Andrew M. Apfelberg acts as outside general counsel at Greenberg Glusker and advises clients, particularly in the middle market, on significant transactions such as mergers and acquisitions, private equity and other financings, joint ventures and licensing. He has particular expertise in the manufacturing and distribution, health and beauty, new media and technology industries. He also served as president of the ACG Los Angeles chapter at the time of publication.
Q. IN YOUR EXPERIENCE, WHERE DO YOU SEE THE MOST AREAS FOR GROWTH?
The industries we have seen at our firm with the most amount of recent growth include manufacturing and distribution, food and beverage, branded consumer products and technology/new media. An additional overlooked growth area relative to major transactions is the work done in the months and years before going to market. Frequently, companies are focused on short-term profits or day-to-day operations and miss the chance to add significant transaction value. For instance, when negotiating an agreement with a client, companies should consider short-term concessions in order to get a multiyear contract or reduce customer concentration. Long-term, reliable cash flow will be valued much higher by a buyer or a PEG. On the flip side, heavy customer concentration (especially if the customer has bad credit) has killed many deals or shifted consideration at the closing to a holdback or earn-out.
Q. WITH A STRUGGLING ECONOMY, WHAT ARE THE BIGGEST CHALLENGES YOU’VE SEEN IN A RECENT DEAL OR TRANSACTION AND WHY?
The two biggest challenges I have seen lately have been a lack of liquidity that forces a buyer to come up with all or a significant majority of the cash required for a deal, and due diligence pitfalls. While the capital markets have opened up quite a bit in the last year or two, that is particularly so for larger or “grade A” companies. For the rest, capital can still be scarce or expensive and, thus, we have had to get creative.
As to the latter, we are in an environment where people do not want to make mistakes. That could be because many PE funds are coming to an end of their life or that the job market is still weak. Regardless of the cause, I now see much more protracted and detailed due diligence (which is a challenge in terms of time, cost and chances of success) and less willingness of a buyer to take certain things on faith (i.e., in the form of a representation/warranty) or deal with it via indemnity or a holdback.