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BUSINESS NEWS NEW CONSTRUCTION STARTS IN APRIL SLIDE 8 PERCENT: NONRESIDENTIAL BUILDING, MULTIFAMILY HOUSING RETREAT AFTER MARCH GAINS The value of new construction starts in April fell 8 percent from the previous month to a seasonally adjusted annual rate of $608.3 billion, according to Dodge Data & Analytics. Nonresidential building pulled back following its sharp March increase, and residential building also declined due to a slower pace for multifamily housing. Meanwhile, the nonbuilding construction sector showed improvement, with public works strengthening after its lackluster March performance. Through the first four months of 2016, total construction starts on an unadjusted basis were reported at $198.4 billion, down 12 percent from the same period a year ago. The first four months of 2015 had been lifted by several exceptionally large projects, including three liquefied natural

gas terminals with a total value of $15.4 billion and three large petrochemical plants with a total value of $11.9 billion, which substantially increased last year’s January-April amounts for the electric utility/gas plant and manufacturing building categories. If the electric utility/gas plant and manufacturing building categories are excluded, total construction starts during the first four months of 2016 would be down a modest 4 percent from a year ago. April’s data lowered the Dodge Index to 129 (2000=100), compared to 140 for March. The Dodge Index had registered improved activity during February and March, averaging 141. April’s decline returned the pace of construction starts to what was reported during the July 2015-January 2016 period, when the Dodge Index averaged 129. “The construction start statistics on a month-

to-month basis are subject to frequent ups- and-downs, so April’s decline after two months of improved activity was not a surprise,” stated Robert A. Murray, chief economist for Dodge Data & Analytics. “The elevated volume for nonresidential building in March was not expected to be sustained in the near term, yet the strength shown by its institutional segment in March does provide an indication of where growth is likely to come over the course of 2016. The prospects for the commercial segment of nonresidential building, while still positive, have grown more tenuous given signs that banks are beginning to take a more cautious approach towards commercial real estate loans. Residential building is still deriving some benefit from this year’s low interest rate environment, and increased funding under the new federal transportation act should provide support for the public works sector.”

JAMIE CLAIRE KISER, from page 9

of the conversation helps relieve that burden. The more time spent between a conversation and an “action item,” the more likely someone is to get distracted by work or other prospects. M&A is about clear communication and decisiveness, and that’s hard to do well when it is not your focus. ❚ ❚ Breaking up is hard to do. It’s just as unpleasant to be the one that gets cold feet (“It’s not you, it’s me”), as it is to be the one left wondering what went wrong. It is hard to tell a firm owner – whether the firm is one that you initiated the con- versation with through research, or one that you have worked with on projects for years – that you just don’t want to try to make this deal work. I worked with a client that felt that the right thing to do was to end the discussion with the tar- get firm directly (versus asking us to help). The client was so complimentary of the target that the target didn’t even real- ize that they had just been dumped. I got a call the next week from the target to discuss deal structure! They had no idea the wedding was off. ❚ ❚ The risk of “falling in love” with the wrong target is mini- mized when you incorporate a level of objectivity. The CFO is often a voice of reason in these circumstances. So can a board member who sees the train wreck up ahead before the first-class ticket is bought. The right level of push-back is important in M&A, whether you have assembled an internal or external deal team. There is a fine line between “over engi- neering” the target firm profile to the point that you have ex- cluded plenty of great options, and having no idea what you’re looking for when you start the process. Firms in the former category never find what they’re looking for, or they get ex- hausted from the pursuit of perfection and end up overpay- ing. Firms in the latter category are at higher risk for wasting time with firms that don’t make a lot of sense for them. Although it might sound like it, this article is not necessarily a plug for hiring a consultant. Instead, the purpose is to make sure that firms enter into M&A with their eyes open as to the unique challenges that arise in transactions, and that they are honest with themselves about their own skillsets. JAMIE CLAIRE KISER is Zweig Group’s director of M&A services. Contact her at jkiser@zweiggroup.com.

financials, critical review of operations, determining a value, drafting term sheets, due diligence, negotiation, and planning for integration! A few points about this process: ❚ ❚ Time is even more valuable than money. It is not uncom- mon to approach 100 firms in an M&A search. Is it really the CEO’s highest and best use to search for these companies and to manage this part of the process? Selling firms, especially, always need to be aware that every hour that they spend not out there developing new jobs or otherwise continuing busi- ness as usual is risking the value of their firm. Our Valuation Survey shows that the single greatest distinction in a valua- tion obtained for an actual or potential sale or merger (versus any other reason for a valuation), is backlog. Buyers want to know that they understand what they are buying and that the revenue is predictable in order to minimize risk. ❚ ❚ It’s not what you say, it’s who says it (and how long it takes). A consultant acting on your behalf can “follow up” with the target that’s gone MIA many (many!) more times than a firm can on their own. The consultant, although al- ways professional and courteous, can be perceived as pushy, at worst. The firm that leaves five voicemails? Desperate. No other options. In addition, the first-date jitters are only exac- erbated when it takes two business days to hear if there will be a second date. Having someone whose job it is full-time to manage the communication process and to be one step ahead and then – suddenly – they vanish. Is it me? Is it them? Are they seeing someone else?” “It should be pointed out that the comparison to dating is more clear than ever at this point in the M&A process. You met someone interesting, felt a connection,

THE ZWEIG LETTER June 27, 2016, ISSUE 1158

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