M&A strategy

Capital raising

Financial consulting

Buying & investing

Fairness opinions

Transaction support

Selling & divesting

Valuations

Due diligence

Merger integration

Restructuring

Leveraged buyouts

Distressed M&A

Unsolicited suitors

Management buyouts

In today’s financial marketplace, merger, acquisition and divestiture activities continue as important means of achieving corporate and shareholder objectives.  ECHELON provides companies with comprehensive M&A services.  ECHELON has represented its clients in numerous ways, including:

• Advising clients in the development and formulation of merger, acquisition, and divestiture strategies
• Identifying potential buyers or acquisition targets
• Establishing valuation criteria and ranges
• Developing alternatives and recommending appropriate courses of action
• Arranging acquisition financing for buyers, consisting of all types of debt and equity
• Structuring and negotiating transactions
• Identifying prospective equity and joint venture partners, and working with such partners to create the necessary arrangements to consummate each transaction
• Structuring internal M&A transactions, including management and employee buyouts
• Identifying, screening and initiating discussions with potential buyers/sellers
• Assisting in the preparation of confidential information and selling memoranda
• Coordinating legal, tax, accounting, and other closing-related activities

M&A Strategy

Most companies need to make acquisitions an integral part of their growth strategy.  Yet study after study demonstrates that the majority of acquisitions fail to create value for shareholders.  Seeking a quick fix for growth pressures, companies routinely make acquisitions that are in conflict with their fundamental basis of competition.  In simple terms, a basis of competition is how a company makes money, and how it competes.  In most industries, it represents the single most important factor for winning.  Successful companies use M&A programs either to buttress their basis of competition or to shift to a stronger basis of competition.

ECHELON research shows that companies with the best record of profitable, sustainable growth invest religiously in their core businesses and often expand into highly related businesses that reinforce the core.  They understand their fundamental basis of competition within their core businesses and focus rigorously upon it.

Deal making should be an extension of a company's growth strategy.  Deals fuel a company's growth under two circumstances: first, when they strengthen a company's current core business in a stable industry; second, when they provide a means for a company to lead a change in the industry's competitive landscape, or to keep up with a change that's under way.  A clear understanding of a company's basis of competition in its industry serves to discipline deal making, tying it more closely to the critical drivers of future growth.

That being said, ECHELON helps companies develop acquisition strategies to enter new markets, pursue industry roll-ups and consolidate current positions.  ECHELON provides objective, commercial facts to develop the rationale for an acquisition-led strategy versus other development options.  Exhaustive information gathering ensures a thorough understanding of the strengths and weaknesses of all potential acquisition candidates.  Consultation with management refines acquisition criteria, in the context of actual opportunities, and leads to consensus on required actions.

Buying & Investing

Looking for acquisitions starts with a sound portfolio strategy.  The best acquirers carefully choose where they will invest and know what role a potential acquisition will play before they look at targets.  Research has shown that less than 30% of acquiring executives started out with an investment thesis that stood the test of time.  Successful acquirers screen candidates based on the why and the how, with a focused search that not only identifies the right targets, but also gives a head start on the strategic due diligence process.

ECHELON has screened thousands of companies for its financial and corporate buyer clients.  Following a review of a company's portfolio, ECHELON confirms the corporate strategy and helps create the investment thesis.  Armed with a clear investment thesis as a guide, the screening process typically follows seven steps:

• Profile all relevant industry participants
• Identify potential sellers
• Develop a network of contacts
• Pre-qualify a list of priority investments and initiate contact
• Conduct due diligence
• Structure and negotiate the transaction
• Close and integrate

ECHELON has extensive experience helping buyers navigate strategic acquisitions to achieve maximum benefit with minimum risk.  Whatever the transactional context — exclusive discussions, wide-band auction, or public tender — our clients benefit from disciplined execution and unconventional thinking.  Here, too, the financial aspects — however challenging — must be seen in a context of strategy and culture.  ECHELON is skillful in dealing with these matters, as well as intricate "social" personnel issues.

