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Synergistic Acquisition

By Generational Equity

synergistic acquisition

As loyal readers of this online publication are aware, from time to time we like to highlight acquisitions in the news that catch our eye. These are deals that usually provide some insight into the ultimate motivation of professional buyers. Knowing why a particular buyer is interested in your company can be critical to the successful sale of your business. If you know why a buyer is willing to pay a premium for your business, you will be able to better negotiate the deal to your benefit.

The announced acquisition of Oneida Ltd (Oneida) by Monomoy Capital Partners (Monomoy) provides a classic example of this concept in action. As many of you are aware, “Oneida is the world's most recognized tabletop brand and the leading supplier of flatware and dinnerware to the foodservice market.” Monomoy is a New York-based private equity group that focuses on making strategic acquisitions in middle-market sized businesses.

You might be wondering the same thing I was once I saw this announcement: Why would an equity firm invest in an industry that appears to be so dependent on economic cycles? I mean if folks aren’t dining out at establishments that use flatware and dinnerware, then I would imagine that purchases of replacement food service equipment would be slow. As the press release points out:

“Oneida serves two broad market segments – foodservice and consumer. As North America’s #1 foodservice supplier of flatware and dinnerware, Oneida boasts a robust product and brand portfolio with many of the world’s strongest players in the hospitality, travel, restaurant and foodservice industries. In the consumer market, Oneida is the #1 tabletop brand in North America and has become one of the most globally recognized houseware brands with a large installed customer base.”

So a couple of things become clearer. As I highlighted above, Oneida just isn’t any other flatware/dinnerware/tabletop brand in the industry. They are in the number one position both in the foodservice industry AND the consumer market. We have discussed the importance of intangible assets before. One of the most important intangible assets (also known as “off-balance sheet assets”) is brand-name recognition. Although no details regarding the transaction were announced, it is safe to assume that the investment bank working for Oneida was well aware of how important the acquisition of the number one brand in both markets was to Monomoy.

Platform Synergies

But still the question remains, why Oneida? Of course acquiring any brand with the number one position in two key markets is a wise financial move. However, if you dig a bit deeper, you discover that Monomoy has a current portfolio company named Anchor Hocking (Anchor). For those of you unaware of Anchor, here is a brief description of its business from its website:

“Anchor is a leading North American designer, manufacturer and distributor of tabletop glassware products, providing the market place a complete tabletop solution. Anchor’s product line includes glass beverageware, bakeware, storage containers and barware; glass candle containers; high-end spirit bottles and specialty glass items. Anchor also sells glassware to both the consumer and the foodservice markets.”

So now the synergies – the motivations – behind the deal become clear. By combining Anchor, Monomoy’s current platform company, with Oneida, the new company will have the dominant position in many segments of the market.

Based on this, I would assume that Monomoy was willing to pay a premium for Oneida. As with all deals, if you can understand why a buyer is motivated to make an acquisition, you can negotiate a far better deal. Of course in a win-win scenario like this, not only are there synergies in play, Monomoy’s business model is designed to bring “customized business improvement programs in all portfolio companies that reduce operating expenses, increase profitability and encourage profitable growth.”

In many middle-market transactions like this, it is the financial, marketing and managerial expertise that the equity firm can bring to the table that really aids in the ongoing growth of both entities. Again, a real win-win for all groups involved.

We bring this deal story to you since it is just one example of the types of professional buyers that are active in the market. Generational Equity has relationships with literally thousands of buyers – buyers that have told us exactly what they are looking for in acquisition targets. If you would like to learn more about our processes, please contact us.

Chances are very good that there are buyers active in your niche right now as well. We would be glad to meet with you and explore your specific options. Given the tremendous economic and political uncertainty facing the country right now, you owe it to yourself and your family to ensure that every option is open to you. Since most of your net worth is tied up in your company, proactively planning for your future is a wise move.

© 2011 Generational Equity, LLC All Rights Reserved

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