Specializing in the food industry

The acquisition process

The Tidewater Group is a small, private investment banking firm, representing a variety of clients in all segments of the food industry — in which we specialize. Since our focus is very narrow, we have developed an extensive list of relationships. Over the past nineteen years, we have been given tours of plants and offices, or enjoyed lunch and dinner with many of the key owners/officers in the food industry. In addition, “The Group” has been asked to provide several associations (NASFT, SCAA, NCA) with seminars on the acquisition and divestiture process. This network of former associates, business contacts, association members, and friends stay in touch on a routine basis. Consequently, phone calls are returned and owners/senior managers are willing to listen to potential opportunities.

The Tidewater Group maintains databases of over 45,000 food industry processing, distributing and importing companies, some of which are listed below.

  • Baked Goods (406)
  • Beverage & Wet Sauces (903)
  • Catalogue Merchants (730)
  • Confectionery (1,011)
  • Dairy, Deli & Cheese (643)
  • Distributors (710)
  • Importers (398)
  • Dry Seasoning Mixes & Ingredients (767)
  • Food Service & Industrial (17,230)
  • Frozen & Refrigerated products, including pasta (1,969)
  • Meats (Chicken, beef, pork) (458)
  • Packaging & Decorative Wraps (food-approved) (641)
  • Dry Pasta (467)
  • Natural/Organic Foods (1,120)
  • Seafood (341)
  • Snacks (556)
  • Specialty Coffee (2,625)
  • Specialty Foods (5,310)
  • Venture Capital Firms & Investors (258)

These databases are kept up-to-date with information on products, size, location, key contacts and interests. As a result, we are able to conduct acquisition and divestitures services quickly, quietly and efficiently. These Databases enable the Tidewater Group to identify companies on a nationwide basis that are beyond the list of competitors in the clients’ region. In many instances, we can also supply the client with sales, product lines and other information on the potential target. Thus, even before the initial contact is contemplated, the client has some knowledge of the target. The Tidewater Group will use its own databases and others, to provide clients with a broad range of firms that could be considered prospective targets. The Tidewater Group’s objective is to provide our clients, that are interested in acquiring companies — the ability to do so, while never losing focus on their business. It also provides those clients interested in selling their companies/divisions — the ability to move foreword during the sale process, with minimal disruption to their organization.

I. Corporate Acquisition: To assist clients that include acquisitions in their strategic plan, the Tidewater Group employs the classic Merger & Acquisition search and marketing approach.   The process begins with the clients’ criteria and ends with the acceptance of the proposal by an acquisition target. Throughout the process, the client is involved to the extent they desire—with most clients this is limited to a weekly update and their suggestions as to additional targets to be added to the list. The M & A methodology has been utilized and perfected by the large Investment Banking firms that specialize in the Fortune 500 We have adopted this method because of our long-term experience and success with it, and believe this method will provide our clients with the best opportunity to achieve their objectives in the acquisition process. A brief explanation of the process may be helpful:

The Process: Commences with the Tidewater Group developing an understanding of the client’s strategic objectives in regard to prospective acquisitions. This listing of criteria will enable “The Group” to conduct an effective and focused database search that will produce targets most likely to meet the client’s objectives. During this process, it will also be important to understand the client’s business and the financial structure the client will most likely propose to conclude the transaction. The services performed will include:

A. Client criteria: Working with the Client, the Tidewater Group will list the search criteria most likely to identify targets that meet the client’s objectives. These criteria will include such factors as the market segment served (grocery, specialty, industrial, food service, etc.), product category (frozen, refrigerated, dry, ingredients, bakery, etc), products produced, company size (sales), profitability/or turnaround, methods of distribution, manufacturer or marketer (products are co-packed), etc.

B. Non-Disclosure / Confidentiality Agreement: Will be developed for the client to sign in the event the target does not have one they insist on using. This Confidentiality Agreement will also be signed by The Tidewater Group before receiving any information on the client.

C. Client Information: In order to make an intelligent presentation to the proposed target, we will need information on the clients’ size and financial position. If the client is a food processor, products produced, markets served, product category, and other information would be helpful.   Most of this information can be obtained from a catalog, price list, product slicks and other standard marketing information. If the client is a financial investor, an executive desirous of owning their own company, or venture capital firm, then information on their financial position is required. No financial information on the client will be divulged, without prior discussion and agreement.

