Chicago — Some issues currently coming up in mergers and acquisitions are very familiar: Does your company operate in a "recession-proof" field? What does your balance sheet look like? Who are your customers?
But if you're trying to sell your company these days, don't be surprised if possible buyers have some new questions.
"One of the first questions we ask now is how do the tariffs affect you?" Jeremy Stone, a managing director with Sun Capital, said at the Plastics Financial Summit Oct. 24 in Chicago. "We don't know how everything is going to play out, but there is some uncertainty [regarding trade changes] that for sure is impacting our investment decisions."
At Sun Capital, Stone has led the private equity group's investments in a variety of plastics and chemical acquisitions, including the creation of packaging firm Coveris Holdings SA.
Trade issues can impact the supply chain as well as global sales, so they can play a part acquirers weren't looking at just a year ago.
And trade isn't the only issue coming out of Washington recently that may play a part in business decisions. The tax reform bill passed in late 2017 brought with it 573 changes to the tax code, Dan Rahill, a tax partner with tax advising group BDO, said.
"This tax bill gained momentum and changed dramatically over a 50-day period," Rahill said. "Fifty days is an incredibly short period of time."
None of those changes, though, is expected to slow the pace of M&A by much at this point, barring any unforeseen economic hiccups. There is plenty of money in private equity looking for the right strategic opportunities and companies looking at a what moves they should make as one generation hands off ownership to another.
"Some names have changed ... but overall, on a net basis, I think there are more people chasing the same companies," Stone said.
In addition to private equity groups like Sun Capital looking to invest in all new platforms, existing companies such as PPC Flexible Packaging are using acquisitions as part of a strategy growth plan.
PPC of Buffalo Grove, Ill., currently has three plants — in Illinois, Georgia and Kansas — Chief Financial Officer Lyle Meshberger noted. But the company, which is owned by Morgan Stanley Capital Partners, is also looking at opportunities for presence on the West Coast.
"We're looking for the markets and the fit," he said.
While it is a major player in plastics M&A thorough Coveris, Stone said Sun Capital has no set rules about the industry it invests in. While some end markets — packaging, medical and, increasingly, e-commerce — are seen as more "recession-proof," there are things that don't show up in just dollars and cents.
An investment from new owners can improve technology and smooth production, he said. Group buying can strengthen resin purchasing moves. New sales contacts can expand market share. But good due diligence must go further.
"Customer service is important across all of our companies," Stone said. "We can go in and fix a lot of things, but it's hard to change customer perception."