B. Riley Financial Launches Review of Strategic Alternatives for Appraisal and Retail, Wholesale & Industrial Solutions Businesses
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Insights
The exploration of strategic alternatives, including a potential sale of B. Riley Financial's Appraisal and Valuation Services and Retail, Wholesale & Industrial Solutions businesses, represents a significant corporate development with the potential to influence the company's financial structure and market valuation. The reported year-over-year revenue and operating income growth of 35% and 69%, respectively, signal strong performance and efficiency gains within these divisions, which could attract strategic or financial buyers seeking to capitalize on established, cash-generating operations.
From a financial perspective, the use of proceeds from a potential transaction is multifaceted, potentially impacting the company's leverage, stock liquidity and investment capacity. Deleveraging the balance sheet would improve financial health and reduce interest expenses, while share repurchases could enhance earnings per share and signal confidence in the company's future prospects. Reinvesting in B. Riley Securities could drive growth within the company's diversified platform, potentially enhancing long-term shareholder value.
The decision to retain an independent financial advisor to review strategic alternatives suggests that B. Riley Financial is actively seeking to optimize its portfolio of businesses. The valuation services industry is characterized by its specialized nature and the importance of reputation and track record. Great American's strong management and history of delivering steady EBITDA growth position it favorably in the eyes of potential acquirers. The expansion into new verticals and the role as a sourcing mechanism for lending and investment opportunities underscore the strategic value of the business beyond mere financial metrics.
Market reaction to such announcements typically hinges on the perceived benefits of the strategic review and the potential for unlocking shareholder value. Investors and analysts will closely monitor the process for indications of the company's strategic direction and the impact on its competitive positioning within the financial services sector.
Engaging in a strategic review process involves intricate legal considerations, particularly when it involves potential transactions such as sales or mergers. The company must navigate confidentiality agreements, regulatory compliance and due diligence requirements. Furthermore, the absence of a definitive timeline and the statement that there is no assurance of a particular outcome are standard disclaimers that protect the company from legal repercussions should the strategic review not result in a transaction. These statements also manage stakeholder expectations and are a reminder of the inherent uncertainties in such corporate endeavors.
Company Believes Businesses Not Appropriately Valued by Market, Could Provide Greater Value to Potential Acquirer
B. Riley acquired Great American Group ("Great American") through a strategic combination in 2014. Since that time, B. Riley has substantially grown Great American's appraisal and retail liquidation business, which together, generated approximately
Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, commented: "Great American is a tremendous business with a strong management team that has successfully executed on a number of organic growth initiatives over the last 10 years. Our appraisal unit has delivered strong and steady recurring EBITDA year after year, and we believe this business is poised for meaningful growth. Strategic and financial buyers are looking to acquire specialized financial services that deliver robust free cash flow at attractive margins. As we've stated since the beginning, we use our balance sheet to acquire quality businesses that we can build over the long term. This is one example of many such businesses where significantly increased valuation is not reflected on our balance sheet, and we have the ability to unlock this value when it best serves our shareholders."
Proceeds from a potential transaction, if one were to be consummated, may be used in a variety of ways including de-levering B. Riley Financial's balance sheet, repurchasing shares and bonds in the open market, and investing in the platform and in particular, B. Riley Securities, the cornerstone of the Company's diversified platform.
Michael Marchlik, Co-Chief Executive Officer of B. Riley Advisory Services, and Scott Carpenter, Chief Executive Officer of B. Riley Retail, Wholesale & Industrial Solutions, added, "Since joining Great American Group in the late 1990s and becoming part of B. Riley in 2014, we have built an industry-leading set of offerings across asset appraisal, valuation, and disposition services. We're incredibly proud of the work we do on behalf of our clients and we believe there's no firm today that offers the combination of experience and expertise that we do. Our business has the ability to expand into several new verticals and will continue to be a proprietary sourcing mechanism for high quality lending and investment opportunities. We remain committed to delivering for our clients and continuing to provide the high quality service they have come to expect from us."
B. Riley has not set a deadline or definitive timetable for the completion of the strategic alternatives review process, and there can be no assurance that this process will result in any particular outcome. The Company does not intend to comment further regarding the review until it determines disclosure is necessary or advisable.
About B. Riley Financial
B. Riley Financial is a diversified financial services platform that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. B. Riley leverages cross-platform expertise to provide clients with full service, collaborative solutions at every stage of the business life cycle. Through its affiliated subsidiaries, B. Riley provides end-to-end financial services across investment banking, institutional brokerage, private wealth and investment management, financial consulting, corporate restructuring, operations management, risk and compliance, due diligence, forensic accounting, litigation support, appraisal and valuation, auction, and liquidation services. B. Riley opportunistically invests to benefit its shareholders, and certain affiliates originate and underwrite senior secured loans for asset-rich companies. B. Riley refers to B. Riley Financial, Inc. and/or one or more of its subsidiaries or affiliates. For more information, please visit www.brileyfin.com.
Footnotes
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Forward-Looking Statements
Statements made in this press release that are not descriptions of historical facts are forward-looking statements that are based on management's current expectations and assumptions and are subject to risks and uncertainties. If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition, and stock price could be materially negatively affected. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of today's date. Such forward-looking statements include, but are not limited to, statements regarding a transaction related to the Company's Appraisal and Valuation Services, and Retail, Wholesale & Industrial Solutions businesses, and potential use of proceeds. Factors that could cause such actual results to differ materially from those contemplated or implied by such forward-looking statements include, without limitation, the risks described from time to time in B. Riley Financial, Inc.'s periodic filings with the SEC, including, without limitation, the risks described in B. Riley Financial, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2022 and in our Quarterly Report on Form 10-Q for the quarters ended March 31, 2023; June 30, 2023, and September 30, 2023 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" (as applicable). Additional information will be set forth in B. Riley Financial, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2023. These factors should be considered carefully, and you are cautioned not to place undue reliance on such forward-looking statements. All information is current as of today's date, and B. Riley Financial undertakes no duty to update this information.
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SOURCE B. Riley Financial
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