When selling all or part of a business, identifying qualified buyers is very important to an effective sales process.  Before I go into my process I would like to share a story that involves my joining CFA in 2004 and being interviewed by a senior investment banker from our Dallas office.

When I was explaining to him my “deal experience” from the four prior years he responded, “Oh, you have been working as a business broker”  I then asked him to explain to me how he distinguished between a business broker and an M&A advisor. He stated that if the “buy-side” was an individual as opposed to a professional buyer (i.e. a Private Equity Group or Corporate Acquisition Group) he would describe the transaction as business brokerage rather than M&A.

His point was that professional buyers are in the market everyday and need very little assistance in evaluating opportunities.  The individual buyer, no matter how sophisticated they think they are, is not in the market on an ongoing basis and therefore, will be less proficient and therefore a more risky prospect.

With that introduction, since joining CFA I no longer deal with individual buyers.  My concentration tends to focus on Read the rest of this entry »

Case Study

Situation: In 2001 CFA was engaged by Bronco Manufacturing, an oil rigs parts specialist, to prepare a business valuation and assist in evaluating unsolicited offers over the next couple of years. Bruce and Max, the firms partners, asked CFA to take Bronco to market.  in 2004. Bruce was 60 and ready to retire while Max was 50 and wanted to grow the company more aggressively.

Solution: We considered a leverage buyout for Max, but determined a re-cap with a private equity group was a better strategy for both owners. This journey took three years and we kissed a lot of frogs along the way. We contacted over 100 potential acquirers. Ninety percent were Private Equity firms. From start to finish, Bronco received 11 letters of intent and ultimately found the right partner. The long time line may lead one to think something was wrong with Bronco, but that is not the case. The client was very selective. The good news was that the value of the company quadrupled during that period. This transaction illustrates the importance of patience, persistence and tenacity, as well as a belief that there was a “right” buyer for Bronco.

Case Study

Founded in 1964, M&M Pump & Supply is a leading distributor of comprehensive systems and components used in oil and gas drilling and production to gas producers and industrial customers located primarily in the Illinois Basin. The Company also provides oil field services such as hydrostatic pipe and tank testing and cleaning, delivery, and equipment rentals. M&M Pump & Supply retained the services of Corporate Finance Associates to identify and negotiate a deal with a strategic acquirer.

M&M Pump & Supply was acquired by DN Partners, a Chicago-based private equity firm with investments in lower middle-market companies generally based in the Midwest. (www.dnpartners.com). The Company specializes in partnering with management teams to facilitate corporate spin-offs, family succession transactions, recapitalizations, buy and build strategies, and management buyouts. DN Partners’ other business interests include manufacturing, packaging, printing, and communications.

Case Study

After trying unsuccessfully to complete a management buyout by the President and 25% owner, CFA was hired to make a Transaction happen. Working with both owners, CFA was able to bring the right balance of debt and Private Equity to the table to do a transaction favorable to all parties. The resulting value was 60% above what the owners had originally anticipated. They were able to select from four competing prospects. Taylor is a $160 Million company using 300 semi’s to transport crude oil from wells to Taylor’s pipeline injection points, so the structure had to allow the Cap X of adding new trucks as they grow.