Apparel textile-webinar

Company Sell‐Side Strategies Apparel and Textile WebinarApparel and Textile Webinar

June 9, 2010

Teleconferencing: (888) 858-6021 / Participant code: 4987578731

S C S G & CQ S O S O O G C C SO S C O

Marc Federbush, CPA Chair of Anchin’s Apparel, Textile, Diamond & Jewelry Services Marc Federbush is an accounting and audit partner at Anchin, Block & Anchin with over 20 years of experience. As chair of the firm’s Apparel, Textile, Diamond &over 20 years of experience. As chair of the firm s Apparel, Textile, Diamond & Jewelry Services Group he provides accounting, business, and financial services to companies in the industry. His clients range from aggressive, growing companies to well-established companies. His knowledge of the business, accounting and tax practices of the industry makes him a sought after resource. Marc has assisted many clients in business planning and analysis, mergers and acquisitions, and sales of companies. He routinely consults to businesses and their owners, advises individuals and businesses on federal and state tax matters, and works with individuals and their advisors on estate planning matters. He has directed due diligence services in connection with the acquisition of manufacturers and distributors and formulated the related tax strategies Marc is a member of theand distributors and formulated the related tax strategies. Marc is a member of the American Institute of Certified Public Accountants (AICPA) and the New York State Society of Certified Public Accountants (NYSSCPA). Marc is Series 7, 24, and 66 FINRA registered. [email protected]


@

S l Li hit CPA

Key Anchin Capital Advisors LLC Team Members:

Sol Lipshitz, CPAExecutive Director of Anchin Capital Sol is a partner Anchin, Block & Anchin LLP and the Executive Director of Anchin Capital. Sol has more than 25 years of experience and has been i l d i h 100 M&A i Th h hi S l hinvolved in more than 100 M&A transactions. Throughout his career, Sol hasassisted clients through the intricate transaction process of either buying another business or selling all or part of their existing business. In many instances, he has assisted clients through multiple mergers and/or acquisitions. He takes an in-depth look at the "big picture" of the transaction, not only from a financial point of view but from an operational andnot only from a financial point of view, but from an operational andmanagement point of view, as well. He knows that in the case of a merger, not only must the numbers work, but the management philosophy, style and method of the operations must match as well. A recognized leader in the merger and acquisition field, Sol has addressed numerous bankers, attorneys, and business and professional organizations on issues affecting mergers andp g g gacquisitions, including company strategies and shareholder and family relationships. Sol is Series 7 and 66 FINRA registered. [email protected]



Kuldeepak (KD) Acharya, CPA Senior Director of Anchin Capital Kuldeepak (KD) Acharya, CPA, is an accounting and audit partner at Anchin, Block & Anchin LLP and a Senior Director in charge of Due Diligence at AnchinBlock & Anchin LLP and a Senior Director in charge of Due Diligence at AnchinCapital. He advises clients on a wide range of industries including manufacturing & distribution, construction, apparel & textile, and entertainment & advertising. KD has been involved with some of Anchin Capital’s largest mergers and acquisitions transactions. He is also a member of the American Institute of Certified Public Accountants (AICPA). In addition to English, KD is fluent in Hindi and Gujarati. KD is Series 7 and 66 FINRA registered. [email protected]


Mi h l L hi k MBA


Michael Luchinsky, MBASenior Director of Anchin Capital Prior to joining Anchin Capital Advisors, Michael Luchinsky was instrumental in raising over $100 million in private equity to help fund a startup company’s t t i bj ti t i i l b ll i th b i /fi i lstrategic objective to acquire companies globally in the business/financial

services industries. Prior to this engagement, Michael managed the international M&A department for a Fortune 500 company and was involved in numerous cross-border transactions. Michael has the knowledge and expertise to assist companies through the entire M&A process, from assessing the goals and needs of a client to advising his clients after the deal is closed His 15-and needs of a client to advising his clients after the deal is closed. His 15-year track record spans over 100 merger and acquisition transactions in both domestic and international markets and covers a wide range of investment banking and M&A advisory services. Michael is Series 7 and 66 FINRA registered. [email protected]


