March 28, 2023
Insight Into the Power of Cross Border Sell-Side Deals
Gerardo Dal Piva, a partner at Translink Italy, takes us through the process of the recent successful acquisition of Italian Dreno Pompe to US-based Industrial Flow Solutions.
In January 2022, Translink Italy and Translink in the United States acted as the exclusive advisors on the sale of Dreno Pompe to Industrial Flow Solutions LLC (IFS). The sale enabled IFS – a leading US-based provider of industrial pumping solutions – to expand its product offering and penetrate the European market by assessing local production and supply chain capabilities as well as new sales channels in the continent.
This successful deal highlighted the many nuances of sell-side cross-border deals, as well as the advantages of using an advisor with global representation.
Unpacking sell-side, cross-border deals
In a sell-side deal such as this, it is often a family run business that might never have been exposed to the acquisition process before. Translink Corporate Finance is well positioned to advise first time sellers, equip them with the necessary knowledge and steward them through every step of the journey.
Start with a conversation and market research
The first phase of any sell-side deal is, of course, the valuation discussion and research into what the market is likely to pay at that time for that type of business. Here, being direct is key. If the client’s expectations are higher or vastly different, we prefer to leave the project for the time being until the client is ready.
From the first meeting with Italian based Dreno Pompe, lengthy discussions about the future of the business and their expectations were had. At the time, the family had two different companies in two different sectors and wanted to focus their time and financial resources on one of these.
Given the very fragmented pump industry in Italy, the decision was made to sell Dreno, a small company but one with extremely high margins and a top best performer within the sector. Further discussions and analysis helped our understanding of what the seller wanted in terms of value, future involvement, the continuity of the business post-acquisition and what types of buyers they would consider.
Begin the hunt for appropriate buyers
The next step was an in-depth search for potential buyers, an effort made across several Translink offices. Here, there is a tremendous amount of data mining involved, looking at recent transactions within this sector by private equities or strategic investors and liaising with partner offices around the world. This complex analysis and research require global sector expertise and knowledge.
What resulted was an impressive list of 80+ prospects globally, all located outside of Italy.
Based on the size of the company, the country where they were based and aligned business values, we focused the list to 24 candidates who were all then invited to consider an acquisition.
Because the acquisition of Dreno Pompe was such an attractive offer, the response received was excellent, with 16 potential buyers initially interested, and six non-binding offers being received.
At the end of this process, Dreno Pompe decided to go with IFS, which is also a portfolio company of Chicago-based private equity group, May River Capital.
The very collaborative, hands-on approach found both parties focused throughout the process on finding the right solution.
Learnings to take away
Much like in the case of the recent Pedrollo deal – which saw this Italian based world-leading electric water pump producer acquiring US-based Superior Pump – often the best solution cannot be found within one’s region. Whether on the buy-side or sell-side, parties need to look in a different direction and in different geographic locations.
To be serious and successful within the M&A space, you must have international representation.
Now more than ever, we are acting in a global market and need a network of deep relationships worldwide.
As an advisor, Translink bridges that important gap between diverse cultures and business approaches and ensures that all players are aligned.
Our 50 years of experience and representation, now across five continents, means that we have a deep understanding of the M&A cross-border process, the many nuances involved, and the technical expertise required to accelerate the process as much as possible so as not to lose momentum. Cooperation is key – both with the client and amongst our offices. We have seen myriad cross-border deals come to fruition between the US and Europe and we expect this proliferate further.
This acquisition enabled Dreno to scale at pace. It additionally leveraged IFS and May River’s capabilities to sell Dreno’s pumps in North America. The deal, which started in May 2021, took only six months to conclude.