How does one transform a small family business into a company worth NIS 50 million? How to find the right buyer for an industrial company? Eran and Amir Berlinsky, the brothers who manage MergePoint, explain everything
After 28 years of hard and dedicated work as founders of a computer company – Shai Eden, Guy Alon, Haim Barash, and Mickey Ben Simon, can look back with satisfaction: They had a healthy and prosperous company with sales of more than NIS 70 million and 80 skilled veteran employees.
But when some of them reached the age of 60, and after a decision was made between the partners that their children would not be added to the group of companies they own, the Dan-El Technologies Group's shareholders decided to sell the company, precisely when it was at its peak – and thus enjoyed their retirement.
The four partners succeeded in selling the company that raised tens of millions of shekels, but they did not do it alone: "Dealing with the challenges of selling such a company was not easy and was accompanied by a lot of concerns", says Guy Alon. "Anyone who owns a successful company understands the level of emotion and involvement that cannot be allowed to operate in a cold and calculated way during a sale."
"Sometimes there is no next generation"
The person who led the sale of Dan-El Technologies was Eran Berlinsky, who together with his brother, Amir, founded MergePoint, which specializes in consulting and escorting mergers and acquisitions processes.
"Many of our clients are people who have worked hard all their lives, and at the age of 60+ they have a successful and prosperous company – and they are beginning to think about the next step," Eran relates. "There are some cases wherein the children of the partners are eager to replace their parents, but in other cases when there is no future generation, professional advice will be required that will include analysis and construction of maximum value for the company and a business recommendation for who the company is right for and why. Here, we come into the picture," he explains.
“Fateful mistakes cost a fortune"
Both brothers recognized the need for a professional to accompany these sales and merger processes – each with personal experience in his or her career. Eran, who served as VP of operations in two large groups, and, was responsible for the merger and acquisition processes, says that: "We sometimes meet company owners who try to lead a sales process on their own and fail repeatedly. The failure is not just that the deal does not close but a lot of fatal mistakes are made along the way."
Amir, who managed the business divisions of Bank Leumi's commercial group, joined Eran after he, "Recognized a growing trend in the economy – where mid-sized businesses seeking to connect with similar businesses, or larger companies, to improve their position vis-a-vis competitors and increase their market share, and in most cases, they do not have someone to manage the process with the necessary professionalism."
What mistakes do company owners make in the search for a buyer?
"Such mistakes are, for example, disclosing data and company secrets too early in the negotiations, or delivering the financial reports, which do not always reflect the potential of the merger, or, the real profits that the company generates, and then incorrect pricing and material expectations are created," Eran explains.
"In general, as long as there is uncontrolled data exposure, no plan, no strategy and without showing all the added value to the buyer – a decline in the value of the company and future damage can be expected."
Accompanying transactions of tens of millions of Shekels
MergePoint, founded by Eran and Amir Berlinsky, has an impressive portfolio of companies that they have accompanied the sale or the introduction of a strategic partner for growth.
Among others, the Company accompanied the sales process of a sanitary products company, Lilo and Tori, whose control was bought for NIS 20 million by Nior Holdings (publicly owned Of Hamat), Regal Beloit, the engine maker purchased by Zoko Enterprises, Diskal, purchased by the Dayan brothers (owners of TradeMobile and Nasa Pai), Maayan Baking Industries, purchased by Shufersal for NIS 8 million, and Pazgal purchased by Rav Bariach and more.
"After finding the best companies for the deal, we discreetly engage with their executives before we even disclose the selling company and make sure they find a rationale for the transaction data. We are progressing to a controlled disclosure stage, and subject to a confidentiality agreement only with companies that have undergone strict screening and feasibility analysis. The process we have developed allows us to maximize monetary value and provide sellers with economic well-being for the next phase of their lives."
The best time for the sale is at its peak
"The best time to sell a company is when it's at its peak or the owner's maximum capability, before a phase of fatigue and reluctance to run the company occurs", Eran emphasizes. "Those who continue to own the business by inertia may end up in a situation where the company begins to lose its position and deteriorate financially, and at this point, it is already much more difficult to sell or merge it with maximum economic value.
"We believe that the iron should be struck while it's hot – when the company registers business success, with the market rising with emphasis on its operating sector, and with the founders still holding the patience and energy needed to manage successful mergers and acquisitions process, even if it is long and convoluted."