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Generational Equity in the News

By Generational Equity

09/09/2016

Recently The New York Times interviewed several members of our deal team, as well as a number of their clients for this piece, Selling a Business Involves More Than Money.

Here are two key excerpts from the article:

“Selling a business is not all about the financial side of it,” said Terry Mackin, managing director of mergers and acquisitions at Generational Equity, an M&A Advisory Firm. “Most are focused on the dollars, initially. They want us to tell them how much their business is worth. But they find there’s an emotional part to this. Eighty percent of the deals I’ve done have not sold for the best dollar offer.”

Part of running a business to be sold is regularly reviewing how it is doing relative to its competitors. Mr. Matich said he built his trucking company, MSS Distribution, with clients in the automotive, window and door and retail sectors, over 15 years but sold it when he felt the business was stuck. “I remember having this meeting with my customer and saying, ‘We can’t solve their problem; we don’t have the size,’” he said. “We needed to make a change to help service our customers, as they had greater needs.”

And now MSS Distribution can grow far beyond the capital limitations of its founders and provide even better service to its clientele:

Post Transaction Benefits of Being Part of an Equity Firm’s Portfolio 

And Ralph Noblin shares his thoughts on his final motivation:

The Importance of the Businesses Legacy

Brad Hennrich offers his input on this topic as well:

The Right Fit is Vital – How Generational Equity Helped Me Find It

The point in all these interviews is simply this: Do not be surprised if your initial motivation, usually “I want to find a buyer who will pay me the highest price,” changes as you get closer to culminating a deal. As we have seen time and time again, the legacy of the business – its ongoing success – often takes precedence.

Another Example

Realize this as early as possible in your exit plan because it often changes the type of buyer you want to pursue. For example, if maintaining the company’s current operations in its local community is vital to you, your M&A advisor needs to make that apparent to buyers at an early stage in the process so they understand your motivation. This was true, for example, with our award-winning work for Terry Stern, the owner of Stern Rubber:

Stern Rubber was founded in 1969 as a manufacturer of compression, injection and transfer-molded products, as well as extruded rubber products. Stern specializes in bonding rubber to plastic, metal, and other materials. Stern was acquired by Zhongli North America, Inc., headquartered in Shanghai, China. The acquisition closed on October 26, 2015.

Managing Director Chris Heckert was the GCM M&A advisor for Stern throughout the transaction. He stated, "We had numerous interested buyers throughout our process. Many wanted to relocate this business away from its location in Northern Minnesota, but the client strongly preferred keeping the business, and its jobs, in the community. I'm proud we achieved that important goal."

As you can see, the owner’s major concern was making sure that Stern remained in Staples, Minnesota. The good news is that he made his needs known to Mr. Heckert, who then found an optimal buyer willing to do just that, and not only retain the location but grow it as well.

Bottom line: Be honest with yourself and your M&A advisor regarding your deal motivations. It might start out being the highest price but could end up being far more different. The sooner you can truly identify your personal goals, the better your deal team can work on your behalf.

If you would like to read and hear more real client stories about how their motivations changed, you can do so here:

I hope that the links above prove helpful to you as you begin to examine your exit planning goals. Most importantly, be very, very honest with yourself, your loved ones and your key confidants: Answer this – what do you really want the final outcome to be when you exit? And, how important is your legacy and the company’s in its community?

If you can honestly answer these questions you will be in far better position to exit on your terms.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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