February Newsletter 2024

February 2024

ThermoCredit is More Than a Lender:

We Can Help You Find Your Ideal Acquisition

Mergers & Acquisitions (M&A) aren’t just for large corporations — they can offer a range of benefits for small to medium sized businesses as well. M&A allows companies to quickly enter a new market and gain credibility. By becoming part of an established brand, real benefits can have an immediate impact resulting in:

diversification of products and services
increased market share
improved geographic presence
hiring of new talent
increased innovation
becoming more competitive with reduced expenses or prices

In the today’s unpredictable economic conditions, consolidation through M&A is a smart growth strategy as it can lower business costs and help insulate a company from market volatility.

If you’re a business owner choosing a target company for M&A, you need to approach the deal strategically. Mergers and acquisitions have a high failure rate because decision makers fail to carry out proper due diligence before making the deal. You’ll want to ensure a target company can bring strategic and financial benefits to your business, increase growth, improve profitability, and/or bring in new talent and innovation. Most importantly, be sure there is synergy between the companies and leadership.

When carrying out due diligence, there are a number of factors to consider, including:

Is the target financially viable? This means determining factors such as cash flow, debt, and future growth prospects. Does the target have tangible or distressed assets?
Is the target’s valuation fair? You can estimate fair value by comparing them to similar companies, using calculations such as a price-to-earnings ratio or evaluating the target’s market conditions and future projections.
Is the target financially and strategically compatible with your business? The target’s resources and assets match your specific growth needs.
Will the merger bring cost-savings to your business? The merger improves operational efficiency and economies of scale.
Will the merger create long-term value for your business? This could be in the form of new products and services, intellectual property, or talent.
Is the target’s work culture aligned with that of your company? Once you’ve closed a deal, your teams will need to integrate and work well together. If the two are dissimilar and staff are unhappy, you may face an exodus of talent.

The value of a solid M&A deal is compounded by having the right partners at the table to help you bring it all together. Not all lenders are the same and many will fund the transaction, but only if they have a seat on the new board of directors. At ThermoCredit, we have been helping companies put together M&A deals since 2002. Our experience has shown time and again, no two M&A deals are the same. Our job is to help you find the right opportunity for your company, provide the funding, and let you run the company. We don’t require a board seat. ThermoCredit provides the capital while you keep control of your company.

M&A deals have a high failure rate because decision makers don’t always have the right team by their side. The ThermoCredit team helps analyze hidden risks or liabilities in target companies. We help you determine if a given business has the potential to help your company grow and will integrate well with your culture. After all, we have the same goal and that is to see your company grow.

Contact ThermoCredit to find the right funding options for your business. Call us at 504-975-8599 or email us at Seth@ThermoCredit.com to schedule your free consultation today.

Sources:

Harvard Business Review: Strategic Analysis for More Profitable Acquisitions: https://bit.ly/3tymkJ3

LinkedIn: How Do You Value a Target Company for M&A?: https://bit.ly/3RKWny0

LinkedIn: Top Ways to Find the Perfect Match for Your Business, Part 1: https://bit.ly/48F20EH

LinkedIn: Top Ways to Find the Perfect Match for Your Business, Part 2: https://bit.ly/48GRDQz

Wharton School: How to Get Mergers & Acquisitions Right: https://whr.tn/48BUnzn

Now is the Time for M&A

A well-chosen strategic merger and acquisition (M&A) gives a business a competitive advantage and helps drive financial growth.

Business owners can use M&A deals to achieve near and long term benefits, such as:

quick entry into a new market

gain credibility through an established brand

better diversified products and services talent acquisition

increased innovation through intellectual property gains

and make a company more competitive by lowering costs and prices.

The number and value of M&A deals fell sharply in 2023 due to lower company valuations, rising interest rates, recession fears, and global market instability. In 2024, it is expected for M&As to take off again as the greater financial markets anticipate inflation and financing costs stabilize. Small to mid-size M&A deals are recovering faster as they are less affected by volatile markets. Consolidation is a good growth strategy in challenging economic times as it can lower business costs while increasing revenue. Regardless of interest rates and activity by the US Federal Reserve, a real pent-up demand exists within the marketplace for M&A. Many companies believe they are missing out on essential growth and key business objectives because they were sidelined in 2023. The consensus for 2024 is to get the deals completed, regardless of interest rates because the realized value outweighs the added expense.

