Punching Out! Keep Your Saw Sharp

My hobby is prairie restoration, which means that most weekends you will find me in the Cook County Forest Preserves near Chicago with a chainsaw or some other power tool. My favorite activity is to cut non-native invasive trees to make room for native plants and other ecological activities. Lately, we took on a project to cut up trees that have been down for 10+ years. Most of these trees have become semi-petrified and very hard to cut. As I was out there on a recent weekend in 90-degree heat in soaking socks, I noticed the parallels between chain sawing and business.

It sounds very simple, but work is much easier with a sharp saw. Abraham Lincoln may have said, “Give me six hours to cut down a tree and I’ll use four hours to sharpen the ax.” Chainsaws are much quicker, but the concept still applies. We usually take our dull chains to the local Stihl dealer to get them Game-of-Thrones’ level sharp. In between trips to the dealer, we use a file to sharpen up the saw.

In an M&A deal, being prepared is extremely important. The company might be doing great, but not being prepared is like having the best chainsaw in the world and a dull blade: you get nothing but smoke. It is important to take the time to get prepared before going to market. For example, getting financials reviewed or audited, having your attorney review your corporate documents, and having a sell-side quality of earnings prepared will give buyers more confidence. This leads to fewer questions and a smoother process. Buyers prefer to get sharp answers quickly. It takes time, energy, and money to prepare for a deal, but it can pay dividends through higher valuations, better terms, and a quicker deal process.

Why would anyone use a dull blade? Because it is cheap, familiar, and does not take much investment. It is easier in the short term to just keep using a dull blade, but the output will not be ideal. As Wolfgang Puck said, “The best restaurants have the sharpest knives.” Nobody likes mushy tomato slices.   Customers, employees, suppliers, and others can tell if a business is using old equipment. If the Employee of the Year is the maintenance guy, something is wrong.

Sometimes, you do not notice that the blade is getting dull. It is the Stockholm syndrome of chainsawing: the chain is going dull, but it happens gradually so you do not notice. Somehow, you are working harder but getting worse results.  If you are getting more smoke than sawdust, it is time to step back and re-assess the situation. It might be time to sharpen or replace the chain. Many owners do not realize that the company has fallen behind, let alone why. Take a step back and ask customers or other related parties for honest feedback. If the owner does not do it, the buyer certainly will, and the owner will end up leaving money on the table.

New, well-maintained equipment is more efficient and often pays for itself. It is not always easy to bite the bullet and make substantial investments in the business, as that can be risky. It is easier to use an old chainsaw that you have fixed 20 times than buy a new one that has some new, unfamiliar features. However, the first time you hear that sucker roar you will wonder what took you so long.

By the way, if one is wearing safety equipment, is properly trained, and is careful, the chainsaw is not the most dangerous part of cutting down a tree. The most dangerous factor is the tree itself. The tree might look like it will fall one way, but it can end up falling a different way or getting stuck in another tree. What is even more dangerous is your nearby buddy who is also cutting down trees but might not be looking out for you. This just shows that one must be prepared for the unexpected.

M&A deals and running a business are hard work, just like chainsawing massive, rock-hard downed trees in 90-degree heat and humidity. Using a dull blade or old equipment just makes everything harder when chainsawing, just like being unprepared makes it much harder to cut the best deal.

Tom Kastner is the president of GP Ventures, an investment banking firm focused on sell-side and buy-side transactions in the tech and electronics industries. GP Ventures has offices in Chicago and Tokyo, with five people in total. Tom Kastner is a registered representative of, and securities transactions are conducted through StillPoint Capital, LLC—a Tampa, Florida, member of FINRA and SIPC. StillPoint Capital is not affiliated with GP Ventures. 

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2021

Punching Out! Keep Your Saw Sharp

06-30-2021

It sounds very simple, but work is much easier with a sharp saw. Abraham Lincoln may have said, "Give me six hours to cut down a tree and I’ll use four hours to sharpen the ax." Chainsaws are much much quicker, but the concept still applies. Tom Kastner explains how this relates to your business.

