Owners considering selling can look at the experience of a N.H. company for ideas of what to do to increase their chances for a good transition.
Globe Manufacturing, a 4th generation family-owned business based in Pittsfield, is a great example. With sales at the time of $110 million, the company was sold for $215 million to strategic buyer MSA Safety in 2017.
This transaction was a great deal. But it was not an accident. It took careful planning and preparation.
Gef Freese and Rob Freese were running the family business and spent eight years positioning it for an ownership change. Here are several insights they shared during a recent presentation:
Higher profitability attracts a higher price. It also generates a higher multiple. You don’t have to be Globe to leverage what you already are doing.
What would a potential buyer find when they looked closely at your business- your organization, processes, financials?
For example, it is natural for private companies to manage internal finances in a way that is “tax efficient”. We examine historical financials from the client and recast the expenses to develop an adjusted EBITDA figure, to show true profitability. These adjustments include expenses unique to the current owner and their structure.
Each of these adjustments is footnoted so that a prospective buyer can review these and see how we arrived at the figure. A rule of thumb is that the more adjustments required, the more questions that will be raised by a buyer.
When a Letter of Intent (LOI) is signed, the financial statements get close scrutiny by the buyer and their advisors including by the buyer’s accounting firm. In addition to confirming the information, this process often includes an independent test of inventory and how this is reflected in the accounting system.
A good first step is to have a preliminary discussion about a transaction. Our niche is companies with revenues between $2 to $20 million, but we work above or below this level as well.
We work under various timetables. It takes some time to assemble the data and information needed to prepare a business to go to market. Our process is aimed at maximizing the value.
If you are ready now, we can begin the process to get you to market right away. If a transaction is to take place in the future, we can get you going on a transition plan to position you for a future transfer. This often has a secondary benefit – it can make the business better for you as well.
It is still a good market. Contact us for a confidential conversation.
"The entire process went smoothly and professionally. The BTS team kept me fully informed at every step. They worked hard and were effective in bringing the deal home."
"Skip and I continue to be grateful for all you have done to make the sale of Pure Flow come to fruition."
"BTS’s level of expertise in the process and close attention to detail enabled us to successfully navigate the deal."
"These types of transactions are often long and complicated and I doubt it could have been successfully completed without your close ongoing involvement."
"The outside objective point of view that you have brought us has been invaluable as we prepare for the rapid growth."
"John then found the right buyer and coordinated a seamless transition—he doesn’t miss a single detail."
"John immediately identified our strengths and experiences and discussed a business that ultimately was more in line with our goals."
"The BTS team came in, evaluated everything in a professional and thankfully non-threatening manner."
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Precision Machining Company
Initially, liquidation was a serious consideration. It would offer a quick exit but would hurt loyal employees and disrupt the customers who had come to rely on its quality production.
Green Product Company
Our client owners could dig in for the long haul…However, this would take five years or more. Owners simply lacked the horsepower to do it.
Water Purification Company and Young Buyers
Owners decided they wanted to retire. They also wanted to be fair to the staff who had been loyal to them. Could the company be sold, the staff retained and the facility remain in use?
Magnetics Company with High Profile Customers
(T)he manufacturer would need to focus on growing EBITDA to capture interest from major strategic buyers and achieve a higher multiple of earnings.