Educational

Time on Market: 10 months

Client Objective: “Is my company sellable?”

Discovery Meeting: The owner started this company 45 years ago and the business had consistent historical revenue. In the previous year, the owner and his wife had some health issues that caused the revenue of the business to decline drastically. The owner was ready to retire and stated, “I knew I should have sold the company a couple of years ago.” He and his wife were concerned that was no longer an option.

Assessment: Due to the age, customer database, reputation, and scalability of the business, we knew that if we found the right strategic buyer, we could showcase the decades of consistent cashflow and explain the legitimate reason it had declined in the previous year.

Deal Process: We received multiple offers from both strategic and financial buyers all around the same price range which was in line with a standard multiple of EBITDA valuation.

Major Challenge: Very little serious interest at the target purchase price and low offers due to the recent decrease in cashflow.

Solution: We targeted a large local strategic buyer that we knew would be able to leverage this company’s reputation and customer database to increase their own revenue and cashflow. This buyer had a large outbound call center with the technology to track both incoming and outgoing phone calls and any resulting revenue. We met with this buyer and went over the synergistic value this acquisition would provide as they could eliminate the lease, the owner’s salary, software expense, and other overhead costs. We proposed a structure that consisted of cash at close equivalent to the previous offers we had received and a minimum and maximum earnout based on sales resulting from mining the customer database.

Result: Closed transaction for approximately three times market value.

Conclusion: Despite a drastic decline in revenue, ATK Ventures was able to leverage the company’s assets and historical cash flow to structure a mutually beneficial M&A transaction.