Our client manufactured and distributed its own waterproofing products that are environmentally sensitive yet highly effective. The niche products contain no VOCs, qualifying them for favorable environmental designations including being Green Spec™ listed, Singapore Green Label Certified, and additionally could enable those in the construction or design field to gain LEED credits by using or specifying the product. With a strong commitment to marketing, our client grew sales organically through independent stores, small chains, cooperatives and to resellers. The question was how to convert the hockey stick sales growth to the next level?
Our client owners could dig in for the long haul, invest in a management team, leverage the distribution paths already in use and continue to grow top line revenues. The firm would need to implement a tighter structure to enhance the bottom line. Further, a national sales team would be needed. However, this would take five years or more. Owners simply lacked the horsepower to do it.
Production was being done in small batches, with inventory of core elements made at a sister plant 1500 miles away. The final blend and packaging was being done at the sales office, then shipped to end users. This created logistics and timing challenges. The solution would be to combine the divisions into one location.
Owners were initially bearish, but came to realize that building would require additional investments and years of work. Retirement would have to be put off. Selling would not be easy, either. The product was young and sales seemed on the threshold of exploding.
Take the coatings products, intellectual property and business operation to market “as is.” Seek a strategic acquirer who could incorporate the product line into its own operation, leverage its own sales channels and achieve efficiencies by using its own manufacturing capacity.
How and when the employees were informed of the upcoming sale of the business.
We took the opportunity proactively to market, and approached private equity groups and companies doing rollups in the fragment coatings industry. We found several interested enough to offer Letters of Intent. We met with owners, their accounting and legal team to evaluate the offers, and selected a buyer. After months of diligence, including a Quality of Earnings study, the deal closed. The proposed strategy became the final plan.
Owners received seven figure proceeds at closing, and have an upside opportunity for substantially more earnings by helping the buyer with strategy and sales, enabling them to profit as the product line grows.
