When the time comes to sell a business, or in the event an unsolicited offer to purchase your business arrives, it is of the utmost importance to be prepared.
Thankfully, in the case of a family-owned food distribution business, the Maximum Possibilities Team had already been working with the owners for the prior few year, so the team was in a perfect position to help with an assessment of an offer and close a sale that was favorable for everyone.
In this Case Study, we explore how Maximum Possibilities helped their client reach a successful conclusion of an acquisition.
Receiving an Offer that Could be Refused
The owner of this family-owned and operated business was excited when they first received an unsolicited offer from a competitor to acquire a significant portion of the business. They felt like the offer was good but wanted to validate and consider all of the angles to ensure their best interests were being served.
One concern was would the family owners individually receive enough to enjoy their desired lifestyles after the sale was completed.
Also, to be considered was the fact that many long-standing employees had contributed to the company’s success over many years. The owners were concerned about them being treated fairly by the buyer.
In the previous years, we had been working with the company to help increase profitability and cash flow and optimize the company’s capital structure. The work we completed resulted in material increases in shareholder’s equity, earnings before interest, taxes, depreciation, and amortization (EBITDA), and EBITDA margins as well as decreased debt.
We had also recently worked with the company’s management to develop their first formal strategic plan and the corresponding growth and operational optimization opportunities were very promising. A conservative financial forecast showed that future EBITDA could more than double over the next two years, generating cash flows that could be used for the company to make acquisitions of its own to fuel further growth.
A Solution with Maximum Possibilities
The client provided us with detailed price/cost/volume trend data for the company’s leading products. The first step we took was to perform a financial analysis of the data. Once completed, we worked with the company’s tax advisors to determine the net realized amounts that the owners would receive if they accepted the offer.
We assisted in negotiating the highest offer possible at that time. We also developed a proforma forecast and analysis of various scenarios depicting how the remaining business would look after the divestiture. The analysis revealed that even with an improved price, the projections showed that the financial and market positions post-deal would not be optimal for the company.
At this point, it was of the utmost importance to determine the goals and markers of a successful sale. This is where Maximum Possibilities excels. We treat all of our clients the way we want to be treated and with integrity.
Based on open and honest conversations with the owners, we created a clear vision of what success looked like. We reviewed the results, comparing the options of aggressively implementing the new business plan or going through with the sale.
Next, we assisted the owners in evaluating the risk of delay vs. the known value of the immediate sale. Finally, we facilitated the owners in achieving clarity on what the future would potentially be like in either scenario.
At the end of this analysis, the owners decided to retain the business, declining the offer. They also implemented the business plan we developed together.
A Happy Hollywood Ending
Two years later, the Maximum Possibilities Team assisted the owners in navigating a sale of the entire company. This time negotiations took place with several potential buyers.
This process started with one potential buyer, but the Maximum Possibilities Team advised management to seek other offers, which resulted in an offer that was almost $20 million (>20%) more than the first unsolicited offer that was received.
The company sold within six months. This resulted in a significant accretion to the total value delivered to the owners from the offer that was declined two years before. Additionally, there was a double-digit percentage return on the investment for implementing the business strategy. In addition, the buyer decided to keep the existing operations in place, and most employees continued to hold their existing positions.
After the sale was executed the company’s owner wrote to tell us, “Thank you! This exceeded anything that we could ever have imagined, and it wouldn’t have been possible without you.”
Receiving Maximum Profitability with Maximum Possibilities
By working with Maximum Possibilities, the owners were able to
- Make an informed decision about the unsolicited acquisition offer,
- Consider all of the options,
- Weigh the risks and benefits,
- Ultimately choose the best path forward for themselves and their employees.
- Simplify the sale process including successful negotiations and due diligence,
- Achieve their goals in selling the business at the right time.
- A detailed analysis of the financials and market projections,
- Facilitated discussions to clarify the owners’ goals and desires,
- Offered guidance and support throughout the decision-making process,
- Support and guidance during negotiations and due diligence for the ultimate sale.
The result was a successful sale of the company that exceeded the owners’ expectations. Just as importantly, the sale provided a positive future for their employees.
Are you ready to receive the maximum possibilities for your company? Schedule a call today.