Jones & Co. adds services

Saturday, November 1, 2008

CHARDON, Ohio--Sandra Jones & Company, a long-time provider of M&A and marketing services for integrators and manufacturers, has teamed with Ray Lynn, former manager of ADT’s and HSM’s acquisition teams, to begin offering valuation and financial services to dealers and integrators.

“This is what the company has done since we founded it in 1990,” said Jones. “We strive to help people optimize their profits. Sometimes you just need another set of eyes to look at the books and that goes hand in hand with what we already do.”

She said she hasn’t had as much experience working with residential dealers as she’s had with commercial integrators, but adding Lynn, who’s conducted due diligence on some 200 residential companies over the years, makes her company uniquely qualified to tell installation firms what they’re worth on the open market.

“What we’re trying to do is give these guys an idea of where they stand,” said Lynn, who participated in closing purchases of some 80 dealer organizations. “Then we tell them what they can do to improve that valuation.”

Lynn said the most common recommendation he finds himself making involves getting clients to focus on their accounts that are over 90 days past due. “The typical industry formula is that any RMR associated with over-90 doesn’t get applied against the multiple,” he noted, and too many companies realize just how many of their accounts are past 90 after they’ve already sat down at the negotiation table.

“If you have sole proprietors,” Lynn said, “the way they often operate is, ‘Do I have cash in the bank?’ If so, they think they’re good to go. But a lot of the time you look at those companies and a significant portion of their accounts are past 90 because they’ve haven’t focused on that. They just look for a good cash flow.”

Jones said another common place the company can provide quickly applied advice is in compensation plans. They “often don’t support the business goals,” she said. “They put commission programs in place once, and then they leave them there. But as business goals and strategies change, the compensation plans need to change as well. Otherwise, you have a sales force that’s not working toward the same goals as the company; you’re not rewarding the best performers, and you’re keeping underperformers overcompensated.”

Lynn said this kind of valuation is more important than it’s been in a while because the current financial situation has made acquirers more careful. “Buyers still have their mega lines of credit in place,” he said, “and the capital is there,” nor are multiples being depressed, but “the closing seems to be a lot slower. I think people are a little more wait and see.”

Some of this, he said, may also be due to the upcoming election. Because of certain statements made about raising the capital gains tax by Democrats, “if the Democrats come in, I expect to be very busy for the last two months of the year.”