Client Company Snapshot:
Adjusted EBITDA at the time of sale: $1,250,000
Negative attribute: One customer made up 25%+ of sales, which caused some buyers to pass.
Calder Capital’s Results:
After 3 months of confidential marketing of our client’s business:
- 102 buyers expressed interest in reviewing the business.
- 83 returned confidentiality agreements, were qualified as strong prospective buyers, and received detailed information on the client’s company.
- 12 Indications of Interest (IOIs) were received.
- 6 buyers were invited to site visits and/or management meetings.
- 5 buyers submitted definitive Letters of Intent (LOIs).
Offers received:
- $4,700,000
- $5,500,000
- $5,500,000
- $5,650,000
- $6,250,000
The Result:
- Our client accepted the $6,250,000 proposal.
- Our client leased their facility on a 5-year lease with a first right of refusal.
- The entire sale process, from engagement to closing, took 6 months.
The earnings multiple (metric of valuation) for this sale was $6,250,000 / 1,250,000 = 5x, which is strong for business with 25%+ customer concentration.
The Calder Capital Difference:
The purpose of this case study is to demonstrate that a correctly-run limited auction-style sale process, such as this, will generally yield the best possible result. This case study should also serve as a note of caution for sellers; it is advantageous to go to market, instead of working with one buyer who says that they are interested. Oftentimes, we have found that a one-buyer process can not only take a considerable amount of time, but also does not produce the best offer (And why should it? There’s no competition).
When buyers compete, the best proposal rises to the top, and the seller receives the best price and terms. This is the process that Calder Capital follows with all clients.
Please contact us if you have any questions about buying or selling a company.