MM M&A - 028: Strategic Exit Planning for Equipment Leasing and Finance Companies

In this episode, we discuss strategic steps for Equipment Leasing and Finance companies as they grow and evolve. The leadership of some of these businesses may decide to remain a certain size and complexity and be " lifestyle businesses", providing healthy cash flow to the owner(s) while they continue to run the business.

However, other options exist, and exiting the business for a favorable multiple to a bank or other buyer can be an excellent strategy, the dream plan for many entrepreneurs. 

In this interview, we interview Bob Rinaldi and discuss the potential to grow and leverage a business to realize a win-win exit strategy. 

This episode is a great follow-up to our previous show, Start Early & Exit Right, as we dive deep into many of the concepts of M&A rationale. What's unique about this episode is that it is geared toward a specific target audience, our friends in the Equipment Leasing and Finance (ELF) industry.

In this episode we cover:

• How partners such as Rinaldi Advisory Services (RAS) and Colonnade work with Equipment Leasing & Finance (ELF) companies to prepare for a successful sale (1:00)
• What are the biggest challenges for the independents as they look to be "bank ready" for an acquisition? (4:00) 
• What are some of the biggest challenges for banks pursuing an acquisition of an equipment leasing company? (9:30)
• What determines the level of a premium in the sale price that an ELF company can expect? (20:00)
• What has M&A activity looked like in recent years and what are the prospects? (23:00)
• What about Private Equity buyers in this space? (26:30)

How partners such as Rinaldi Advisory Services (RAS) and Colonnade work with Equipment Leasing & Finance (ELF) companies to prepare for a successful sale (1:00)

Bob: My practice has evolved around three target audiences in the equipment leasing space. About 60% of my clients are independent leasing (ELF) companies that I work with through the Confidential CEO Resource℠ model. This is multi-year exit strategy planning. Whether the company exits or not is not important. The idea is to get them from point A to point B so they're prepared if that time comes.

The second part of my practice is working with banks, predominantly community banks who are looking to get into the ELF space.

Third, I work with a handful of service providers in the industry, as well.

Rinaldi Advisory Services (RAS) offers the Confidential CEO Resource℠ (CCR) as a robust, full-scope advisory service that provides clients with a broad base of support for long-term strategic management. RAS works with CEOs and Principals to provide meaningful analysis and actionable insights. The aim is to help ELF senior management arrive at strategic and tactical decisions geared toward managing growth as well as operational and financial efficiencies.

Colonnade has deep experience in the ELF industry. Colonnade is a leading investment banking firm that has completed over $9 billion in M&A transactions for clients in the business and financial services industries. Colonnade has advised many companies in the EFL sector on strategic transactions. Please see our Quarterly Updates on the ELF industry here.

What are the biggest challenges for the independents as they look to be "bank ready" for an acquisition? (4:00)

Bob: The biggest challenge is predominantly that these founders/owners are very much entrepreneurs. They started the business. They're very much involved in the everyday transactional nature of their business. They don't have the time to gain the perspective to look at their company objectively and determine what needs to happen to be a better company from a non-transactional standpoint or to be a better company for the purpose of acquisition.

Jeff:  Let's drill down a little bit on some of the biggest challenges for the independents. There's size and scale, where are you today and where are you going? Banks are the natural resting home for specialty finance companies, and ELF companies are such a great asset class for banks in particular. Obviously, they're a number of large independents, but from the bank's perspective, what are the other things you see where companies need to focus? Is it finance and accounting? Is it operations? Is it servicing?

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