A seasoned executive had substantial industry as President of an industrial distributor specializing in the OEM market. The business was owned by three generations of his extended family. Family disagreements led him to search for a new opportunity.
A smaller business with a different, yet similar product line was identified. The husband and wife owners of the target business were beyond their desired retirement age and prepared to exit. The target business had a solid base of long term customers. However, the product line was stale, the existing sales force was not being challenged and internal systems and process were in need of an upgrade.
- Develop a buy agreement to minimize risk and maximize profitability.
- Establish a long term, sustainable solution for accounting system and internal controls.
- Establish a reporting system so they could track production KPI’s (key performance indicators) in real time.
- Give the owners peace of mind that the finance function was being appropriately managed, allowing them to continue to focus on business growth.
- Ensure that all systems were scalable to accommodate the expected rapid growth.
- Assisted potential buyer with due diligence process, including document requests and review of submitted information.
- Prepared a normalization of historical earnings and cash flow analysis.
- Collaborated to develop a forecast of potential future earnings and perform appropriate sensitivity analysis.
- Used these analyses and worked with legal counsel to help the buyer formulate and offer and negotiate terms from a business and tax perspective.
- Post sale, transitioned the company to a new accounting system and recommended appropriate internal controls.
- Designed and implemented a reporting structure to provide the new owner with strategic information on a timely basis.
The buyer was able to obtain the business on very favorable terms. The new reporting system allowed him to quickly identify slow moving and low margin SKU’s. He was able to utilize his industry knowledge to identify alternative vendors and additional products. The new reporting system identified underperforming members of the sales team and take corrective action. The acquisition debt is being paid well ahead of schedule.