Investment banking expertise helped each of the three companies below successfully monetize the value of their business. From owners who loved their company but were ready to retire to the go-getters who wanted to spend more time creating products than handling the finances, each company was helped by outsourced investment banking experts. The name of each company has been changed to protect their anonymity.
Note: A senior member of the G-Squared Partners team advised these transactions while employed by another firm.
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Example 1: Investment Banking Expertise Helps Owners Monetize Business Value
Example 2: Husband-Wife Duo Sell Fast Growing Company to Support Life Goals
Example 3: Tragic Death of Business Owner Leads to New Future for Growing Business
Example 1: Investment Banking Expertise Helps Owners Monetize Business Value
Challenge
Owners of rapidly growing firm seek to support business and find balance
Safety Co* was a rapidly growing specialty contractor, distributor, and integrator of fire, safety, and security systems in the western United States.
The company’s two founders had merged their respective predecessor entities a few years earlier, bringing their unique strengths to the combined company. One of the owners focused on operations, and the other managed sales and customer service.
Safety Co. became the leader in its geographic market, and the partners enjoyed considerable financial success. Although they were doing quite well, they began to struggle with growth in recruiting, accounting, expanding to other markets, and delegating responsibilities.
While both founders were making more and more money, they worked harder and harder and had difficulty balancing their obligations to the businesses and their families.
As such, the owners decided to seek a strategic buyer who would continue to support the company’s growth and diversify their financial exposure.
Solution
Ensure financial documents will support a successful sale
Safety Co. engaged advisors with prior experience in security and safety contracting and installation to assist the company through the process of selling the business. The first task in working with the owners was to ensure that Safety Co.’s financial statements and operating data would withstand the due diligence process.
It was recommended that the company seek reviewed financial statements for the prior two years using percentage completion accounting. Observation of inventory was also completed. This step was critical to ensure an efficient selling process.
Results
Investment banking expertise helps owners monetize their business
Several strategic buyers were identified and approached. After holding exploratory meetings with a shortlist of interested parties, Safety Co. was sold to a fire and safety subsidiary of an international holding company growing through acquisition, targeting companies in the western and southwestern United States.
The transaction closed approximately nine months after the selling process began. The owners were able to monetize the value of their business while continuing to run one of the fastest-growing regions of the combined company. The parent company brought capital, sales, marketing, and administrative support, allowing the founders to focus on growth and their strengths, and freeing up some time to devote to their families.
*The company’s name has been changed to protect confidentiality.
Example 2: Husband-Wife Duo Sell Fast Growing Company to Support Life Goals
Luxury Food Co.* was a specialty branded food company focusing on a lucrative, expanding market in the United States. Run by a husband and wife team, the company was originally created to supplement the couple’s income while running another business.
However, their food company eventually started to take off, winning several national awards and amassing widespread recognition.
Challenge
Owners find their time and energy overly taxed by the demands of a growing business
While the two business owners were thrilled with its success and nationally recognized awards, 1/2 of the duo decided to retire to spend more time with family.
While Luxury Food Co. hired additional employees as the company grew, most operating decisions big and small fell on the owner’s shoulders. The couple decided to seek a partner that could invest in the company’s continued growth and assist with operations.
The owners had previously received an offer from a mid-sized private equity firm. The owners eventually terminated those discussions after concluding that it would not add value to Luxury Food Co.
Solution
Identify buyer with the right experience and a commitment to add value
A year later, Luxury Food Co engaged an advisor with prior food and consumer products experience willing to work on a lower middle market transaction.
After an extensive marketing effort, the owners eventually began negotiations with a family office whose members had previously worked for large private equity firms and had substantial real estate and retail experience. After signing a letter of intent with the proposed buyer, a series of challenges ensued, including the coronavirus pandemic.
Results
Patience and communication during pandemic leads to a successful transaction
Despite the challenges posed in 2020, both parties stayed patient and maintained an open and ongoing dialogue, and Luxury Food Co. was successfully recapitalized as a platform investment to the family office.
The company is now poised to grow with the backing of a financial partner with capital and the right industry experience to be supportive.
*The company’s name has been changed to protect confidentiality.
Example 3: Tragic Death of Business Owner Leads to New Future for Growing Business
Branded Food Co.* was a rapidly growing branded food company focused on a growing market niche in the US, selling through both grocers and ethnic markets. The two founders had equally important roles: sales and business development and the other in operations.
Challenge
Business partner dies unexpectedly, widow engages in operations
The founders jointly owned the production facilities used to make their products in a separate real estate holding company, but in different proportions than their ownership in Branded Food Co. Tragically, the owner responsible for sales and marketing died unexpectedly.
The deceased partner’s ownership in Branded Food Co. was his widow’s most significant financial asset. She decided to become involved in the business’s daily operations to monitor the value of her investment.
Solution
Surviving partner and former partner's widow agreed to sell the company
Initially, the former partner's widow was focused on obtaining a fair valuation opinion of her shares in the company for estate purposes. The two owners, however, eventually agreed to sell the company to satisfy their mutual desire to move on and monetize the total value of their ownership positions.
As that process began, the relationship between the widow and the co-founder deteriorated. As the transaction progressed it was discovered that the rent charged by the real estate holding company was substantially greater than fair market.
As that process began, the relationship between the widow and the co-founder deteriorated. In an effort to move the sale of the company along, the two decided to retain the services of a retired industry executive as a management consultant.
The goal of an outsourced partner was two-fold: one, to help manage the business and mediate disputes, and two, to perform unbiased due diligence of the company's finances and assets. For the two stakeholders, the latter proved to be lucrative, as it was discovered that the rent charged by the real estate holding company to the operating company was substantially above market levels.
Results
Firm completes successful transaction within one year
Branded Food Co. was sold as a platform investment to a well-established national private equity firm experienced in growing consumer packaged goods companies. As part of the transaction, the real estate holding company decided to maintain the above-market rent paid by Branded Food Co.
As a result, a portion of the transaction consideration was allocated to continuing the above-market rent payments, thereby reducing the upfront consideration paid to the shareholders of the operating business.
The time from the start of the engagement to closing was just under one year. Despite allocating potential profit for above-market rent, both stakeholders were happy with the result and are pleased to be pursuing new business opportunities.
*The company’s name has been changed to protect confidentiality.
Securities Products and Investment Banking Services are offered through BA Securities, LLC.
Four Tower Bridge, 200 Barr Harbor Drive, Suite 400, W. Conshohocken, PA 19428.(P) 877-738-5841. Member FINRA SIPC. G-Squared Partners, LLC and BA Securities, LLC are separate, unaffiliated entities.
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