Challenge: Reporting Financials / Partner Disputes

Due to partnership conflicts, our client went from being a passive minority investor to a majority active owner in an industry with limited knowledge in a short period of time.

To make matters worse, late paying customers and a non-traditional accounting approach made year-end financials appear drastically different from the health of the business which caused great pause for lenders. Given a majority of deals are financed through some type of third-party financing and the financial limitations of the company, we knew the buyer pool could be limited which could increase the time to close. The seller was anxious to sell quickly so we had to balance the seller, the business hurdles, and marketplace.

Approach: Expanded Deal Structure / Demonstrated Value

Established Expectations. Because of the late-paying customer and non-traditional accounting methods, we understood the lending climate would be limited at best if not non-existence.
For this reason, we educated the seller a significant amount of seller financing would be involved. We provided an estimate of value as well as expected deal structure before engagement ensuring the sellers would be open to all types of offers and the lay foundation a full-price all-cash offer would be the exception and not the norm.
Told the story. While every buyer could see the financials were on a decline, the company still have some great assets. The company has some great accounts, focused on a very niche industry within the IT sector and had multiple channels of revenue. The core of the company was still intact and with a focused growth strategy, a new buyer could easily return the company to its glory days.
Focus marketing search. Given the issues of the company, we understood a generic buyer probably won’t be the best buyer to target. We either need a strategic partner who understood the assets of the company and could create synergies or an IT professional who wanted to run his own operation.

Result:

Received 3 competing offers | Closed in 4 ½ months | Seller received 94% of asking price.
An IT professional purchased the company using a ROBS (Rollover for Business Startups).
The purchase price consists of equity from the buyer and a seller note.
Since no outside banks were used, we will able to have a quick close and save time.