Timing is Everything
Our client was a stagnant construction supply business (hardware of all types and sizes), in a red-hot market. Started decades prior it was now owned 50-50 by the founder’s son and daughter, with the son running the company. Stagnant in a booming market you ask? Well, when the owner brags about how it took hours, but he reconciled a 29 cents difference between the accounts receivable account and the individual customer AR accounts you can understand why.
There wasn’t time to work on an exit plan to maximize value. Besides, the owner wouldn’t do the work. So, it was find someone in the industry to take over a business at breakeven, but with an extensive customer list and solid inventory (all accounted for and accurate on the books).
Action Items
Nothing more than good old fashioned hard work.
- Identify potential buyers.
- Reach out to them.
- Discuss the opportunity to those interested.
- Get a deal done.
We found a few interested parties and one rose to the top. They were a specialty lumber business and having more commodity products opened doors for them in addition to selling the hardware to their existing customers.
The Result
The timing was perfect. We got the deal closed, the seller went to work for the buyer, the transition went smooth and a few months after the close the seller had a heart attack and died instantly. Just imagine if the owners had procrastinated on selling. Without the operating owner the business was worth a lot less than what they got for it plus they’d have the costs of liquidation.
This points out why it’s so important to have a management team that can keep the business rolling when the owners on vacation, gets sick, etc.