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Punching Out! How to Stand Out Among Other Sellers

05-26-2021

It is a very busy time in the M&A world. Many owners in the electronics industry, especially in the PCB and EMS sectors, are of retirement age. Meanwhile, there is a lot of interest from both competitors and private equity firms in making acquisitions in the space. Because there are a lot of deals happening, it is important to know how to stand out compared to other sellers.

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Punching Out! 2021 COVID and Post-COVID M&A Outlook

04-27-2021

The first quarter of 2021 was the busiest opening quarter ever for global M&A (since records started being kept in 1980), according to financial data company Refinitiv. The total global deal value was $1.3 trillion, which is a 94% increase over the same quarter in 2020, which was feeling the effects of the pandemic. But don't pop open the champagne quite yet.

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Punching Out: ‘If I Were 20 Years Younger’

03-31-2021

We hear a lot of owners say, ‘if I were 20 years younger, I would…’, meaning they would make major investments or strategic changes if they had the time to realize the return on investment. Other reasons for not making investments are the lack of funds, lack of energy, etc. However, we feel that the return on investments does not always take as much time, money, and energy as owners think.

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Punching Out! The ROI of M&A

02-15-2021

The common stigma surrounding M&A is that 80% of deals do not reach expectations. Still, deals grab headlines, and many companies use M&A as their primary growth strategy. Is there a disconnect between reality and the headlines, or is the stigma of M&A failure not really true?

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Punching Out! The ‘Dream’ Business Exit

01-12-2021

Almost all business owners have a “dream exit”: a well-financed buyer flies in, offers up a suitcase full of cash with no strings over a steak and lobster dinner, and the next day the owner is sitting on a beach with a mai tai. These kinds of dream exits do occur, but they are extremely rare. Tom Kastner explains.

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2020

Punching Out! 2020 M&A Wrap Up

12-21-2020

According to our count, there have been 19 EMS deals and 7 PCB (bareboard) deals in North America so far in 2020. There are several deals that we heard of that are in the works and there are probably many small deals that we have not heard of. Given the general economic climate in 2020 and the virtual prohibition on overseas deals, the number of completed deals so far is impressive.

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Punching Out! Dealing With Burnout

11-24-2020

Owners of companies in the PCB and PCBA industries are used to ups and downs, but yeesh, 2020 has been tough. The good news is most owners have survived all kinds of stressful situations in the past, and hopefully, better days are ahead. Meanwhile, when an owner is faced with constant, elevated levels of stress, it is easy to feel burnt out. Tom Kastner details ways to deal with burnout at work.

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Punching Out! Bringing PCB and PCBA Industries Back to the U.S.

10-14-2020

Although U.S. PCB companies have been waving the flag for years, the COVID-19 crisis has shined a spotlight on the U.S. dependency on overseas suppliers for many electronics products. Tom Kastner lists five ways production will come back to the U.S.

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Punching Out! Are We Selling a Business or Watching ‘Die Hard’?

09-15-2020

There is a lot of drama involved in selling a business. According to Wikipedia, the movie series “Die Hard” is about “a police detective who continually finds himself in the middle of violent crises and intrigues where he is the only hope against disaster.” Tom Kastner explains how if you use the “strong or powerful” definition of “violent,” that pretty much describes many M&A deals.

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Punching Out! Due Diligence: Quality Inspection for Business Sales

08-12-2020

Although the due diligence process can be exhausting, Tom Kastner explains how it is important that buyers and sellers keep their eyes on the prize of closing, stay positive, and don't allow emotion to run the deal.

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Punching Out! Acquiring a Distressed Company

07-20-2020

Everyone loves a bargain. Just like buying an old car or a fixer-upper house, you can get a great deal, or sometimes you get what you pay for. Tom Kastner shares some thoughts on acquiring a distressed or underperforming business.

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Punching Out! 20 EMS Deals in the Past 12 Months

06-15-2020

Does it seem like there have been a lot of EMS deals in North American in the past 12 months (June 2019 to May 2020)? Tom Kastner highlights some of the major M&A deals, as well as predictions.

