Dan Counsell, president and CEO of White Family Investments, has done different types of deals as the Global Head of Corporate Development and M&A for Kohler Co., all of which had different capital stacks attached to them based on whether they were domestic or international deals.
Counsell says Kohler, being a family held business, was well capitalized. That position afforded a lot of flexibility and optionality with its banking syndicate. He says an emphasis on banking relationships was particularly helpful on international acquisitions because international acquisitions can be so complex on so many fronts.
“The complexities we always faced was trying to aggregate cash on a global basis when you have operations in Asia, Europe, Africa and North America,” he says. “And if you're doing international expansion, aggregating that cash to pool up is not as easy as you think it is.”
While intercompany lending is an option, Counsell says what he preferred was using banking relationships to finance those. That helped mitigate any tax ramifications for moving cash around globally. It also allowed the company to borrow money on a local currency basis, which hedges against the local currency in that region. Additionally, it enabled the company to add another local resource to the company’s bench, which was helpful for cross-border acquisitions.
With domestic deals, where currency differences aren’t a factor, Counsell says Kohler also preferred not to finance those because it had a strong cash position and a line of credit that it could easily access to finance deals. He says North American acquisitions tend to be a little bit easier in part because regional banks and local banks add a lot of value to the process.
“Those relationships, they understand who you are. They understand the culture of the business and how your business works. So, in different capacities, we absolutely leveraged a lot of local relationships to get deals done. And just their perspective on the different markets and what EBITDA multiples are and how to creatively get things done was really helpful.”
Counsell, along with Mark Anderson, Co-Owner of Masteq Manufacturing; Michael Cornell, Vice President and Senior Lender of Commercial Banking at North Shore Bank; and Steve Kohl, Vice President - Loan Officer at WBD, Inc., spoke at the recent Milwaukee Smart Business Dealmakers Conference about financing M&A transactions and how relationships factor into a deal’s lending equation. Hit play on the video above to catch the full panel discussion.
