Andrew K. Petryk started his career in accounting, but quickly became intrigued by the vibrant, unpredictable world of dealmaking.
“It’s very rewarding to be involved in transactions, particularly with family-owned companies where it might be the second or even third-generation of ownership,” says Petryk, managing director at Brown Gibbons Lang & Co. “You’re working with them to help them capitalize on the legacy of something that may have been started by their grandfather or great-grandfather.
“It’s probably the most important decision they’ve ever made professionally relating to the business, when to sell and who to sell to. Being part of that whole decision-making process and being a key driver of the outcome as an investment banker is very rewarding. “
Petryk has completed transactions throughout the Americas and Europe for family-owned, publicly traded and private equity-controlled businesses. He came to BGL in 1996 as an associate focused on M&A, capital raising and restructuring for middle-market companies.
“What intrigued me was the dynamic and fast-paced nature of the work and the fact that no two days were alike,” he says. “It’s a great profession because it is so intellectually challenging. That constant challenge is what excites a banker to get up every morning and get back out there and drive your deals forward and to find the next client.”
“I’ve seen a lot of transactions, but you learn something new and different on every one,” Petryk says. “No two companies, no two management teams are alike.”
In this week’s Master Dealmakers, Petryk shares his thoughts and observations about how best to prepare for the M&A process and maximize the result.
Take a critical look at your business
Business owners should be self-reflective of both themselves and their business. BGL has developed an assessment tool and score card that we share with business owners and then review the results with them. It can lead to some very interesting and productive dialogue. Focusing on the strengths and weaknesses of the business and how best to position the company to maximize value. Not every business is a market leader, but if you can develop a plan that shows a path to becoming a market leader, buyers and investors will show strong interest.
Many clients are initially intimidated by the M&A process. But as they continue down the path, they find that they enjoy the process and are forced to think about the business in ways they never had to before. This is a very rewarding aspect of my job.
Plan for M&A success
The companies that are most successful in M&A are generally companies that have planned for the event. What I mean by that is they have been self-reflective and developed and executed a strategy that capitalizes on strengths and mitigates weaknesses. Develop a clear path to either become a market leader, or if they already are, create barriers to entry to protect their leadership position. Showing a clear path for growth within large addressable markets will drive valuation.
It comes back to a willingness to promote change and invest. We see businesses that have been relatively flat for long periods of time. They fall in to a rut and never challenge themselves to get better or to invest in growth. While these businesses are saleable, they don’t achieve valuations of vibrant growing businesses that have invested. Investments come in many forms; people, technology, R&D, new locations and capital equipment. Challenging the paradigm and investing wisely will best position the company for growth and a higher valuation.
The growth of private equity has created a more transactional M&A environment. There are far fewer companies being passed from generation to generation. Many more businesses are taking on private equity partners or selling to large strategics and changing that ownership dynamic. This trend will likely continue as fewer children either desire, or are qualified, to run the family business. Moving from family-owned to institutionally owned can change the culture and can lead to accelerating growth.
Business owners should assemble a team of high-quality professionals to maximize valuation. A full team consists of an M&A adviser, a full-service law firm, an accounting firm and perhaps an industry consultant. Shortsightedly, many owners focus on fees rather than results. I frequently joke with potential clients that if you needed heart surgery, would you look for the cheapest cardiologist you could find? An M&A process is something you only want to do once, and it needs to be done right the first time.
The Last Word
The vast majority of buyers are buying companies to use them as platforms or to leverage into their existing business. New owners promote growth, particularly when buying a family-owned business. With new ownership, particularly if it is private equity, there’s a change in the paradigm toward making investments to accelerate growth.
Selling a company is often the most important decision owners make. The M&A process can be intimidating for business owners that have not been through it before. It requires planning, a lot of hard work and commitment. Retaining a high-quality M&A team will streamline the process and significantly increase the likelihood of success.