CHICAGO — It’s a bull market for the automotive aftermarket. Dan Smith, president of Capstone Financial Group, and numerous other presenters at the Aftermarket Financial Symposium, echoed this sentiment, noting that there is a great deal of activity in the merger and acquisition market, as well as growing interest in the aftermarket from the investment community. “Right now it’s a ‘perfect storm’ in private capital markets,” he said. “There is more and better activity from private equity groups, industry players, senior lenders and mezzanine lenders.” Smith, who presented both on mergers and acquisitions and on ways to maximize your business value, noted that everyone from industry players to financial companies are looking to buy into aftermarket companies. “The merger and acquisition market overall is surging greatly. We’re seeing the best evaluations since 1999 by a long shot,” he stated. According to the presenters, right now is an excellent time to sell your business. Investors are confident, the market is solid and buyers have money to burn. Smith provided key business tips to make your company valuable, such as diversifying your customer base and getting into key product lines. Neal Berman, managing director of Harbour Group Industries, Inc., also offered some key considerations at the symposium. In order to improve business value, he suggested having quality management with a breadth of knowledge and having a wide concentration of profits. “If you have 100 different products and you’re making all your money from two of them,” that’s not a valuable position to be in, he said. The aftermarket’s charm So why are investors so interested in the aftermarket? According to Smith, the main reason is demographics. There are 78 million baby boomers with high incomes buying our products. “That’s whom people are selling products to,” he said. “If you have the products that are sold to the baby boomer generation, the smart money and banks are looking to fund your company.” Other characteristics include the industry’s relative recession resistance, its strong track record of growth and the hobbyist culture. Our industry, he added, is often driven by the country’s love affair with the car, not by necessity reasons. “In the near term, never in history has so much money been looking for a home,” Smith offered. “In the long term, there will be lots of changes in the next three to five years,” notably the effect of overseas deals and distribution changes in the industry. “About one-third of our 50 clients are coming up with innovative ways to sell directly to car dealerships and installers.” The first-ever Financial Symposium was September 7-8 in Chicago and was hosted by the Automotive Aftermarket Industry Association. Hot market segments These aftermarket categories had the highest percentage year-to-date increase in transactions, according to Capstone Financial Group:
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