Case Study: Successful CNC Machining Company Sale

Cash flow of the Client Company at the time of sale: $650,000

Negative attribute: one large publicly-traded equipment manufacturing customer made up a significant portion of sales. This fact caused consternation with numerous suitors, however it was overcome in the following fashion:

Results after 3 months of confidentially, yet aggressively marketing the business:

• 63 buyers expressed interest in reviewing the business.
• 45 buyers returned confidentiality agreements and received information.
• 12 buyers went to see the business/meet the owner.
• 4 buyers submitted offers.

Offers received:

• $1,400,000 cash offer
• $1,700,000 offer, 80% seller-financing over 5 years.
• $2,400,000 offer, 50% cash at closing, 50% seller financed.
• $2,400,000 offer, 90% cash at closing, 10% escrowed for 12 months.

Our client accepted the $2,400,000 offer with 90% cash at closing.

The earnings multiple (metric of valuation) for this sale was $2,400,000 / $650,000 = 3.70. This multiple is not exceptional except for the fact that during the course of the sale, the Client’s main customer (mining industry focused) went soft, which spooked many buyers and added a layer of ambiguity to the future earning potential of the Company.

The entire sale process, from engagement to closing, took 5.5 months.

The purpose of this case study is to demonstrate that a correctly-run limited auction-style sale process will generally yield the best possible result. 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.

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Calder Capital, LLC