A. Industry overview and reasons to consider a sale:

1. Cash Out on Value

2 Difficulty in Obtaining Appropriate Financing2. Difficulty in Obtaining Appropriate Financing

3. Inability to Attract Investment Capital to Grow

4. No Family Succession

5. Size of Business Matters


1. Cash Out on Value

a. Strategic buyer interest b. Brand, customers, talent pool, diversify product

categorycategory

2. Financing Issues a. Banks/Factors have tightened lending formulas


3. Investment Capital

a. Difficult to obtain for apparel & textile industry (volatility)

b Give up substantial ownershipb. Give up substantial ownership

4. Family Succession

a. Tough industry b. Risk value of business


5. Size of Business Matters a. Size of business is important to be competitive

b. Need to grow to have better chance for success c Retailer consolidation and their relationship withc. Retailer consolidation and their relationship with

vendors


B. Mechanisms for Selling Your Company:

1. Hire an Investment Banker

2. Do Your own Active Search

3 Going it Alone Vs Using a Professional3. Going it Alone Vs. Using a Professional

4. Conduct Passive Search: Get the word out




a. Position companies for a sale b Fi d t ti l bb. Find potential buyersc. Design and implement a very specific strategy to meet

owners’ objectives


2. Do Your Own Active Search2. Do Your Own Active Search a. Conduct your own research to find potential buyers b Search cond cted conc rrentl ith r nning theb. Search conducted concurrently with running the

business c. Negotiate with potential buyers


3 Going it alone Vs using a professional3. Going it alone Vs. using a professional

Buyers on their own 2%

With a rookie broker 2%

Experienced broker 5%

Intermediary 17%

Intermediary 17%

Exceptional intermediaries 50%

Investment Banker +90%

Source: Burbank Group


Going it alone Vs using a professional (continued)Going it alone Vs. using a professional (continued)

a. Experience negotiating deals b C fb. Cost of engagementc. Opportunity cost of going it alone


4. Conduct Passive Search: Get the word out4. Conduct Passive Search: Get the word out a. Let your bankers, accountants whomever else you

deal with know that your company is for saledeal with know that your company is for saleb. Functional issues of making a deal work c. Effectiveness


C. Requirements for a successful transaction:

1. Commitment to Process

2. Realistic Goals

3 Cleanup Balance Sheet and Income Statement3. Cleanup Balance Sheet and Income Statement

4. Identify Deal Issues in Advance

5. Buyer Integration Issues


1. Commitment to process

a. Internal and external team b. All owners on board

2. Realistic goals

a. Timetable b. Price range of valuation c Tax impactc. Tax impact


3. Cleanup balance sheet and income statement

a. Presentation b. Non‐performing divisions, brands c. Bad assets evaluation

4. Identify deal issues in advancey

a. Customers b Employeesb. Employees c. Legal d. Financial Reporting


5. Buyer integration issues

a. Financial

b. Operational

c. Human Resources


D. How to position your company for sale:

1. Planning 2. Positioning 3. Family/Ownership Issues4. Minority/Majority 5 Operations5. Operations


1. Planning a. Develop process b. Discuss objectivesc. Timing


2. Positioning

a. Improve reporting and financials b. Restructure operations if needed c. Determine best type of buyer d. Clean up legal issues, if possible e Get consensus on commitment from ownerse. Get consensus on commitment from ownersf. Line up key executives support g. Determine costs that are not true business costs h D fi l f b ih. Define value of business


3. Family/Ownership Issues

a. Consensus exists b. Talented versus not talented employees c. No excess baggage d. Estate / family planning


4. Minority/Majority

a. What are objectives b. Sale of majority

1) Loss of control (but may not be so bad) 2) Maintain % for future growth 3) Only way to make a deal4) Ability to grow with less risk 5) Keep younger generation employed 6) Favored by private equity6) Favored by private equity


4. Minority/Majority c. Sale of minority

a. Maintain control but not as it seemsb. Provides initial liquidity event c. Get a partner to support growth d Need to find right partner interestedd. Need to find right partner interestede. Future sale controlled by minority owner


5. Operations

a. Clean up b. Zero based budgeting analysisg g yc. Eliminate divisions / products that are drag on

profits


Questions?Questions?

This presentation is not an offer to sell securities or any other services.


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