What was our client’s situation? What was the opportunity? What action did we take? And what was the final result?
S: Two years before signing up with us, our client’s business was not profitable. In the current year, the business was performing much better. Our client did not know if now was the right time to sell given the growth he was experiencing. However, he was aging looking to create that succession plan.
O: We let our client know selling while the growth is going on is always the right call if you are looking for that premium valuation. He did not think ASA would be able to get a buyer to pay the amount he wanted for the business and have the transaction meet all his goals.
A: We signed up the client and created detailed analyses to prove to buyers the growth will continue far into the future. This is key to persuade buyers to pay upfront for this growth. We ended up with a pool of buyers that would create the right transaction for our client.
R: The company sold for a premium valuation at 8.4x earnings (EBITDA), which was more than he thought was possible. All our client’s goals were met: he had a board role going forward, he retained 10% of the equity, he gifted equity to family, and his management stayed in place. He now has more time for family and friends and is still as involved as he wants to be in his company.
S: Our client had a fantastic business doing $2-4M in profit (EBITDA) over the last 3 years. He was also starting a new service line and saw huge potential growth here. However, he was later in his career and was not looking to invest all the capital needed for this new division. He was also thinking about a succession plan.
O: We told him we could find a partner with the specific expertise to help grow this new service line of the business so he does not have to personally fund the entire operation. This partner would also pay him upfront for the growth the new service line was about to undertake and help create his succession plan.
A: Through much outreach, we gathered a very custom group of buyers with the expertise desired. We calculated detailed forecasts of the new service line. We even helped our client hire a CFO for this new division by writing a job description. We knew this would go a long way to increase valuation.
R: We received 11 very high offers on his business ranging from 9x EBITDA to 12x EBITDA valuation. Although it was a difficult choice, he ended up with the right partner. He retained 25% equity and will continue to benefit financially from the growth of the new division until he fully exits.
S: Our client already had offers on his business from larger corporations within his sector for valuations around 4x profit (EBITDA) before we engaged him. He was not looking to be swallowed by a larger corporation and he thought with the right investment partner he could significantly grow his business over the next 3-7 years.
O: Our client was also not looking to spend his own money on these growth initiatives and bear all the risk. We let our client know we could find him an investment partner that would use their capital to invest in this growth and at the same time sell 70% of the equity in his business for an 8x profit valuation.
A: After rigorous research and the typical process, we found 5 such partners for our client all in the 8x profit valuation range. The decision came down to which would be the best cultural fit for our client and his management team. He did not want the investment partner to come in and fire any key personnel.
R: The investment partner bought 70% of our client’s company and he retained 30%. In just 24 months after this transaction, the investment partner has helped our client nearly triple the size of his business. If growth continues on this trajectory, our client will receive more upon selling his retained 30% than he received on selling the original 70%. In the process, he has already created generational wealth.
S: Our client owned a company with a small employee base and was very busy. She had started thinking about her succession plan but did not know if her company would be worth that much if she sold it. She had also heard horror stories of how long and cumbersome the process to sell your business could be so did not think she had the time to go through a process.
O: We told her when her company is that small, we would need to find a perfect strategic partner to acquire her company. We also thought we could achieve a significantly higher valuation than she had in mind and close the transaction in six months or less.
A: We had to put together a much narrower than typical list of buyers for her business given the specific strategic partner that would be needed. We began introducing her to these buyers very early on in the process to expedite the transaction.
R: She ended up selling at a 7.5x earning multiple valuation, much higher than she had anticipated. From signing her on as a client to closing, it took about 5 months and we kept all the heavy lifting off her shoulders. She even wanted to retain some equity in her company because of the opportunity she saw with the new strategic backing. The new ownership has been reinvigorating for her small business and exciting for her personally.