Las Vegas — Deal-making in the plastics industry is neither solely a science nor an art, deal-maker Tom Blaige believes, but a combination of the two.
And to maximize the most out of a business, owners need to do plenty of work before putting a "for sale" sign in the yard.
Plastics businesses in general, and plastics packaging businesses, are enjoying strong valuations in the acquisition market.
Both strategic buyers — those already in the business looking to improve their standing — as well as financial buyers — those looking to take advantage of the market's opportunities solely from a fiscal standpoint — continue to show interest.
But the CEO of the Chicago-based Blaige & Co. investment banking firm said regardless of what type of buyer eventually is successful, business owners should start preparing their firms well in advance of any potential sale.
That means looking at the company's assets, strengths and weakness five years before a potential transaction to maximize a potential sale price.
"You don't want to wait until you retire" to think about selling a business, Blaige said at the Packaging Conference in Las Vegas.
There are several ways to consider a sale to either a financial buyer or one who is already in the business, and each of those approaches must be explored.
Exit strategies open to business owners include selling all or just a portion of their operations to private equity firms. Companies also have choices in which type of strategic partner. Those include smaller companies in the exact same business and those in adjacent businesses looking to expand their offerings. Even sales to larger global consolidators can differ depending on whether they are domestically or foreign owned and whether those firms are publicly traded.
"The process involves preparation, organization," Blaige said. "It's a critical thing for you to understand the nuances of financial vs. strategic and all of the options you've got."
Those interested in selling their firms would be well-served to take a close look at their options regarding increasing profitability of their firms prior to any sale. But it's also important not to "milk" the company and continue investing in the firm as you prepare for a sale, Blaige told the conference crowd.
Key investments in areas such as capacity and technology will make a company more attractive to potential buyers and could result in a higher sales price.
And when it comes to price, he warned, the first side to show their hand could ultimately lose.
"Don't establish an asking price. It's going to put a ceiling on the value. No asking price," he said.
That's where firms like Blaige & Co. can come in and act as an agent for the seller to establish a range of value based on its analysis.
While a financial adviser can help establish a starting point for a sale, such a firm also can engage a potential buyer without emotion to get the best price. These investment firms create a "book" for the market that describes the company that's for sale and allows people access to additional information on a confidential basis.
After receiving and vetting potential buyers based on preliminary information, sellers can then go in and kick the "real tires" of a firm and potentially increase their bids, he said.
Sellers, he said, hold leverage in any potential deal earlier in the process. But once an agreement is reached with a particular party, that leverage shifts to the buyer, who then can potentially pick apart aspects of the proposal as a way to lower the ultimate sales price.
That's why it's important for sellers to have all their bases covered before entering the sales process.
Successful sales involve a focus on tomorrow, not yesterday.
"You are presenting your vision of the future, not what happened five years ago," he said. "This is a roadshow. This is a promotional meeting. ... It's 'Shark Tank' basically."