Selling & Divesting

The scope of sell-side assignments varies depending on the goals of each business owner.  ECHELON’s work has ranged from resolving family business succession issues through complete divestitures to providing business owners with liquidity and estate diversification through minority or majority equity recapitalizations.  The scope of ECHELON’s involvement has ranged from full scale representation, in which ECHELON prepares the information memorandum, identifies potential buyers and negotiates the transaction, to special assignments in which ECHELON may be retained to negotiate a specific transaction with a previously identified buyer or investor.

A typical sell-side assignment involves four phases:
1. The Decision to Sell - During preliminary discussions prior to its engagement, ECHELON works closely with the prospective client to bring focus and objectivity to the decision of whether to sell.  At this stage, the Firm uses its experience in:

• Exploring the client’s goals and reviewing the available alternatives 
• Reviewing the timeliness of the transaction
• Educating the client about the issues involved in completing a transaction
• Discussing valuation parameters

2. Due Diligence / Preparing to Sell - A definitive decision to sell and a formal engagement trigger the due diligence stage of the process.  The experience that ECHELON brings to this process enables it to recognize and capitalize on values that others may not see.  The due diligence effort involves:

• Assessing the company’s strengths and weaknesses
• Analyzing the company’s historical earnings and projected future performance
• Reviewing the company’s operations and management infrastructure
• Researching the company’s industry and competitors

3. Marketing the Business – ECHELON implements a rigorously planned marketing strategy.  It prepares a comprehensive confidential information memorandum that describes the client’s business and highlights the strengths of the company.  Drawing on its extensive network and proprietary database, ECHELON prepares a well-researched list of potential acquirors that includes strategic buyers, foreign corporations, and private investment groups.  Throughout the marketing process, the teams goals are to:

• Contact only qualified parties who have the financial means to consummate a transaction
• Maintain confidentiality during the process
• Contact acquirors within a short time frame to minimize rumors and maintain momentum
• Insulate management from the marketing effort, allowing it to focus on running the business
• Obtain indications of interest from qualified parties by specific deadlines
• Create an "auction" environment where several buyers compete to acquire the company
• Negotiate bids in principle and select the top ones based on a weighted evaluation of the qualitative and quantitative elements

4. Final Negotiations and Closing - After the selection of the most desirable buyer, the agreement in principle is negotiated and formalized into a definitive agreement.  ECHELON plays a critical role during final negotiations and buyer due diligence when transactions often falter.  During this stage, ECHELON guides the deal to closing by:

• Negotiating the agreement in principle into a definitive agreement
• Introducing, if necessary, competent legal and accounting expertise
• Assisting management during buyer due diligence
• Addressing sensitive issues such as employee continuation, representations and warranties, and the form and timing of consideration

Identified Buyer Situations
At times, a seller may have already identified a buyer and even agreed on some of the basic transaction terms.  In such a situation, the seller will still benefit from engaging ECHELON. ECHELON’s professional assistance helps the seller avoid numerous pitfalls in the transaction process; gain a clear, objective view of the value of the business and; if appropriate, expand the potential list of buyers.  In many cases, the engagement of an investment banker can motivate the buyer to complete a transaction expeditiously to avoid a potential auction process.

Divestitures
Successful companies not only invest, they divest too.  When they think about how best to manage their portfolios, they think simultaneously about which businesses to grow and which to divest.  Looking beyond the stigma associated with divesting businesses, they see its clear benefits:

• Divesting non-core assets permits management to focus its attention on its core business.
• The perceived risks of earnings dilution and cash flow are generally less than the actual risk.  Our case history is chock-full of examples of companies that have divested assets and seen significant rises in their stock price post-divestiture.
• The decision to restructure the portfolio creates a good opportunity to reshape the company's message to investors, employees and other interested stakeholders.  A divestiture can act as a catalytic event causing management to take action that it has long known it should take.

ECHELON’s experience across a number of divestiture cases has taught it that to get the value, divestiture programs must be carefully orchestrated.  ECHELON’s approach to divestiture typically includes two steps:

Pre-divestiture program - Such a program optimizes a divestiture's exit value through development of a compelling vision and business plan, and a credible process and organization to achieve it.  Ideally, part of the value is realized at the time of the transaction, enhancing the economics for the seller while demonstrating the worth of the business plan to the buyer.

Acquirer screening - This involves prioritizing a list of acquirers based on their appetite for acquisitions and the value of the assets to them.  ECHELON understands that this value often varies by buyer.  In addition, our experience in private equity consulting and access to networks of investors helps in gaining access to potential buyers.

