Our primary goal at Commonwealth M&A is to support lower-middle market business owners as they prepare and go through the process of selling their business, bringing our deep expertise in the landscape of M&A/tax law and corporate finance to make sure our clients get the outcome they are looking for. To that end, we never give up on our clients.
This client, the owner of a successful PVC pipe supply company, had reached out to their banker for help in finding an M&A firm that would do the work to help him secure his ideal outcome. The banker, part of our professional network, reached out to us, knowing that we go above and beyond for all our clients, and would do the same for this business owner.
At first, the business owner was skeptical about the value of M&A advisory, but after a few conversations with Joe and Rick, he realized that we were going to work around the clock to maximize his outcome and ensure that he was well-informed throughout the process, taking the time to educate him so that he was fully comfortable, every step of the way.
In these conversations, the business owner also communicated to us that his primary goals were to be able to retire as soon as possible after the sale, and also to sell the business’ real estate along with the business itself.
The Challenge
Coming out of the pandemic, where the building supply industry as a whole was booming, this business had very strong growth and recent financial performance, selling a lot to commercial excavators and landscapers. However, two to three months after signing on as our client, the company’s performance started to decline from its previous peak as the industry faced some economic headwinds. At that point, we already had a great acquisition deal in place with a national pipe distributor at a very high valuation, but the deal unfortunately broke down due to the recent fall in financial performance.
When we sign a client, we plan to see it through to the end to ensure that their goals are accomplished. Often, this means adapting on the fly as challenges arise. We went back to regroup and began the process of finding new buyers. During this time, the business performance began to stabilize as the industry came out of the somewhat chaotic post-pandemic period.
The Process
One of the most important things we do for our clients is identifying what makes their business attractive to buyers, both in the short and long term, identifying opportunities for growth, specific beneficial attributes, and so on. Our background as generalists is especially helpful for this — with our deep expertise across industries in the lower-middle market, we’re able to see beyond the trees for the forest to help us identify unique selling points. This versatility and adaptability enable us to apply insights from one industry to another, enhancing our effectiveness in positioning each business attractively.
“Even when the initial deal fell through,” said the business owner, “They never gave up on my business, and were able to identify the factors that made it attractive to buyers.”
One of the most impactful things we did was conduct a detailed analysis of customer concentration, which revealed that the largest customer accounted for only 2% of the sales. This is remarkable for the industry, where high product-based businesses typically see significant revenue from a few major clients, which is a massive risk factor. However, our client sold to a very broad range of end markets, from chemical manufacturers, to landscapers, to excavators, this extreme diversity in clients ensuring long-term stability and minimizing risk.
Prepared with our pitch and with the company’s performance stabilizing, we took the business back out to market, and ultimately were able to source a buyer through a professional networking event we attended. At the event, we met a lender who knew the perfect buyer for this business. The buyer’s family had owned a similar business back in the 60s, so he perfectly understood the opportunity present, and the mechanisms for growth we had identified that were just waiting to be pulled.
Once we had the buyer lined up, it was time to get to work negotiating and closing the transaction. Joe did an outstanding job with the Confidential Information Memorandum (CIM), addressing many of the buyer’s questions and educating them on the unique aspects of the business.
While Joe worked with the buyer’s CPA to conduct a mini audit of the business, Rick worked to get the deal set up. Both our client and the buyer asked us if we had recommendations on lawyers to use to broker the deal, and ultimately both of them went with our references. As negotiations and due diligence began, Rick worked as a coordinator between the parties, ensuring that everyone was being heard, that our client was happy at every step, and managing anything that popped up to keep progress moving forward. This resulted in the cleanest, easiest transaction we’ve ever been a part of. The lawyers on either side knew they could trust us, and that everything we did was in good faith, meaning there was little to no back and forth, no fighting, and the transaction was completed in just one month.
The Result
The outcome of such a clean and easy transaction meant that we sold this business in record time. Our client signed the letter of intent in late December 2023, and we closed the transaction on March 28, just three months later. Not only was our client able to retire like he wanted, we also sold the real estate to the buyer along with the business, meeting both of the goals our client had stated at the beginning of our relationship.
One of our client’s primary goals was to be able to walk away from the business as soon as possible, which we were also able to secure for him. This is a common desire in retiring business owners, but can be difficult to achieve when the business owner was heavily involved in the day-to-day running of the business. Getting this in place for our client ultimately came down to us sourcing the perfect buyer, who genuinely believed in the business and its employees and planned to take great care of them. Our client could trust that the transition was going to work out, and as a result, was able to walk away sooner than anticipated.
“These guys didn’t stop working from the moment I signed on until the deal closed,” said the business owner. “I really respected that – they weren’t just talking big, they backed it up. They’d even meet with me on Sundays and helped us count inventory onsite. Without Joe and Rick’s help, I don’t think I would’ve been able to retire anytime soon.”
If you are ready to begin the process of selling your business, or just starting to think about it, and want an M&A advisor who will treat your business with the same passion and dedication that you do, drop us a line. We’d love to chat about how we can help you maximize your outcome.