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A 4-Step Business Plan That Will Have You Looking Forward to the Next Recession

recession

A 4-Step Business Plan That Will Have You Looking Forward to the Next Recession

The following is adapted from Rock the Recession: How Successful Leaders Prepare for, Thrive During, and Create Wealth After Downturns.

The highest-performing companies don’t fear recessions—they look forward to them.

The idea sounds counterintuitive, we know. What possible reason would a business leader have to want an economic downturn?

The answer is simple. A recession, properly planned for, can present opportunities for growth that would otherwise take a decade or more to pan out, like mass purchasing expensive assets for cheap, acquiring other companies, and convincing top-shelf talent to join your team.

By following the four steps outlined below, you can plan ahead and set your company up to not only survive the next recession, but use it to fuel your growth.

Create Uncontested Market Space

Rather than struggling to beat the competition and exploit existing demand during a recession, the more strategic route is to create uncontested market space (read the book Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne for more on this topic). Doing so, of course, is easier said than done and requires creativity and drive, but if you can successfully pivot to a new market, the payoff of a less-crowded space will be worth it.

Research shows that “companies that successfully adapt can emerge stronger than ever,” while those that do not “face a Darwinist reality” (Journal of Business Research). Why fight the competition when you can make them irrelevant?

The best way to create uncontested market space is to adopt new technology and use it to differentiate your service from your competitors’ before they get the chance to do the same. Find a way to solve a problem for your customers that no one else has solved. Embrace technology as a way to both create a better user experience on your clients’ end and to save labor on yours.

You’ll be able to integrate new tech into your company with fewer hiccups if you follow the next step and look ahead to your end goal.

Begin With the End in Mind

Look at your business goals from a strategic perspective by beginning with the end in mind. In other words, look ahead to what would happen in an exit situation.

Consider, for example, how an acquirer might pay seven to eight times earnings for an annuity service business, but they would only pay book value, or at most two to three times earnings, for a one-off project business. Use these predictions to plan how you want to diversify or grow your business to maximize its value.

Growing your company in a good economy will make you more likely to survive a recession because, in general, bigger companies tend to fare better. By looking ahead, you’ll know where to invest your money and efforts to reach the goals you have in mind.

This step naturally ties into the next, which involves bridging the gap between your beginning and end states.

Bridge the Gap

Once you have an end goal in mind, you need a plan to bridge the gap between where you are now and where you want to go.

For example, if you aim to go from $25 million to $100 million in revenue, and want to enter different markets, but don’t have the in-house talent to do it, then what you have is a “talent gap.” One way to close that gap could be through acquisitions.

Similarly, if you want to adopt continuous improvement practices within your company but don’t have anyone on your team who is an expert—that would also be a talent gap. Hire a “lean” expert.

Identify your gaps and come up with a timely, actionable plan to fill them.

Create Your “To-Buy” List

You have your market, your goal, and your plan. Now you just need to seize the opportunity created by a recession and acquire assets while the price is low.

As a general rule, everything is cheaper in a recession. Talent is cheaper. So is the competitor you want to acquire. And when banks are looking to dump assets that they’ve already written off—assets they just want to get off their books—that’s when you can score some of the best deals.

By planning out what you want to acquire—and maintaining enough liquidity to buy it—you can strike as soon as the recession hits, giving you first pick of assets while your competitors scramble to find the capital. 

Hopefully, being armed with this four-step plan will turn your recession fears into anticipation. Start creating market space, setting goals, laying out actions to make them happen, and writing your to-buy list, and you’ll be well positioned to experience enormous growth when the recession finally hits.

For more advice on recession planning, you can find Rock the Recession on Amazon.

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Jonathan Slain and Paul Belair founded Recession.com to give entrepreneurs a free tool to assess their recession readiness at Recession.com/Ready.

Jonathan Slain spent the Great Recession huddled in the fetal position on the floor of his office. He borrowed $250,000 from his mother-in-law to survive. Jonathan paid his mother-in-law back and is now a highly sought-after consultant (and, yes, he’s still married!). Jonathan leverages his experience in investment banking and as an entrepreneur on the keynote speaking circuit because he doesn’t want anyone else to have to borrow money from their mother-in-law in the next recession.

