Integrity. Vision. Success.
Time on Market: 5 months
Client Objective: “Sell my business so I can spend time with my family.”
Discovery Meeting: Soon after starting the company, the owner and his wife started their family and had two sons within a short period of time. The company was growing fast, and the wife soon started working full-time in the company. By the time the boys were preteens, the owners realized they had spent more time running the business than with them. After much consideration, they decided selling their company was the best thing for their family. They were not sure what they would do for a living once their sons were grown in a few years. We advised they would probably have a non-compete agreement. They could make up time with their sons during that period and then start another business if they wanted to.
Assessment: Due to the year-over-year growth, zero debt, tenure of the employees, scalability, and reputation of the business, we knew the company would demand a premium and were engaged to sell the business.
Sales Process: We identified a financial buyer that had just lost out on buying a similar company because the seller backed out prior to closing. This buyer had a transferrable skill set from his time in the corporate world and he was more than ready to buy a business and become an entrepreneur. We quickly enticed a full-price offer and negotiated an excellent structure. We reviewed with our clients and executed the LOI (Letter of Intent).
Major Challenge: The seller had the only operating license for the business. The buyer did not have an operating license. The business and the buyer easily qualified for an SBA loan with one very important exception, it takes four years of field experience to get the necessary licensing. We could only use the current owner’s license for a period of 12 months per SBA regulations. We discussed with bank after bank and after about 6 banks rejecting the deal, we finally found one out of state that said if we could come up with a reasonable solution, they would approve the loan.
Solution: We researched and found that with a mechanical engineering degree, only two years of field experience was needed to get licensed. We knew that if a full-time employee was licensed, the business could operate legally in Texas. We confirmed that two tenured employees had the experience and ability to pass the licensing test. Our solution was for the two employees to each get their license post-close. The new owner agreed he would pay them both a quarterly bonus for the right to lease their licenses for a minimum of two years. That redundancy, combined with having the seller’s license for the first year, covered the two-year gap and was acceptable to the bank.
Result: Closed transaction on the high end of market value.
Summary: It’s hard to place a monetary value on time and selling a business is a highly emotional experience. That said, once the decision has been made, it’s extremely important to partner with an experienced M&A firm that can help overcome obstacles and maximize your exit.