Adjusted EBITDA of the Client Company at the time of sale: $1,250,000
Negative attribute: one customer made up 25%+ of sales, which caused some buyers to pass.
Results after 3 months of confidentially marketing the business:
- 102 buyers expressed interest in reviewing the business.
- 83 returned confidentiality agreements and received detailed information.
- 12 IOIs were received.
- 6 buyers were invited to site visits/management meetings.
- 5 buyers submitted definitive LOIs.
Offers received:
$4,700,000
$5,500,000
$5,500,000
$5,650,000
$6,250,000
Our client accepted the $6,250,000 proposal and leased their facility on a 5-year lease with a first right of refusal.
The earnings multiple (metric of valuation) for this sale was $6,250,000 / 1,250,000 = 5x, which is strong for business with 25%+ customer concentration.
The entire sale process, from engagement to closing, took 6 months.
The purpose of this case study is to demonstrate that a correctly-run limited auction-style sale process will generally yield the best possible result. And it also should serve as a note of caution for working with one buyer that says that they are interested. Oftentimes, we have found that a one buyer process can not only take a considerable amount of time but also does not produce the best offer (and why should it? There’s no competition).
When buyers compete, the best proposal rises to the top and the seller receives the best price and terms. This is the process that Calder Capital follows with all clients.
Please contact us if you have any questions about buying or selling a company.