May 2, 2024
We recently facilitated the sale of a service business in the oil & gas industry. The two owners of the company were at two different stages of life: one was ready to retire, whereas the other was interested in finding a strategic buyer who would help him grow the business for the next 3-5 years.
After sending out our teaser to strategic and financial buyers, we signed confidentiality agreements and provided books and videos to 90 potential buyers, of whom 8 submitted bids for the business. Although there was good competition among the bids we received, a new buyer emerged later in the marketing campaign and outperformed the rest. It was a strategic publicly traded company that was an active acquirer, and our client was going to be their largest acquisition. All of the previous bids were coming in at around 6x EBITDA, but this new buyer came in at 9x! The buyer’s stock was trading higher than 9x, which enabled them to pay a premium to the market. Prior to our process, our client had never heard of this buyer, and this acquisition was to get them into a new vertical, which meant a new storyline to their shareholders. Our client solved a problem for them!
We kept the tension on the publicly traded buyer so they never felt like they were far ahead of the other buyers. Throughout due diligence, our client was very organized and turned around documents very quickly, which moved things along – time kills deals! There was one item that did come up with one of our client’s customers. This customer accounted for 33% of the business, and they were winding down operations. We were able to negotiate a very modest adjustment to the deal terms in the seller’s favor, resulting in only a 4% holdback on value until they matched the bar of last year’s revenue.
From the date of engagement until the deal closed, our entire process took 174 days. With our approach, 75% of the time our clients are bought by someone they had never heard of, and this was the case for this deal as well, in addition to us – prior to this transaction, we had never done a deal with this buyer. It’s not “who you know”; it’s us working from a blank slate, presenting the company in a compelling, credible manner, creating tension and momentum so the market can truly speak and our client has the best visibility on viable options.