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Punching Out! Pivot Like MJ

05-11-2020

Most successful businesses have pivoted at least 4–5 times during their history. The COVID-19 pandemic has forced many companies to close and many others to find other business models. You might not want to stop making boards and start delivering for Amazon, but Tom Kastner explains how it is good to keep looking for new opportunities.

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Punching Out! Stress Testing Deals

04-07-2020

Most M&A transactions fall apart several times before closing, even during normal times. When a major crisis occurs—whether internal or external—a deal can truly be stress tested. Tom Kastner shares 12 tips his company has used (and are currently using) to keep deals rolling.

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Punching Out! What Is a Quality of Earnings Report?

03-23-2020

For the past several years, quality of earnings reports (also called “Q of E” reports) have become more popular in M&A deals. Whether the seller’s financials are audited, reviewed, compiled, in QuickBooks, or on the back of a napkin, a Q of E report helps buyers become more comfortable with the seller’s numbers and identifies risks in the business. Tom Kastner explains.

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2019

Punching Out! Why Buy a PCB/PCBA Shop?

12-31-2019

Overall, the U.S. economy is strong, and manufacturing has seen a resurgence over the past decade. Still, the overall trend for investors and small company buyers for 20 years has been in asset-light, tech-enabled services businesses, such as Uber, Amazon, Airbnb, etc. Given that background, why should someone buy or invest in a North American manufacturing business such as a PCB or PCBA company? Tom Kastner explains.

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Punching Out! Lessons From Recent PCB/PCBA Buyers

11-25-2019

Tom Kastner reached out to several buy-side clients as well as others who have recently made acquisitions in the PCB and PCBA sectors. He shares some common themes and their thoughts on what went right, what went wrong, and what they would do differently next time.

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Punching Out! Trust Is a Major Factor in M&A Transactions

11-04-2019

Trust is critical in M&A transactions. Both parties are naturally suspicious of each other, and tensions run high even in the smoothest of deals, so any small molehill can be magnified into Mt. Everest. To avoid bigger problems, Tom Kastner emphasizes the importance of establishing trust from the beginning and continuing to be trustworthy throughout the process.

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Punching Out! SMTAI 2019

10-10-2019

My firm goes to a lot of trade shows—at least one each month—because it is a great way to meet business owners as well as their trusted advisors. Trade shows are also an excellent way to hear industry information that otherwise we would not hear (aka rumors).

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Punching Out! What Goes Into the Confidential Memo?

09-23-2019

One of the key materials used in the business sale process is the confidential memo or book, which is essential if an owner is considering a sale of the business. Even if you are considering a sale in the future, it is good to have a basic book ready in case an unsolicited buyer comes calling.

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Punching Out! Mid-2019 M&A Round-up

08-22-2019

There have been quite a few deals in North America in the PCB and EMS spaces over the past 12 months. I have attempted to track down a fair number of these deals and list them, but many are not publicized. What’s remarkable is that so many of these deals involve private equity. PE firms are certainly a great source of liquidity for owners in these sectors. PE-owned firms tend to make a lot of add-on acquisitions, so we’ll look at these companies to acquire many smaller shops in the coming years. Here are some of the most notable PCB, PCBA, and EMS deals since December 2018.

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Punching Out! Why Can’t You Sell Your Business on eBay?

07-25-2019

Wouldn’t it be a lot easier if we could buy and sell companies online? Owners could avoid a lot of trouble and fees as well as get deals done quicker. Unfortunately, it’s not that easy. Here are seven reasons why a business cannot be sold online and how owners can make the sale process go more smoothly.

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Punching Out! Exit Planning 101

06-26-2019

Proper planning can take away many headaches for the seller and buyer as well as increase the value of the company, help obtain better terms, and overall, make it easier to complete a transaction.

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Punching Out! Delegate and You Shall Be Set Free

05-29-2019

It is good for owners/CEOs to step back a few times a year and think about what they do well, what they like to do, and what others can do better. Delegating simple tasks, like sweeping floors, is easy, but delegating sales management or quality control might be tougher. Although delegating is difficult, almost no business can grow solely on the efforts of the owner.

