Buy-ins, Mergers & Acquisitions
Many private homebuilding companies are seeking capital to help
them survive the housing downturn, and to purchase assets at deep
discounts which will support the growth of the company once the
housing market begins to recover.
Fortunately, there are numerous investors and buyers interested
in direct investment in homebuilding companies, often as an alternative
to buying distressed land assets which the investor may have no
experience in managing.
Mergers and acquisitions arranged during the recent housing boom
were generally purchases of 100% interest in a company. Now,
investors and buyers are interested in acquisitions of a partial
interest in a homebuilding company, also called a “buy-in.” The
investor or buyer might acquire 51% of a builder, recapitalize
the business, and provide some capital specifically to acquire
distressed assets. The builder contributes selected assets
to the new venture, and may have the ability to earn back some
equity as a result of performance. The transaction will provide
for multiple exit strategies, allowing either party to exercise
an option to acquire the other’s interest, or for the parties
to join together in selling the revitalized operation to a third
party.
Michael P. Kahn & Associates is the industry leader in arranging
and closing mergers & acquisitions for homebuilders. We already
have a few partial interest acquisitions underway, and as expected,
our experience in valuing homebuilding operations, assessing management
teams, and structuring transactions is positioning Michael P. Kahn & Associates
as the industry leader for these transactions. In time, the
housing sector will improve, and the public and large private builders
which used M&A to support their growth plans will once again
be on the lookout for desirable candidates.
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Buyer or Investor Representations
Michael P. Kahn & Associates has assisted numerous national
and private homebuilding companies in planning their entry into
new markets, or expansion of existing operations, through the merger/acquisition
of qualified homebuilding companies with local expertise. This
service is also applicable to investors seeking opportunities for
direct investment in homebuilding.
The process may include:
• Identifying private homebuilding companies in client specified
markets
•Winnowing the list to match the client’s criteria,
including size in annual deliveries, product type, or price point
• Contacting local homebuilders on a confidential basis to
gather information on product, pricing, etc.
• Visits to candidates’ operations to gather financial
information, view product, and evaluate competitive position.
• Discussions with local housing experts and brokers
• Prioritizing candidates
• Negotiations with candidates
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Valuations of Homebuilding Assets & Operations
Michael P. Kahn & Associates is especially skilled in developing
valuations of homebuilding operations, because we are regularly
involved in structuring transactions in the housing sector. We
can evaluate a company’s value in terms of current market
realities and structures, recognizing that transactions completed
in past years may no longer be representative.
Valuations can be useful in considering
the sale or merger of a homebuilding business, but may also
be used for estate planning and other planning purposes.
To determine a valuation, one of our associates conducts an onsite
visit over one or more days, learning about the operation and reviewing
financials in order to identify factors affecting the value. Shortly
after the visit, our clients receive written reports detailing
the valuation and approach used in establishing the valuation,
as well as any structuring details which would affect the valuation.
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Divestitures of Divisions or Related Companies
Some homebuilding companies want to sell divisions or related entities
which no longer fit with the company’s goals and strategies.
Alternatively, divisions or companies may be sold in order to raise
capital for pursuit of other opportunities.
Michael P. Kahn & Associates assists in arranging the sale of
divisions or related companies, utilizing its extensive contacts
in the housing industry.
In many cases, we first prepare a Business Plan or other documents
to aid in arranging the sale (see Preparation of Business Plans
in the list of services).
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Public or Private Debt Offerings
Michael P. Kahn & Associates helps managers of growing companies
recognize their ability to access debt in the public market and
through private placements with institutional investors.
We will prepare you for introductions and assist you in negotiations
with underwriters, legal and audit firms. We work with the selected
team to create a timeline for successful execution.
We will also assist homebuilding companies to renegotiate the terms
of existing debt.
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Profitability Analysis and Tune-up
Our experienced team can evaluate your organization and financial performance
in comparison to others in the same or similar markets and offering similar products.
We can identify areas within your operation that are the sources of slippage
in profitability, and we can make specific recommendations for improvement. If
required, we can assist in the implementation of revised procedures designed
to eliminate the slippage.
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