The shareholders of Nowata Filtration selected Acquisition Advisors to represent them in the divestiture of their interest in the business. Acquisition Advisors developed and executed a quiet, confidential and effective strategy that resulted in a transaction that met all of the client’s primary goals and objectives.
Nowata is a highly successful fourth-generation company. The owner was at retirement age and it was not a viable option to pass the business to the next generation. It was large, complex, capital intensive, and the industry was very competitive. The owner had received regular inquiries from interested buyers. One in particular was a large, acquisitive company with a product line and customer base that would offer a strong fit with Nowata Filtration. Darrel Fry, the controlling shareholder, was not experienced in M&A transactions. He knew that he would be outmatched by experienced teams of buyers.
Acquisition Advisors listened to Fry’s objectives and devised a sound strategy to attempt to work out a deal with a firm by the name of Amafilter – a Dutch firm backed by the renowned Netherlands-based multinational investment bank ABN Amro. If the suitor’s terms were found to be “fair market” – as judged by AA’s experience – Fry would forego bringing in competing bidders.
AA negotiated a generous price and terms on behalf of Fry. The terms included a retention package for the key senior employees. After much work, the deal closed as planned and no alternative suitors were contacted.
Aside from the challenge of maintaining confidentiality, which is always a priority, the most significant challenges were the following:
Challenge #1: Getting the buyer to pay a maximum price without the pressure of competing bidders. This challenge was overcome by Acquisition Advisors’ experience with deals of this type. The buyer was also very experienced in deals, and knowledgeable of what price and terms were “market.” Once the buyer came to realize it could not outwit the seller and its representative in connection with fair price and terms, it capitulated and paid the premium that was merited.
Challenge #2: Valuing the company and pegging a fair working capital level, given the rapid growth and wide swings in working-capital levels that occurred due to the concentration of high-value orders common in the business. In this case, AA’s experience and skill brought logical analysis to the task of communicating and selling the methodology to the buyers. The end result was a significant working-capital adjustment bonus for the seller at closing, which in effect added 20 percent to the purchase price.
Challenge #3: Incentivizing and retaining key managers to run the company and allow an early exit for Fry. Securing and maintaining active cooperation of key managers is frequently essential to closing a deal. In this case, it was necessary to inform key managers early in the process. They became convinced of how the deal could benefit them personally, which is often the case (and runs contrary to conventional wisdom). They were also briefed on what to expect and what roles they would be expected to play in the transaction. Finally, as a parting reward for their good service in building the business and assisting in the transaction at hand, they were promised a bonus upon closing of the contemplated transaction. Each key employee received, as part of the deal, an employment agreement with the new owner, and the new, larger ownership entity promised them opportunities for further growth and professional development.
In a multimillion-dollar transaction with many intricacies, there is no replacement for the experience and advice of a specialized M&A advisor who has successfully negotiated a similar situation many times before. The value that can be delivered from using an experienced dealmaker is unique and creates significant value in addition to the role of accountant, legal or tax advisor.
I made the right decision hiring Acquisition Advisors to assist me. They worked with me throughout the deal, coaching me at each stage and skillfully orchestrating the process all the way through to closing. There’s no doubt that they added considerably to the deal, in excess of the fee that I paid to them.
Alkmaar, The Netherlands, Europe