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moldmakingtechnology.com 29 CONTRIBUTOR Deborah L. Douglas is the managing director of the Douglas Group, a private investment banking firm focused in plastics M&A.; Capabilities with a wide range of materials also play a vital role in attracting buyers, as they demand much sought-after expertise. For example, plastic molds are made from materials like zinc, aluminum and steel. This requires capabilities that create access to special customers with thinner competition, which can be a strong basis for added value to a buyer. Additionally, any unique ability or tendency to improve reliability or precision will help salability and enhance value. Examples include specialty projects such as multi-cavity molds, insert molds, shuttle molds, silicone rubber handling, resin transfer molding and various prototype molds. Other key criteria beyond the basic industry expertise of a given company might include facilities. Specifically, a facility that may be of particular value to a buyer is a location within a specific geographic range that is being targeted or a location that houses a pre-identified capability that is necessary for substantial expansion. People, their skills and a company culture that closely aligns to key corporate cultural issues like continuous improvement initiatives matter. Efforts to enhance capabilities in applications that are slightly more difficult, more costly and more unique offer increased value and potential for greater long-term marketability, which in turn can improve profitability and make access to growth capital more certain. Processor M&A; Versus Moldmaker M&A; In the world of plastics M&A;, often-accepted "norms" for plastics processors apply differently to moldmakers, so it is important for both parties to understand the dif- ferences. For example, the Douglas Group works with injection molders with sales ranging from $25 million to several hundred-million dollars, and there are not many moldmakers who fit in that range. Often, the difference in sales makes it difficult for molders to appreciate the value of a much smaller supplier of an adjunct part. On top of that, an injection molder's assessment of a moldmaker's financial per- formance subjects the moldmaker to the "norms" of injection molding. For example, buyers looking for moldmaking capabilities commonly determine profitability as they do for buying and selling activity in injection molding. That is, they look for financial performance with earnings before interest, taxes, depreciation and amor- tization (EBITDA) that is strong enough to compare well with injection molding operations around the country. Companies with EBITDA of 7–13 percent of sales are considered average performers. Those with EBITDA in the high teens are per- ceived as great performers, commanding a higher acquisition price. Speed of collection is another vital difference between processors and moldmak- ers that all parties must consider. Buyers inevitably look for strong cash flow and a solid balance-sheet performance. However, moldmakers commonly face customers that delay full payment for molds until the molds are in use and producing income. Buyers do not expect to add increased risk by accepting long delays in customer payments. This should be another consideration for the buyer who is assessing a moldmaking acquisition opportunity. M&A; activity in moldmaking can give companies a great boost toward available capital and financial resilience. In 2018, this series will continue to provide insight to help moldmakers better prepare for any M&A; opportunities in their future. FOR MORE INFORMATION Douglas Group / 314-991-5150 / ddouglas@douglasgroup.net / douglasgroup.net • Compact w/ Multiple Mounting Options • Greater Max Pressures & Stroke Range • Quality Control: Better Steel, Extra Seals, & 100% Pre-Tested • The Only Small Block Cylinders with Integrated Switches We Only Make MOld Cylinders injection Molding is in Our dna For Sales and Support in North America contact: Call: 909.941.0600 www.albaent.com Design custom cylinders and download 2D & 3D files, catalogs & tech manuals. Register Now at: VegaCylinder.com Configure Your CYlinders