Because ECHELON’s professionals have been operators in the investment management business, they know far better than most advisors that a sale must be about more than money — it must be about the firm's employees, clients, and culture.

Merger Integration

The ability to successfully integrate acquired companies is generally ranked as the single most important factor influencing acquisition success.  Merger integration is tough, but there are ways to successfully tackle the challenges.  ECHELON’s approach to integration rests upon four critical imperatives:

• Integrate where it matters - Being highly selective where you integrate is the most effective way to extract value and to reduce unnecessary friction.  Companies should integrate only where valuable or necessary.  Speed makes a difference, but only in the right direction.
• Put culture high on your leadership agenda - Retool the culture in a way consistent with the strategy behind the merger.  Decide quickly on a specific approach and use hard tactics -- organization structure, compensation incentives, and a shared decision-making system -- to address cultural integration.
• Make tough decisions early - Ideally, acquirers should launch their integration planning several months before the deal is publicly announced.  The best acquirers move quickly to determine the new organizational structure and the key people who will drive the integration.  Some CEOs focus on the integration even before the final details of the deal are worked out, leaving the CFO to close the deal.
• Focus firepower on the base businesses - Mergers can exert a gravitational pull on employees: most will want to be part of the integration team.  But acquirers need to focus their talent on the base business.  And they must have a plan to maintain the market share of both companies and their brands while the integration is underway -- acquirers are also most vulnerable to competitive attacks on customers and employees in the months following the announcement of a deal.

There is a wide range of possible strategic rationales for a deal, and these imperatives must be considered in the context of the deal's objective.  ECHELON’s approach to merger integration draws on its accumulated experience, but is highly tailored to the specifics of a deal. 

Corporations facing challenging financial and strategic circumstances are often not effectively served by “cookie-cutter” corporate finance or restructuring approaches.  Rather, each of these situations requires an investment banking perspective and a subsequent unbiased action plan to produce a value- maximization strategy for all constituents.  ECHELON is well positioned to provide such advice by approaching these situations with a broad array of financial advisory, finance, and corporate restructuring skills.
Special Situations are characterized by some of the following attributes:

• A need to raise private capital to effectuate a balance sheet re-capitalization, fund growth opportunities, or refinance impending debt maturities in a conservative capital market environment;
• Having a need to adjust the current corporate capital structure or access alternative sources of finance to meet emerging industry or capital market dynamics;
• Having a need to implement M&A or other value optimizing initiatives for subsidiaries or operating divisions with faltering operating performance or which are currently deemed to be non-core assets;
• A previously healthy company but one which has suffered recent operational setbacks or liquidity constraints;

To serve special situation clients, ECHELON’s approach is to: (1) thoroughly assess the Company’s performance, capital structure, industry conditions and current capital market dynamics; (2) explore all possible strategic alternatives simultaneously; (3) present the Company with all viable transaction alternatives, their process timeline and their impact on the various corporate constituencies; (4) recommend the value-maximizing strategy and (5) assemble the best team to successfully execute the selected corporate finance strategy.

Capital Raising

ECHELON raises private capital for clients to fund acquisitions and recapitalizations, or to support other growth initiatives, such as new market entries, commercialization of new technologies, or to build out organizational infrastructure (e.g., a sales force).  ECHELON’s professionals assist clients in designing a capital structure that provides management with the flexibility to pursue its strategies while taking into consideration parameters related to the company's size, its growth profile, the competitive dynamics, and its projected financial performance.  ECHELON will structure a security that best serves a company's needs, assist management in drafting a placement memorandum outlining the investment opportunity, contact and initiate dialogs with relevant institutional investors, ranging from private equity institutions to mezzanine funds to commercial banks, and negotiate pricing and terms to ensure that its clients achieve the most cost-effective source of funds.  ECHELON’s network includes approximately 1,500 strategic and financial investors who have either completed a financing in this industry or expressed an interest in doing so.