Paul Belair wasn’t scared when the Great Recession hit. He invested $1 million to purchase a business and just five years later sold it for over $70 million dollars. He achieved an American dream exit by using the Recession Gearbox model outlined in this book to create an intentional recession preparation plan. Paul is a CPA and an MBA, and currently serves as chair of the Young Presidents’ Organization Construction Industry Network.

AI

Report: U.S. Companies Led AI-Tech Acquisitions 2014-18

.Leading data and analytics company, GlobalData, released a report this week highlighting companies that dominated the artificial intelligence-tech space from 2014-2018. In the report, four out of five top acquirers were U.S. based: Facebook, Microsoft, Apple and Splunk. These companies represent a combined total of 30 acquisitions during the time period studied. Accenture made the list as the only non-U.S. based company, representing six acquisitions total.

“Technology companies have been the dominant deal makers in the AI space. However, with artificial intelligence making inroads into diverse sectors, the buyer universe in expanding and the space is also attracting investments from non-technology companies,” said Aurojyoti Bose, Financial Deals Analyst at GlobalData.

Top Deal Makers-Payment Tech_V2

“The high number of American firms attracting investments in the AI space is a testimony to the country’s dominance in AI technology. The recent launch of American AI Initiative program also augurs well for the development of the sector or start-ups operating in this space,” added Bose.

Additional insights in the report confirm the U.S. as a leading region for targeted acquisitions, representing 70 percent of those acquired by the top five in the list. Regions closely following include the UK, China, India, Canada and Israel due to the talent pool and innovative technology offerings.

Top Deal Makers-Payment Tech_V1 Table

“With increasing adoption of AI across sectors, this space is bound to witness growth in an already burgeoning M&A activity. Corporates are extensively evaluating options to integrate AI in their business operations and automation initiatives. Going forward, AI solutions will be an integral part of their strategies,” Bose concludes.

Source: GlobalData

Major Los Angeles Industrial Estates Acquired by Goodman Group

Goodman Group can now add two major Los Angeles-based industrial estates to it’s acquisitions list. A former L.A. distribution center and Long Beach Boeing C-17 manufacturing plant confirm a total of 127 acres for the acquisition and will be recognized as the “Goodman Commerce Center Long Beach” and “Goodman Commerce Center Los Angeles.”

“Supply across the Los Angeles market is heavily constrained with a current total vacancy rate of approximately one percent. This makes the size and location of these facilities beneficial to prospective customers looking to improve their delivery speed to market,” said Anthony Rozic, CEO of Goodman North America. “This will be the first time these sites have been available to customers, having been owned and occupied by the former owners for a long period of time.”

Goodman confirmed it will utilize the newly acquired sites to provide its customers industrial-specific opportunities, citing the optimal urban locations as advantageous in targeting large consumer populations. The industrial property group added $3.7 billion to its U.S. development pipeline and will continue seeking logistics-focused acquisitions within the Los Angeles, Inland Empire, Northern New Jersey and the San Francisco Bay Area regions.

“As advances in technology, changes in consumer behavior and the continued urbanization of gateway cities are driving the demand for well-located industrial space, we continue to invest in, develop and manage facilities close to consumers and key infrastructure such as ports, airports and major motorways enabling customers to develop an efficient supply chain and provide faster transit times,” concluded Rozic.

Source: Goodman Group

Lineage Logistics Expands Global Footprint with Preferred Freezer Acquisition

Global temperature-controlled logistics solutions provider,
Lineage Logistics, announced the formal closing of its acquisition of Preferred Freezer Services, LLC. This announcement comes less than three months after the acquisition was first confirmed back in February.

“With the integration of Preferred’s exceptional team and its network of state-of-the-art facilities, Lineage is the clear go-to logistics partner for both large and small food producers and retailers worldwide,” said Greg Lehmkuhl, President and Chief Executive Officer of Lineage. “Together, we look forward to delivering operational excellence and innovative, high-impact supply chain solutions for customers on a global scale.”

More than 1.3 billion cubic feet and 37 million square feet of capacity in 200 facilities across North America, Europe and Asia are dedicated to servicing customers with supply chain-focused needs. The combined company now represents the largest temperature-controlled facility network global network and boasts a total of 800,000 automated pallet positions across 17 facilities.

“Since founding Lineage in 2008, we have been focused on strategically growing the business to meet expanding customer needs,” added Kevin Marchetti, Co-Founder and Managing Partner of Bay Grove, LLC (“Bay Grove”), the principal investment firm backing Lineage. “The close of this transaction unlocks an entirely new set of opportunities as we look to build upon our industry-leading position with additional capital deployment in technological advancements and new projects.”


