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Good timing = 20% premium/ delay = 52% decline

May 5, 2022

Two of the companies we’ve sold this year illustrate the importance of timing:

  1. A $40 Million liquidity event for the owners of a manufacturer we sold, their timing couldn’t have been better. At 8.2x, the valuation was 20% higher than anticipated – their company’s operating performance was finally hitting on all strides, and we found a buyer that believed in their model and paid a premium, despite some capacity issues! The ultimate buyer was one of 8 bids we obtained, and we selected the top 2 buyers for meetings with our client and obtained viable Letters of Intent from both of them. We obtained this client from our direct marketing and referred in a wealth management team.
  2. A potential $25MM liquidity event for a service company we sold became $12MM owing to a 5 month delay.Our client did hire us on a timely basis, however prior to us prepping and going to market he chose to negotiate on his own with one large strategic buyer…….after 5 months of back and forth with nothing meaningful, he had enough and gave us the green light to prep and go to market. We were in the market within 6 weeks, however then the client’s business fell off, declining from $5MM to $2.5MM of ebitda. Our advice to the owner was to wait until the business trends back up again and re-market the company, which he appreciated; however he had made enough money over the years and wanted to move on with his life. Owing to the declining trends, the bulk of the 20 bidders we obtained dropped out of the process, however there was one larger strategic buyer that felt our client’s company completed their offering and was crucial to their growth, so they stayed in and we closed a deal that made sense for our client. A happy client, however in this case a 5 month decreased the value by 52%.

Timing is everything! When someone asked one of the Rothschild’s the secret of their investing success: “I always sold too soon.”