Tulsa World: 5 Questions with Bruce Jones
As it appeared in the Tulsa World – CLICK HERE
Interview by Laurie Winslow, Tulsa World Staff Writer
1. What is ClearRidge, and how long has it been in business?
Our team provides investment banking services for business owners to sell a company, buy a company, raise equity capital, restructure or replace debt, and perform financial, operational and strategic restructuring. We help our clients get a challenging deal done and solve complex financial and business issues. We have deep transactional experience and have represented both sides of the table. ClearRidge was formed in 2008, but I have personally been in this profession 30 years and working with Tulsa-area businesses since the late 1980s.
2. How is merger and acquisition activity faring in the current economic environment?
M&A activity has picked up in 2010. More precisely, M&A volumes for middle-market deals are up 39 percent in the first half of the year over the same period in 2009. The second quarter of 2010 was more active than the first, and we expect this positive trend to continue through the rest of the year.
3. Would you say it’s more of a buyer’s or seller’s market? Why?
For most deals, buyers continue to have an advantage, because they control the checkbook and can adjust the closing date and conditions for closing. Additionally, many sellers want to sell their company prior to 2011’s long-term capital gains tax increases, which experts peg at a minimum 5 percent increase over 2010. If that happens and you sell a $10 million company on Jan. 1, you would receive $500,000 less in after-tax proceeds, compared to Dec. 31 this year.
However, sellers have increasing leverage for a couple of reasons. Private equity firms are sitting on cash and have aggressive mandates to deploy that cash. If they don’t get deals done, their limited partners aren’t making any money. Second, strategic buyers who are looking to grow within their markets, expand their offerings or grow into new geographies will often seek acquisitions rather than exclusively pursue slower-pace organic growth. And they’ll miss some great buying opportunities if they sit on the sidelines too long.
4. Is there any industry or sector where M&A activity seems particularly busy? If so, what do you attribute that to?
We are seeing heightened activity in light manufacturing in almost all materials (in particular steel, plastic and wood), oil and gas and related service companies, distribution, financial services, aerospace and technology.
Activity is higher for sound, well-managed companies that have consistent revenue over multiple years. Buyers understand that 2009 hit industry hard across the board, and they realize that many companies temporarily lost 20 percent to 30 percent or more of their revenues. Those companies that have bounced back with revenue gains in the first half of 2010 over the same period in 2009 are prime candidates.
Buyers are always looking to achieve synergies with their existing company and are also looking to leverage the strength of their existing balance sheet while adding the target’s revenue and customer base or geographic reach.
5. What is the greatest challenge you encounter in helping get deals done?
Avoiding road blocks. We focus extra effort on both quality of earnings due diligence and determining the likelihood of financing various capital structures the buyer may pursue. These can be major stumbling blocks that hold up a deal at the later stages. With this in mind, we’re proactive in our own QoE due diligence, financing analysis and scenario testing prior to going to market with a company. Being prepared for inevitable deal issues helps our clients to keep a deal on track and close on time.