Space Cargo Group Acquisition Confirmed for Global Forwarding Efforts

With global expansion as the primary goal, C.H. Robinson confirmed its acquisition of the Space Cargo Group this week, adding more global forwarding strategies to the company. As a leading provider of logistics, international freight forwarding, customs brokerage and more, Space Cargo provides significant added value.

“The acquisition of Space Cargo advances our strategy of expanding our presence globally,” said Bob Biesterfeld, Chief Operating Officer and CEO-elect of C.H. Robinson. “We look forward to working with Space Cargo’s customers to offer our full suite of logistics services to enhance their supply chains. Space Cargo’s leadership, expertise and strong customer and carrier relationships, combined with C.H. Robinson’s global service offerings and network, will also create more robust capabilities for our customers and add scale to our business.”

“We are excited to join C.H. Robinson, the best third-party logistics provider, and build on the business we have done together for more than 10 years,” said Jordi Pellice, Chief Executive Officer of Space Cargo. “We believe this partnership will position us to better serve our customers and promote continued growth by leveraging C.H. Robinson’s worldwide network and diverse service offerings.”

 

Source: C.H. Robinson

 

PORT OF VANCOUVER USA’S BOARD GREENLIGHTS 2018 STRATEGIC PLAN

The Port of Vancouver USA Board of Commissioners on Sept. 11 unanimously approved the port’s 2018 Strategic Plan, which includes a new vision statement and outlines 20 goals and 66 strategies to guide the port’s activities and budget for the next decade.

The plan was developed over 11 months with broad public and stakeholder input, including advisory panels, public open houses, commission meetings, public workshops and hundreds of public comments.

“We appreciate all the time and energy our community has put in as we’ve created our new strategic plan,” says CEO Julianna Marler. “We heard from hundreds of people, both within the port and across our community. Their perspectives helped us develop a balanced plan so we can continue to advance as an organization while achieving our state-directed purpose and our mission of creating economic benefit through leadership, stewardship and partnership in marine, industrial and waterfront development.”

The port first developed a strategic plan in the early 2000s and updated it each year as necessary. By 2017, the port needed a new plan to address organizational change, including completion of many key initiatives; marine and industrial business growth; identification of new projects; and changes in staff and elected leadership.

The 2018 Strategic Plan is available at www.portvanusa.com/key-projects/strategic-plan.

 

 

 

 

How US tax overhaul has led to increased international investment and M&A activity

The limit on interest deductibility is impacting the way that firms finance domestic mergers and acquisitions which is fueling the existing trend for US companies to pursue foreign M&A.

Why invest in foreign companies?

Growing a business internationally has always been attractive to US companies. Businesses are still structuring for tax purposes, however the main reasons for going abroad are now; the desire to find new markets with more customers, access fresh talent and technology and optimize international supply chains. Foreign markets can be an attractive destination for leading US brands given that if you can succeed in the world’s most competitive consumer market you may find you thrive in less developed economies.

 

Deduction changes

With the recent tax reforms in the US, there have been some changes in the way deductions can be applied affecting the financing of domestic mergers and acquisitions. Often mergers are at least partially funded with debt which would be paid off in the form of a dividend. The dividend would be deductible making it a tax efficient way of financing the acquisition.

This deduction has been reduced greatly in the 2018 US tax reform. Companies were previously unrestricted in the amount of interest they could deduct before tax, but now there is a cap deduction of 30% of their 12-month earnings before interest, taxes, depreciation, and amortization (EBITDA). After 2021, the limitation becomes even more constraining by switching to 30% of EBIT only – that is, the deductions for depreciation and amortization are removed from the calculation, lowering the cap even further.

The deduction applies only when acquiring domestically, so not when buying a foreign company. You can still get the full deduction on dividends for a foreign owned corporation. Based on the current interpretation of the legislation, if you are looking to finance via debt, buying a foreign company will still allow you to benefit from this type of funding mechanism.

Why foreign M&A is more attractive

For insights and an introduction to M&A and carve-outs, take a look at the “M&A and Carve Outs from A to Z” eBook.