If you are considering an M&A deal this year, you are likely to find some well-priced targets and less competition. Many businesses are likely to wait until the market is more stable before acting. By moving ahead now with an M&A deal, you may find some good deals and pay a fair price for a well-valued business. Some companies are divesting businesses in response to recent regulatory changes, such as data and privacy protection laws, cybersecurity, and ESG considerations. Companies that have been experiencing lower growth and higher debt levels because of sluggish sales and falling profits may choose to restructure and seek a merger or sale. In addition, distressed M&A activity increased in 2023 and will likely continue into 2024.

ThermoCredit is an alternative lender with over 20 years of experience sourcing customized M&A finance packages. We don’t just assist with financing—we also provide business expertise to help develop growth strategies to help achieve your growth plans. We can even source and evaluate target companies for M&A. Our main strength lies in building long-term relationships with our clients. We know each company has its unique roadmap to success and that providing financing is just part of getting there. We provide the capital and you keep control of your company.

Contact ThermoCredit to find the right funding alternatives for your business. Call us at 504-975-8599 or email us at Seth@ThermoCredit.com to schedule your free consultation today.

Sources:

BCG: M&A Is Looking Up After Bottoming Out: https://bit.ly/3RJYCS0

Carta: Why M&A Activity Could Rebound in 2024: https://bit.ly/3TO7d8W

DealRoom: Acquisition as a Growth Strategy: https://bit.ly/48pGWSP

DFIN: M&A Industry Trends & Outlook 2024: https://bit.ly/3vndaQ5

LinkedIn: The Role of M&A in Growth Strategy: https://bit.ly/3H6ytIb

LinkedIn: Using M&A For Business Growth: https://bit.ly/3RP02L9

Know Your Lender:

Bankers vs. Alternative Lenders

Selecting funding for new and existing businesses is like opening up a fresh box of crayons and finding the right one to start your creation with: you have lots of options but you know only one will lay the foundation for what you’re building. You have lots of choices. Due diligence about your lender and their offerings is the best way to ensure you are making the right choice.

Banks for example are often limited in the types of lending they can offer. They primarily deal with loans requiring excellent credit or leverage against some sort of collateral, both of which many new or small businesses may not have. Conventional loans and mortgages are not always the best or most viable options, while interest rates on credit card debt are entirely cost-prohibitive.

In light of the products a bank can offer, very often businesses turn to alternative lenders, which are companies or individuals providing funds to help companies when a bank cannot or will not meet their needs. Alternative lenders can provide funding of their own, away from banks, offering capital in exchange for outstanding billing, collateral, inventory, and much more. A good alternative lender will often match start-ups with individual investors and venture capital. In addition, the types of loan products are typically more diverse than what banks can offer, as are the terms. An alternative generally has more flexibility in repayment terms and options.

Qualifying for funds may be easier through alternative lenders, as they often have different requirements. Banks focus on credit scores, while alternative lenders tend to focus on the bigger picture like inventory, AR, collateral, business plan, market projections, and more. Alternative lenders believe more in partnering with a small business and looking toward the future rather than assessing the past—such as the length the business has been in operation and may take into consideration special circumstances.

Another benefit to working with an alternative lender is that, while interest rates are fluctuating, they are known for faster approval than banks. The approval process with banks can take months of pouring over your books and credit history, which still very often result in rejection of the loan, which is time wasted. Alternative lenders tend to have approval in just a few weeks, meaning you can implement your business plan quicker. This is especially convenient if your business is facing a hardship or financial emergency.

Loan approvals with banks historically only cover 80% of the money requested, meaning even with an approval, you will still be short a significant sum and when the loan is repaid, the loan is closed. Alternative lenders can work with you to provide 100% of your funding and keep the loan open as a line of credit for as long as you needed it, even after it is repaid.

ThermoCredit is more than just a lender—they have been the first choice of businesses for more than 20 years, providing more than $1,000,000,000 in funding because of their product flexibility. Like your favorite color crayon fresh out of the box, it’s nice to be picked first time and time again. ThermoCredit can help you partner with small businesses and other alternative lenders to find a custom solution or even acquisition to meet your specific needs. The first stroke of the crayon is the most important, so be start with the choice that will make the biggest and best impact to your business plans. Contact ThermoCredit to discuss all of your lending needs at 504-975-8599 or Seth@ThermoCredit.com to schedule your free consultation today.