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Punching Out! What’s Special About Your Business?

04-29-2019

To help sell your business to buyers, or to sell your products and services to customers, it is a good idea to find out what is special about your business. It is also important to know how to communicate what's special. Read on to find out how you really compare to the competition, and what concrete metrics and KPIs you can use to judge your own performance.

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2018

Punching Out! Avoid Surprises During the M&A Process

11-27-2018

No one likes surprises, especially in merger and acquisitions (M&A) deals; there are enough unknown variables to start with. As the deal progresses, tensions start to rise, so any additional variables can cause a disproportionate response. Below are some ways to avoid surprises, and how to deal with them when they come up.

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Punching Out! How to Avoid Key-Person Risk

09-06-2018

PCB West 2018 is next week in Santa Clara, California (September 11–13). Can you go to the show and visit a winery or two without your shop falling apart? Have you taken a vacation in the past few years? Can you afford to not do board rework on a holiday weekend, like this past Labor Day? If you answered “no” to any of these questions, you may have key-person risk.

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Punching Out! Beware of Customer Concentration Risk

08-08-2018

One of the biggest risks in M&A is customer concentration risk. It is hard to avoid as a business owner; if a customer is giving you orders, you generally take them! The next thing you know, your customer has 90% of your sales and they own you. We see this a lot in both the PCB and contract manufacturing industries.

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Punching Out! Dealing with Family Businesses

06-28-2018

Some families may have spent this past Father’s Day discussing family business issues, including when, how or whether to pass the baton. There are several issues to consider when dealing with a family business.

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Fact or Myth: Do 80% of M&A Deals Fail?

05-09-2018

We are often asked by business owners if the commonly quoted figure is true that 80% of mergers fail to meet expectations after closing. There is a fair amount of research on large ($1 billion+), public deals that suggests that the 80% post-closing failure rate may be true.

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How to Prepare for a Smooth Post-M&A Deal Transition

04-05-2018

Selling a company is an exciting process, as well as time-consuming, stressful, and complex. Both sellers and buyers are sometimes so caught up in the deal that they forget to properly plan the post-deal integration.

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Cross Border Deals: What to Look for and How to Manage

02-22-2018

My firm has been approached by foreign firms several times this year and in 2017 who want to acquire PCB, PCBA, or other electronics companies in North America.

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Punching Out! Top 10 M&A Deal Killers

01-25-2018

I am often asked about some of the reasons why M&A deals die. Although this is a very painful subject, hopefully through sharing these reasons we can help some deals survive the M&A process. Here are my top 10 M&A deal killers (and some of the solutions).

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2017

Punching Out! Survey on State of the North American PCB M&A Market

12-29-2017

Recently, my firm surveyed about 20 PCB manufacturers in North America with an estimated greater than $10 million in revenue. Quite a few replied, and we have spoken with many others throughout the year, which gives us a good view on the state of the PCB market. If I did not contact your shop recently, it is because we already talked within the last 12 months.

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Punching Out!: PCB/PCBA M&A Top 10 FAQs

11-13-2017

We talk with owners a lot about the possible sale of their businesses. Here are the top 10 questions asked by PCB/PCBA shop owners about the process.

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Punching Out! Case Study—Lessons on a Deal

10-19-2017

This is a story of one of our clients, a U.S. contract manufacturer that sold a few years ago. To maintain confidentiality, the names have been changed and the details slightly modified.

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Punching Out! Making the Process Easy (M&A Process Engineering)

09-06-2017

In the M&A world, there are companies that make it easy (or at least easier) and those that make it difficult. By making the process easier, sellers should see better valuations and terms, and have a smoother deal process.

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Punching Out! Bridging the Valuation Gap Between Buyer and Seller

06-13-2017

PCB acquisitions in the U.S. are down so far in the first five months of 2017, with only two announced deals (HT Global Circuits’ acquisition of Pho-Tronics in April; American Standard Circuits’ acquisition of Camtech in May); and one anonymous deal that I am aware of that has not been announced. This compares with 11 announced deals in 2016. There are a variety of reasons for the decline, but one reason could certainly be the valuation gap between buyer and seller.