Other elements of the tax reform are also likely to drive further M&A and make it more likely that US firms look abroad for these acquisitions:

  1. The tax reform was structured to incentivise businesses to bring money back to the US if they are holding historic earnings off-shore. This windfall of foreign held monies will enable some companies to invest more, with a portion of this spending likely to fuel M&A.
  2. Related incentives to bring money back to the US have also reduced the tax on repatriation of future foreign earnings. Meaning that the return of investment for these foreign assets is improved.

What we are hearing from our clients is that US companies will continue to look to the global market as a way of leveraging faster growth and diversifying their business.

TMF Group

TMF USA are experts when it comes to M&A and international expansion, supported by a strong global presence in more than 80 countries worldwide. While there are always challenges when it comes to foreign investment the recent tax reform has introduced a whole new set of considerations. Please get in touch to find out how we can support your business achieve its global ambitions.

Find out how our services allow our international clients to maintain focus on what matters most to them.

Trans World Acquires Four-Star German Hotel

New York, NY – Casino owner and operator Trans World Corporation has acquired the Hotel Columbus, a modern, four-star 117-room business hotel property, located in the suburb of Seligenstadt, Germany, for $8 million.

Hotel Columbus was acquired for approximately $8 million, inclusive of taxes and closing costs, with approximately $3.3 million of equity from TWC’s available cash and approximately $4.7 million, of local bank financing.

Located near both downtown Frankfurt and Frankfurt international Airport, the Hotel Columbus features five meeting rooms equipped with the latest conference technology, a spacious restaurant and separate breakfast room, each with its own kitchen, two full-service bars, a 32-space parking garage and a 27-space surface parking lot.

Frankfurt, Germany’s fifth largest city, is home to the European Central Bank, Deutsche Bundesbank, Frankfurt Stock Exchange and several other large commercial banks, and ranks amongst the world’s leading financial center.

Trans World Corporation, founded in 1993, is a publicly traded, Nevada corporation, headquartered in the U.S., with all of its gaming and hotel operations in Europe.

11/04/2014

Global Payments Inc. to Acquire Australia’s Ezidebit

Atlanta, GA – Payment solutions provider Global Payments Inc. has entered a definitive agreement to acquire Australia-based Ezi Holdings Pty Ltd (Ezidebit).

Founded in 1998, Ezidebit is a leading integrated payments company focused on recurring payments verticals in Australia and New Zealand.

Under the terms of the agreement, Global Payments will acquire Ezidebit for US$269 million.

Similar to Accelerated Payment Technologies and PayPros, Ezidebit markets its products through a network of integrated software vendors and direct channels to numerous vertical markets.

The transaction is expected to close during the second quarter of Global Payments’ 2015 fiscal year, subject to receipt of regulatory approvals in Australia and the satisfaction of customary closing conditions, the company said.

For the partial year of fiscal 2015, Global Payments expects the transaction to contribute approximately US$25 million in revenues and to be “slightly additive to total company cash operating margins,” it added.

10/30/2014

Waldorf Astoria Hotel Sold to Chinese Investors

New York, NY – China’s Anbang Insurance Group Co. has agreed to pay $1.95 billion for New York City’s iconic Waldorf Astoria hotel, the most ever paid for a standing building in the US by a Chinese buyer.

The purchase of the 1,232-room Art Deco tower on Park Avenue is the biggest real estate deal for a single existing hotel in the entire country and marks the high-water mark of a surge in the acquisition of big-ticket New York City properties by Chinese investors.

Earlier this year, Shanghai-based Greenland Holding Group Inc. purchased this year of a 70 percent interest in the Atlantic Yards project in Brooklyn. The project, recently renamed Pacific Park, includes 14 buildings that are yet to be built.

China’s Fosun International Ltd. paid $725 million in late 2013 for lower Manhattan’s 1 Chase Manhattan Plaza, the former headquarters of Chase Manhattan Bank. The building’s main tenant, JPMorgan Chase & Co., has said it will vacate most of its space in the 60-story tower.

Earlier last year, a group including the co-founder of Shanghai’s Soho China Ltd., put $1.4 billion on the table to acquire a 40 percent stake in midtown Manhattan’s General Motors Building, one of New York’s most-valuable office towers.

According to press sources, including Anbang’s purchase of the Waldorf from Hilton Worldwide Holdings Inc., Chinese investors will have bought $2.7 billion of New York-area real estate in 2014, topping last year’s $2.6 billion.

Anbang is reportedly planning a major renovation of the Waldorf, which could include the conversion of some of the hotel’s upper floors into high-end condominiums.

10/07/2014