A Unique Transition: Shotgun – Mega-Buyer Offer & Trends going the WrongWay!

About a year ago, I was approached by a local Banker to see if Transition Architects could help support a client of theirs that was struggling with negative trending.

The company had strong sales of approx. $8 million but profits below market for a distributor, with EBITDA of 3-5%. We took on the Advisory Engagement and completed a full financial review & SWOT analysis to identify areas where improvement could be made to improve profitability & increase Enterprise Market Value. The owners were pleased with the recommendations provided, which helped them focus their efforts in areas that buyers would also be focused on.

Such as:

  • Change from Top-line driven, to bottom line results
  • Focusing sales on higher margined products, dropping low margin customers
  • Improving inventory turnover

The owner/operators decided to work on the company for a couple more years and focus on improving company value. But several months later, they were approached by a synergistic buyer – Unsolicited. This larger player was approx. 100x their size, with a full M & A department in-house. My clients were uncomfortable meeting with them on their own & asked me to represent them in discussions.

Transition Architects operated as the sell-side intermediary, facilitating communication & information sharing between both parties in the language each party could relate to & presenting company value and buyer positions objectively. The buyer presented an LOI shortly after for a solid price of 6x/EBITDA & advised confidentially that the only reason they were comfortable moving forward was because Transition Architects had been in the middle, helping with information gathering & negotiation.

A success story for sure!

But there was another curve-ball.

One partner was anxious to exit the business, the other still had enough energy and passion to try to turn the company around and drive improved value for an exit in 5+ years. A shotgun situation developed and one partner bought out the other.

An interesting journey for a $2.5 million Enterprise Value business, with lots of twists and turns on the way to creating a great transition strategy for both partners!!

& the relationship with the potential buyer was salvaged with timely and honest communication, so that they are willing to reopen acquisition discussions in a few years.

Transition Architects was pleased to help facilitate this positive exit outcome for all.

Feel free to come talk to us about all of your transition needs, not just when you are ready to go to market!!!