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Punching Out! How to Put a Wrench in the Rumor Mill During the Sale of a Company

05-23-2017

When selling a house, the owner’s agent puts a sign in the front yard, posts info on the Web, and invites buyers over for an open house. When selling a car, we put a sign on the windshield and take out an ad with our phone number on it. However, when selling a business, some owners do not even tell their spouses.

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Punching Out! Selling a Company—Seeing it as a Triumph, Not a Defeat

04-25-2017

Somehow, there is a still a stigma that selling a company is a negative for the owner. Many people think that there must be something wrong, otherwise, they would not be selling. In reality, exiting a business should be looked at as a triumph for the owner, not a defeat.

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Punching Out! 10 Ways to Increase the Value of Your PCB/PCBA Shop

03-22-2017

I have worked with a wide range of companies in the PCB, PCBA, and other tech and electronics sectors. Through the years, I have developed some ideas on how companies can improve their valuation. Some of these ideas are simple and involve little cost, other ideas are more long-term and involve more effort or investment.

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Punching Out! When Should I Call an Investment Banker?

02-20-2017

The quick answer is ASAP. Even if you are not considering the sale of the company for 5−10 years, it is best to be educated and prepared. Give your advisor (or a few advisors) a call to discuss what can be done to get the company ready for a future sale. The worst time to call an i-banker or business broker is when you are forced to sell due to poor performance, health issues, pending bankruptcy, or dispute with a partner or manager.

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Punching Out! Types of Company Buyers in the PCB and EMS Sectors

01-09-2017

Mergers and acquisitions in the U.S. PCB sector have been in the news recently, with at least 12 deals completed over the past year, and several more in the works. In contrast, the EMS sector has been relatively quiet, but that may change now that the presidential election is over.

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2016

War Stories from the Front Lines of Deal-Making

09-16-2016

Here are some war stories from my experience in working on M&A deals in the PCB, EMS, and electronics fields. The names and details have been changed to protect the innocent.

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Timing: When is the Best Time to Sell?

08-18-2016

A few of the top questions we receive relate to the timing of the sale of a business. The first is, "Is now a good time?" The second one is, "How are market conditions?" These are the top FAQs.

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The PCB Sector—What Buyers Look for and Recent Deals

07-14-2016

The past few months have seen a rash of PCB deals in North America, for a variety of reasons.

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What the Heck is Adjusted EBITDA?

06-07-2016

If you are looking to sell or buy a business, you will most likely come across the term ‘adjusted EBITDA.’ Other common terms are adjusted cash flow, owner’s discretionary earnings, earnings after add-backs, etc. What do these terms mean, and why are they important?

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The Additive Process: Tips on How to Buy a Board Shop or Assembly House

05-14-2016

One of the quickest ways to grow a business is to acquire another business. At the same time, acquiring a business can be risky, and a really bad deal may put your original business in jeopardy. Here are some tips on how to make acquisitions.

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Your Baby’s Ugly, Now Get Over it (How to Work with Buyers)

04-14-2016

Here’s a scenario: An owner has gone to market and is starting to get feedback from buyers, and shockingly, not everyone appreciates the hard work and achievements that went into the business. Buyers may not understand the business, or they may be trying to position things for a low offer. In any case, it is important to know how to work with buyers.

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Putting Together the Deal Team

03-21-2016

When preparing to sell, remember the old saying, “He who represents himself has a fool for a client.” While many owners might be tempted to go it alone, in my experience it pays to have a deal team to help prepare a company (and the owner) for a sale

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Punching Out: How to Sell Your PCB/Assembly Shop

02-04-2016

You are thinking of selling your PCB or assembly shop. Perhaps you are contemplating retirement, you have no successors, and the thought of going to the office on Monday is driving you crazy. This column is designed to help your planning efforts. Future columns will go deeper into each subject

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