We have all
attended industry events that failed to live up to the hype of the title.  I was appropriately skeptical this past
Wednesday as I drove over to the Tysons Corner, VA office of law firm Patton
Boggs for an executive breakfast event titled “Lessons of the Legends: the Art Before
the Deal.”

Wow…was I
pleasantly surprised.  The panel featured
two prominent executives: 

Ken Bartee,
ManTech MBI

http://www.linkedin.com/pub/0/5/845
 

Sterling Phillips, Pequot Ventures

http://www.pequotventures.com/team.php?ID=50&catid=18

Both Sterling and Ken steered
their respective companies – McDonald Bradley and Analex Corporation -- through
impressive growth strategies, combining organic sales growth with targeted
acquisitions to enter new markets.  The
end result for each company:  an eventual
acquisition at a valuation that provided a stunning return for investors.

John Hagan
of BB&T Capital Markets/Windsor Group served as the panel moderator.  He is one of the region’s top investment
bankers, and his firm is considered the premier provider of M&A advisory
and transaction services to government contractors.

Here are a
few highlights from the discussion:

-At McDonald
Bradley, a targeted M&A program was put in place to help the company more
quickly enter new markets.  Ken joined
when sales were about $3M a year.  Five
acquisitions later McDonald Bradley’s revenue exceeded $55M with about 50
percent coming from acquired companies.

-From a
seller’s perspective, Ken acknowledged the auction process employed by investment
bankers is a hassle.  Yet, it typically leads
to a higher price and gives the seller multiple options to consider.

-Ken also
explained that buying a company of less than $10M in revenue is most
challenging transaction to pull off.  “There
is more emotion from the seller around the valuation of the company and they
are often inexperienced in the process,” he said.

-Perhaps Ken’s
best advice for a company positioning itself for sale is to follow industry
standards when it comes to operations, governance and staff compensation.  “The more a company looks different…, the less
the buyer will understand you.”

-Sterling
Phillips’ situation at Analex was quite different, however he also believes in
the auction process as a seller.  Analex
was publicly traded and Sterling
explained that as a CEO and director his number one priority was to optimize
shareholder value. 

-An auction
also provides a level of legal protection from shareholders who might question
the value of a transaction.  Sterling explained that
any major corporate or financial initiative required good advisors, as well as
a well-documented process.  “In a public
company, if you try to be a cowboy, you end up as a defendant,” he said.

-Here’s
another great quote from Sterling about how his job as a partner in a private
equity firm is a lot easier than the requirements of a CEO, “In the boardroom,
the doughnuts taste a lot better when you’re not the CEO.”