Fairness Opinions

ECHELON assists boards of directors, investors, trustees and other corporate and organizational leaders in fulfilling their fiduciary responsibilities by providing them with unbiased opinions about the financial fairness of pending transactions.  A comprehensive analysis, including thorough assessments of the proposed transaction as well as alternatives, allows clients to make informed decisions in the interests of their constituencies.  A timely independent analysis may establish for the record that fiduciaries have adequately considered the proposed transaction and the potential alternatives, and have properly exercised their business judgment.

ECHELON’s extensive expertise in valuing companies and its underlying securities, in addition to its vast transactional experience, enable ECHELON to provide its clients with the expertise required to assess complex situations encompassing virtually every type of change of control transaction, including affiliate and insider transactions, concurrent mergers and tender offers, spin-offs, synergistic mergers, as well as transactions with competing offers.

ECHELON specializes in valuing companies and their underlying securities - including common stock, convertible and preferred securities, warrants, options, various debt instruments, and partnership and limited liability company interests—and is adept at situations that involve challenging and unusual circumstances.  In addition, in rendering its opinion, ECHELON analyzes the valuation and structure of the transaction, the form and timing of consideration, and the financial, legal, accounting, and tax implications.

Valuations

With its analytical sophistication and institutional independence, ECHELON works with its clients to assess their value and position within the marketplace and advise them on how to realize maximum value.

Companies require independent assessments of their worth for a variety of reasons: to go public; merge with a partner; acquire a business; redeem shareholders’ interests; determine tax liabilities; assess collateral values; configure buy/sell equity incentives; structure ESOPs; and reorganize family-owned businesses.

ECHELON’s ability to understand and determine the value of a company is a core strength that permeates a number of ECHELON’s services.  ECHELON’s professionals often combine a powerful assortment of analytical tools with real-world experience to objectively determine corporate worth.  In addition, ECHELON tracks the latest techniques in valuation and financial analysis, as well as changes in the capital markets, in order to apply the most up-to-date analyses.

ECHELON provides valuation services for a broad range of purposes, including:

• business sales, purchases, and mergers
• buy/sell agreements
• corporate planning and strategic alternative agreements
• dispute resolution, litigation support, and expert opinions and testimony
• dissenting shareholder actions
• equity placements and financings
• intellectual property/intangible asset valuations
• liquidity assessments
• management compensation and stock-option programs
• portfolio valuation and strategic alternative assessment for private equity groups
• purchase price allocations
• recapitalizations, restructurings, stock repurchase, and spin-offs

Restructuring

Business downturns and failures are inevitable.  Recovery - whether returning to profitability or salvaging viable assets - involves a broad array of options for company owners and managers, creditors, shareholders and other involved parties. In these situations, ECHELON can bring order to financial turmoil and provide structure amid disarray.  ECHELON’s professionals have a reputation for thorough and comprehensive analyses of the vital factors in restructuring transactions and an ability to rapidly implement creative solutions.  For clients, this translates into an ability to efficiently manage the restructuring process: thereby maximizing value and minimizing delay.

With an ability to both anticipate the many variables of restructuring cases and analyze situations from the perspective of all constituencies, ECHELON’s professionals have the advantage of strengthened negotiating skills. While the restructuring process is inherently fraught with risk and uncertainty, the professionals at ECHELON strive to manage outcomes for the benefit of their clients, often employing innovative, unconventional methods when situations demand creativity.

Unsolicited Suitors

Whether a company’s performance is stratospheric, middle of the pack, or abysmal, it can unexpectedly find itself the object of suitors (weak, strong, big, or small).  This interest and the associated request for meetings and information can quickly escalate into the need to conduct detailed analyses and act in accordance with fiduciary responsibilities.  Boards and management teams often find themselves unprepared, highly frustrated, and ill-equipped to handle the intense demands of these situations.  ECHELON’s seasoned professionals, on the other hand, are adept at taking control of these situations, educating target companies about their options, and conducting the associated analyses to evaluate the opportunity and fulfill fiduciary responsibilities.  Whether it is early in the process or after some of the basic transaction terms have been discussed, prospective sellers stand to benefit greatly from engaging ECHELON.  ECHELON’s professional assistance helps the seller avoid numerous pitfalls in the transaction process; gain a clear, objective view of the value of the business and; if appropriate, expand the potential list of buyers.  In many cases, the mere engagement of ECHELON can motivate the buyer to complete a transaction expeditiously and under more favorable terms to avoid a potential auction process.

