Tuesday, January 20, 2009
The Acquisition Game
Industry M&A professional offers insights to deal with economic, credit crunch
Source: CSP Daily NewsBy Linda Abu-Shalback Zid
[Editor's Note: This article is the first in an ongoing series on how the recession is affecting the convenience store landscape.] CHICAGO – Although big-oil divestments have put many potential acquisitions on the table, a downtrodden economy and the credit crunch have made it challenging to take advantage of such deals. "If oil companies are dead set to divest now, they may need to take a lower price or get creative on financing." Dennis Ruben, managing director of Chicago-based NRC Realty Advisors LLC, told CSP Daily News.
He added that if the majors are not willing to consider these options, then they will need to take a "time out" to let the credit market recover. "But let's be clear," Ruben said, "credit generally needs to improve."
Still, players on either side of the bargaining table can still win, despite such tough times. Ruben offers some suggestions for both buyers and sellers.
- It's a pretty good time to buy with prices coming down, but retailers and investors still have to figure out where the financing is coming from. A lot of companies are spending on due diligence without a clue of where they are going to get the money. Get into that process sooner rather than later.
- Is it a mortgage you prefer? Buyers need to realistically think about what they can get financed. "It's important to get on that early on," Ruben said.
- Consider partnering with foreign investors. "We have people who want the assets but need someone to manage it," Ruben said. "It provides liquidity, and you get to [retain] management."
- Sellers should ask themselves if this is the time they want to sell or need to sell. Then they should be realistic about expectations. "The kinds of prices that were attainable in the past are probably not attainable now," Ruben said.
- If it is the right time, get help to see what assets will bring. Start a process to see where assets are and what they're worth-and try not to let disappointment get in the way. Think about how much money you want.
- Think about whether there are some creative things you can do to get the property sold. If someone could assume ownership vs. a pay off, the buyer would have to come up with less money. If not, consider a "carry back" mortgage to facilitate the sale.
- Consider breaking down the sale into small pieces.