Sell-Side M&A

Ready to Sell

A referral partner contacted Blue Sky in search of buyers for a boat dealer they were actively marketing to prospective buyers.  Our Business and Market Value Analysis indicated there were two major concerns that needed to be addressed.  We worked with the listing agent and business owner to resolve the identified issues.

 

The first issue identified was the current valuation had add backs that were not normal or customary.  The listing agent added back two items; flooring interest (the interest charged on boats in inventory), and an add back for non-normalized rent.

 

The second issue identified was the lack of a complete management team. The owner was a significant portion of the business, wearing multiple hats for sales, purchasing, and executive management.  The owner also wanted to exit the business shortly after the sale.  This presented risk to a potential buyer.  Typically, the seller stays for a transition period and then exits the business.  If the owner holds the key relationships and/or the secret sauce for running the business, the buyer may have problems after the seller leaves.

 

How Blue Sky Helped

Blue Sky suggested normalizing the net income of the business utilizing acceptable adjustments.  This entailed removing the flooring interest adjustment as well as making an adjustment to reflect a market rate rent.

 

In the offering memorandum, we stated a long-term employment contract with the current owner was possible and we identified a number of key employees that could be promoted to fill in the gaps.  These statements demonstrated the owner’s awareness and willingness to work through the concerns.

 

Blue Sky showed the opportunity to several potential buyers, which led to a signed Letter of Intent (LOI). Blue Sky’s continued involvement through the due diligence / financing process was critical to the eventual completion of the transaction.  Blue Sky was able to navigate both parties through intense emotions and additional negotiations to successfully close.  Since closing the transaction, the previous owner has worked diligently to increase revenue and profits.  The new owners have relieved him of his stress point and have expanded the business into a multi-state operation.  Both parties continue to work with Blue Sky on new initiatives.