Financial Consulting

Many middle market companies lack expertise in the corporate finance and strategic planning tools used extensively by larger companies.  ECHELON’s professionals can help management and owners by analyzing their current financial status and strategic position to help prepare for the future. ECHELON provides financial consulting, on a timely and cost effective basis, on such issues as:

• Internal growth versus growth through acquisitions.
• The maximizing of shareholder's return on investment, including the appropriate actions to prepare a company for sale.
• Balance sheet restructuring to increase profitability and permit flexibility which can enable the company to take quick advantage of strategic opportunities.
• The appropriate mix of equity and debt based on the owner’s risk profile and long-term objectives.
• The development of a company’s business strategy, including the preparation of a detailed business plan with financial projections, to maximize shareholder value.
• The recapitalization of both healthy and distressed companies and the strategy to best accomplish these goals.

Transaction support

ECHELON complements its M&A strategy and Financial Advisory services by supporting its clients with the other needs they typically have throughout the transaction.  These services include:

• Continued valuation throughout negotiations, as assumptions are revised and ownership structures refined.
• Assistance with joint venturing and licensing.
• Preparation of regulatory submissions, particularly on competition issues.
• Incorporation of analysis and information into shareholder documentation, investment and credit committee reports and press releases.

ECHELON also works to ensure completed transactions are successful, by working alongside new management teams to translate the acquisition mandate into prioritized action and implementation plans, agreed budgets and monitoring processes.

Due Diligence

If strategic due diligence seems like a retrospective check-the-boxes exercise, it is likely being done incorrectly.  The science of book due diligence is vital.  But it is a meaningless exercise without the art of strategic due diligence, a forward-looking process that helps acquirers understand how they can create value through the contemplated acquisition.  The best acquirers investigate targets with a nose for what's really important, identifying the key sources of ongoing value, and sniffing out sour companies that have been polished up for sale.

ECHELON has worked alongside many of the best private equity investors in the business.  It is ECHELON’s observation that these financial buyers have enormous advantages over corporate buyers in the area of strategic due diligence.  With input from these pros, ECHELON has developed an approach based on four principles they commonly use:

• Ask the big questions to confirm your clear investment thesis
• Determine the target's standalone value based on a rigorous understanding of cash flows
• Ensure synergies work for you, not against you
• Chart a course early to unlock integration value quickly

For many corporate executives and private equity principals, the decision on whether to pursue an acquisition and how much to pay is amongst the most important they will make.  In these high profile, often time pressured situations, ECHELON addresses the fundamental issues that determine the value of the target business to its client:

• Are there 'fatal flaws' that will undermine the future performance of the business, or expose its lack of fit with the acquirer's strategy?
• What are the key areas of management focus that will have greatest leverage on the business' future performance?
• Does the business have competitive advantage? Will future market and industry developments strengthen or weaken its position?
• What is the realistic enhancement from combining the business with existing activities?
• Will long term industry trends trigger exit options, or new platforms for profitable growth?
• What are achievable revenue, profit and cash-flow targets for the business? What are the major external and internal risks?
• What is the value of the business, stand-alone and post acquisition? How does this compare with the perspective of the target and other potential buyers?

ECHELON’s due diligence advice draws on its core consulting skills and the experience gained from hundreds of completed assignments.

Leveraged Buyouts

ECHELON works with senior executives who are seeking to take control of their company and/or another company.  Executives that find themselves in this position, stand to benefit greatly from partnering with ECHELON to obtain the strategic guidance and funding necessary to maximize the returns and minimize the risk associated with leveraged buyouts.  ECHELON works in conjunction with management to acquire the company from a corporate parent, an inactive founder, or other significant shareholders.  ECHELON then helps structure the transaction with the right amount of debt to ensure that cash flow is available to fund future growth initiatives.

Management Buyouts

ECHELON advises the management of companies in formulating buyout plans.  Such situations may include advising management on alternative courses of action, presenting the plan to the Board of Directors, negotiating the terms of the transaction, and arranging financing.  By utilizing ECHELON, the management group protects its delicate relationship with the Board of Directors and the shareholders of the company.  In working closely with management, ECHELON anticipates the probable responses by shareholders and Boards of Directors in order to prepare appropriate actions by the buyout group.