that can fall into a box of objectives and with clear reasoning to back-up our decisions. We take our time to conduct a forensic sensitivity analysis - but we are not held-back by data from making a decision. Autonomy allows for effective decision-making.
COMPLETION: Day-1.
Partnerships are standard. We want to work with the people we do deals with; often it's a covenant from banks/financiers. This is what often bridges the gap between a frank and sometimes tentative negotiation and forming long-term, cordial and conciliant relationships after a deal is struck. Ultimately we want to work with companies and add-value to make our participation worthwhile. How? What could this look like?
- Targets are key. Joining a company with fresh-eyes allows us to quickly identify new routes for the business. What gets measured, gets achieved.
- People. Folk pay lip service to 'people first'; often this is bullshit. Without recruitment solutions, industry will decline and ultimately die inside-out; this is an example where being spread industry-wide can be advantageous. Broadening employment opportunities - people want to feel they have options; especially as someone develops as a professional, opportunities should open-up to them.
- First 100 day roadmap: working with owner/managers in advanced stages of a deal on simple changes and system updates, taking away complexity and overheads, implementing helpful synergies.
- Not to touch anything unless certain of improvement.
- Cash-reserves. We are very comfortable in not receiving dividends in the interim for the sake in long-term profitability. There are plenty of mercenaries who will carve-out cash, strip-and-burn, buy-and-flip. The whole philosophy of bread-and-butter is long-term investment.
Non-disclosure. We protect new acquisitions by keeping quiet. It's business as usual. Changes are devised as a deal progresses to final stages in concert with the owner as mentioned. We have sophisticated systems that allow businesses we buy to remain lean and nimble, but afforded all the advantages of a multi-national conglomerate. But the business will keep it's heart and soul. We are respectful about brands and company culture. We are protective about customer-base & staff; this is why we don't publicly announce acquisitions.
The Firm.
We are a limber firm with an outstanding track-record. Avmoric is independent and well-connected, with a variety of ongoing affairs; organic growth, business development, acquisition projects, start-ups and joint-ventures. It's the central nervous system of our group.
Avmoric is considered and reflective, but does not stand-still. It's taken years to build up our team, who reflect our values and priorities. They are trusted and respected, hence we do not delegate negotiations to external advisors. Discussions are always director-led, relationship-led - everything in-house.
Avmoric is neither old nor young. Tradition meets new-thinking, experience with new horizons, and continual pivoting &
re-establishment - never stasis. Action is deliberate and swift; but thought slow and dispassionate. We know what we want, what works best for us and what is within scope.
Contact~
Industry-wide:
Good businesses all have fundamental principles and similarities. You'll find we have numerous active targets in several different industrial sectors; but often they compliment and feed into each other.
Avmoric Infrastructure Ltd. SC717316.
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