Flexible Exit with Continued Opportunity

The Challenge

The owner of a Montana based company, although relatively young (about 50), was beginning to realize changes were needed.  The high demands of owning and operating a very successful crane company, were keeping him from many other compelling interests that he wanted to have more time for. His wife wished she could see more of him, and the levels of stress were rising as was his blood pressure. However, he still loved cranes and still had some fire in his belly for the business.
Flexible Exit with Continued Opportunity

The AdvantEdge Solution

They contacted AdvantEdge Advisors and together we began discussing options and alternative approaches. Ultimately, it was decided that the company should be marketed and sold, but that he had a strong preference to find a buyer with some flexibility with regard to his exit. Once engaged, an in-depth analysis of the company commenced and a list of highly-targeted prospective buyer pools was developed. Full preparation was completed and ready to go. However, one buyer had emerged to be of particular interest mainly because it appeared to have the most capability to offer a more flexible transition plan. This prospective buyer was already in the business (on an international basis) and was mostly owned by a Private Equity Group (PEG). Experienced with this type of buyer, we were well-aware of the primary advantage, namely; flexibility in deal structure. Feeling that this could be an ideal situation, and after weighing carefully the pros and cons of a quiet and private negotiation with a single buyer, this buyer was approached. Although the owner had exchanged a couple of casual conversations with the CEO of the company, going to them fully prepared for market achieved several important outcomes. First (and the buyer affirmed this often) they appreciated the efficiency of  pursuing a company that had been professionally prepared for sale. Second, they were approached with a direct understanding that they were being given a “proprietary first chance” at the opportunity and were requested to make a strong offer at the outset. Finally, they clearly understood that our intended broader marketing process could be easily and quickly launched… it was obvious to them that we were ready to go.

The Results

A strong offer from the outset is exactly what the process compelled them to do.  Later in the process we were able to discover what they had been paying for other acquisitions and what they had offered was indeed at the top of that range for companies of this size. It was also reassuring that the offer was well beyond initial aspirations discussed in the preparatory process. Additionally, terms were also attractive and a good fit with the owner’s objectives. The transaction was structured as a “recapitalization” which allowed the vast majority of the transaction value to be taken off the table by the owner at closing, but also included an equity stake for him in the buyer company. The owner now had a chance for a “second payday” or “second bite of the apple” at a future liquidity event of the company. During the seller’s due diligence process, several former owners were interviewed and were delighted with the growth in value they had achieved with their eye already on their “second payday.” The owner could stay, well-compensated for three years (more if desired) and a long-term lease was secured for his property. Besides all that, he was relieved of many of his former undesirable management responsibilities such as finance, safety, HR and large capital expenditure decisions. He now spends much of his time in a second home in Arizona recreating, but staying involved (both on-site and remotely) with limited oversight responsibilities. Rather than an exit that was an end-of-the-road finality, a near-perfect outcome resulted from preparing properly and approaching the right buyer in the right way.

Share

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email
Share on print
Print

Call Us

MISSOULA OFFICE:

SPOKANE OFFICE:

5 Lessons from Home Depots Acquisition of Blinds.com

We are committed to keeping your e-mail address confidential. We do not sell, rent, or lease our contact data or lists to third parties, and we will not provide your personal information to any third party individual, government agency, or company at any time unless compelled to do so by law.