Expertise Beyond the Numbers

Merging Healthy and Distressed M&A Expertise for Better Business Outcomes

When selecting an investment banking and advisory firm, finding one that has a comprehensive and in-depth understanding of all aspects of an M&A engagement could make or break your deal. Our unique process combines our expertise in both healthy and distressed M&A to create an approach that fits the challenges of your business. Our goal is to find the best solution for our clients by utilizing all the resources available to us.

 

Ken Mann is a Managing Director of SC&H Capital, our Investment Banking and Advisory practice, where he provides distressed M&A advisory to private company business owners. With more than 25 years of experience, Mann leads the team’s go-to-market strategy, lender and attorney interface, offer and purchase agreement negotiation, and everything in between.

Greg Hogan is a Managing Director of SC&H Capital where he leads the team’s ESOP practice, provides M&A transaction guidance to business owners and boards, and maximizes results in sell-side representation, recapitalizations, management buyouts, and divestitures. With 20 years of M&A and investment banking experience, he’s advised on deals valued at over billions of dollars.


 

Video Transcription

Greg Hogan: SC&H Capital, historically, has been focused on healthy M&A deals. When we came across distressed opportunities in the past, those were opportunities that we passed on since we didn’t feel that we had the level of experience and understanding to navigate a client through the nuance of a bankruptcy process. Our team was really built to be focused on healthy M&A as opposed to distressed M&A. And so, Special Situations has been a great addition for our overall team along with the distressed capabilities that we can bring to bear in certain client situations. This also gives us the ability to combine some of our expertise, insight, and relationships from the healthy side into the distressed model from an execution standpoint. I think this really drives value and better outcomes for clients.

Private equity is a great example of the types of relationships that we’ve built over years on the healthy side. Many distressed bankers don’t particularly spend a lot of time in that area, just based on the nature of how private equity acts as a buyer in transactions. So, being able to leverage some of those relationships into the correct and proper distressed opportunities, really bringing more buyers to the process, is creating more value for distressed companies.

Ken Mann: Yes, absolutely. I think there are a few areas where the combination of a healthy team and distressed team are of particular value and a real differentiator in the market.

Most distressed investment bankers don’t have much reason to talk to the private equity groups that the healthy M&A team is talking to. They’re just not a fit and they’re not looking for distressed deals. After 30 years of doing this, we have a robust database of those family offices and private equity groups that look at distressed deals. But what’s happened over the last year and a half is that we’re now able to bring healthy-based relationships to bear in cases where, for example, maybe family offices are not pursuing distressed companies, but already have a holding in that space and are looking for an add-on. I think that’s been very valuable.

And we’re bringing some parties to the table that you wouldn’t typically see in a distressed deal. Because our healthy M&A team is working with a different subset of people and selling growing, healthy companies, our clients find that there is no stigma. If you go hire a distressed-only M&A shop, there is a fear—I don’t know if it’s well-founded or not, but there is a fear that this might impact the market. Customers might get nervous, employees might get nervous, and maybe buyers even approach it as a little bit more of a distressed sale because they see who the banker is.

With SC&H Capital, that stigma doesn’t exist because our professionals are out there in the market every day selling and growing healthy companies. So, I think that’s beneficial, too.

Then, the last thing is kind of a hybrid process that we’re able to run. Learning from our healthy M&A team’s deeper, more intentional approach to the problem, of really understanding the industry—and incorporating that where we can on the distressed side. Obviously, sometimes distressed companies really are the proverbial “melting ice cubes” and there’s just not time for that kind of depth. But when there is, we’re trying to recognize that not every deal should be treated the same way.

For instance, what you really have might be a “diamond in the rough”, not a “melting ice cube”. And that more intentional approach, a little bit more time to understand the buyers and the value drivers, really can make all the difference.

Just being flexible and understanding your process better now, evaluating the circumstances, and, as much as possible, using a hybrid model that brings all the benefits of our respective processes is really something that adds value to our clients and gets better results.