Mike and Kelley have ambitions for additional growth of the company. These plans include opening new locations north towards Waco and south towards San Antonio. With the tremendous growth that the IH-35 corridor is experiencing, they want to move as quickly as possible. In order to do so, they needed additional resources and thought that a strategic arrangement with someone with the proper resources would help the company.
Corporate Investment was retained by Cody Pools to help it evaluate its various options and to manage the process of finding the best financial partner for the company. After a national search, Cody Pools entered into an agreement in May, 2007, with Prospect Partners, a Chicago-based private equity firm with over $270 million under management, which focuses on the lower middle market.
Mike and Kelley are delighted with the new arrangement with Prospect Partners. Mike says, “We have already begun working closely together to pursue growth opportunities.”
Regarding their relationship with Corporate Investment, Mike and Kelley said, “From the time you spent on researching the future housing market, to the constant recasting and forecasting of financials, your firm was always on top of what needed to be done. We could not have possibly had the time to do these ourselves. Your efforts allowed us to continue to run our business on a daily basis. We were glad to have you on our side, especially in the last month of negotiating.”
Prado had built a solid business, but our valuation feedback was less than what the owner needed to accomplish his exit goals, so we counseled him over the next 24 months about the steps he could take to improve profitability. We also advised Jim on the value of keeping accurate, current financials and records, so that the due diligence phase would proceed smoothly and without surprises. Other issues that a buyer would also consider a “value detractor” were addressed, and the company was offered for sale in June, 2007. After spending approximately 30 days preparing the information memorandum on the business, Corporate Investment began contacting both financial and strategic buyers in early August.
In September, a buyer emerged that was an excellent fit. The buyer met the owner, visited the operation and began discussions toward a business sale transaction. The buyer presented a Letter of Intent in early October; negotiations were completed and the LOI was signed in early November. The buyer was financing the purchase through the SBA. Corporate Investment has worked with many lenders in the past, and provided guidance as to which lenders might be the best fit for this transaction.
The sale of the company was closed and funded in early January, 2008, with the holidays slowing the process down minimally. The seller was extremely pleased with the outcome, as the transaction required only six months from listing to close and the sale price was very close to asking price.
Keys steps to closing this transaction sucessfully were a) the seller had prepared the business for market, b) the seller listened to his advisors, c) the seller anticipated the questions buyers would likely ask, and d) the seller had reasonable expectations related to the value of his business.
The speed of this transaction was welcomed on all sides, but often the sale of middle market businesses takes longer than six months. But no matter what the eventual timeline, taking the proper steps to prepare a business for sale, and having reasonable value expectations are extremely important to a successful outcome.
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Austin Certified Business Brokers, Ltd. d/b/a Corporate Investment is not licensed to practice law, draft legal documents and/or provide legal advice, nor do we provide tax or accounting advice. We recommend that you consult with your attorney and CPA or accountant. Nothing contained herein is intended to be an offer to either buy or sell securities. Security transactions are offered through Statesman Corporate Finance, LLC, a FINRA, SPIC member firm.
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