D. The Search: Since we operate on a national basis in the food industry, we will review our database for the corporations that most closely fit the criteria that have been identified. In addition, we will add any companies that a client would like to include in the list of target opportunities. We will work to bring the top candidates to the table. This will include:

• Identifying likely candidates in the database;

• Mailing a letter to prospective targets describing the company (without identifying) and the potential opportunity;

• Follow-up phone calls to those who receive the marketing letter to ascertain the level of interest in being acquired;

• Providing a Confidentiality Agreement;

• Obtaining information on the target including: products produced, markets served, financial information, personnel, interests of shareholders and management (desire to stay or leave, etc.), size and condition of plant and facilities, and other information as required.

• Answering questions, providing information and doing what ever is necessary to bring the party to the table.

E. Acquisition pricing: The Tidewater Group will bring information and advice to the relationship. This will include information on deal pricing in the food industry with examples of recent acquisitions including, the purchase price, deal structure, contingencies and other important aspects of successful transactions. This enables our clients to understand the market and structure their proposal to meet the minimum level required to be seriously considered by the seller.

F. Target Valuation: The Tidewater Group will assist the client in valuing the target company, using a variety of methods. We will use sales, gross profit, operating profit, EBITDA, net asset value and other ratios and multiples, as appropriate for each company. In addition, “The Group” will also assist the client in a “present value” analysis of future cash flows in order to place a value on the Target Company. These valuations are a key element in the development of a strategy for making an offer.

G. Deal Structure: We will provide the client with feedback from the target and advise on pricing and structure so the client can structure the transaction to their best possible advantage. We will further assist the client, if requested in drafting the Letter of Intent.

H. Due Diligence: If requested, we will provide guidance and direction during the due diligence process including a due diligence check list, suggestions on what information to request, what people to interview, and generally assist throughout the process.

I. Closing Process: We will assist the client in the management of the process to make it as smooth, stress-free and successful as possible.

II. The Engagement Agreement: The Tidewater Group typically works for clients based on an Engagement Agreement. The Agreement will spell out what services will be performed and the costs associated with them. The amount of time it takes to successfully bring a transaction to a conclusion varies but usually runs six to nine months — some go more quickly, but a six-nine month average is not unusual. There are two types of relationships: A Retained Search and a Buyers Alert.

A.Retained Search: Used by individuals, venture capital firms and corporations seeking growth through acquisition. This relationship serves their desire for a significant focused and concentrated search for companies/brands that fit their criteria. Frequently this necessitates broad-based market research, and contacting a number of potential targets through a significant mailing of marketing letters. The extensive follow-up campaign to parties that express an initial interest should bring as many targets to the selection pool as possible. This is usually an extensive and time-consuming process. A weekly phone report and a monthly written report is included in the retainer fee. The fee is determined by the scope of the project. The full outline of the Retained Search process is provided in the Fee Agreement.

B. Buyers Alert: This is a more passive type of relationship. When a client of the Tidewater Group that is interested in selling matches the interests of the prospective acquirer, they will be mailed a letter. The letter will describe the client organization and inquire as to whether the buyer has an interest. In this way you will be kept abreast of companies for sale that are in the buyer’s general category.

III. Costs and Fees:

A. Retained Search

1. Retained Search: Costs and fees are detailed in an Engagement Agreement. The amount of the retainer is determined by the scope of the project. The fee can be a one-time flat fee or a monthly fee, as agreed. Other costs include:

2. Transaction fee: Paid when the transaction closes. It is based upon a percentage of the selling price (see Engagement Agreement).

3. Out-of-pocket expenses: These expenses include the costs of the database search, typing, mailing, telephone and other costs associated with the search. They are billed and payable on a monthly basis.

4. Travel & Other Expenses: Those expenses over and above out- of-pocket costs, that are requested by the client or agreed to in advance, such as plant visits, visits for strategy sessions, or other items of significant cost. These expenses are also billed and payable monthly.

B. Buyers Alert: In this relationship, the fees are paid by the seller unless the buyer requests special services.

The Tidewater Group would enjoy working with you to achieve your objectives. “The Group” works on a national basis — and is solely focused on the food industry. As a result, we believe we can identify prospective acquisition targets, advise you on market pricing practices and deal structures in an efficient and cost-effective way.   In addition, since the time consuming search, to identify a broad number of potential targets is performed by Tidewater Group, the disruption of your business will be greatly reduced. We will work closely with you throughout the entire period so that you are comfortable with the process and the final result.