The shareholders of Roto-Hammer Corp. selected Acquisition Advisors to represent them in 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.
Roto-Hammer is a manufacturer of specialty valve accessories that enhance safety, ease of access, ease of use, speed and durability of valves and valve applications. Products include chain wheel operators, impact or “hammer blow” operators, floor stand actuators, retaining cables and clips, extension controls and gear reduction operators.
Roto-Hammer was founded in 1959 by an industrial engineer who recognized the market need for manual valves with special accessibility features. He developed the Roto-Hammer, patented it and began selling it and other innovations worldwide. Herbert Miller purchased the business from him in 1989 and steadily grew the company. In the 1990s, he moved the manufacturing of cast parts to China, successfully reducing cost per unit. In 2005, Miller hired Acquisition Advisors to represent him in the sale of the company. Acquisition Advisors secured more than 20 offers from buyer prospects around the world. But Miller was diagnosed with a virulent form of cancer and the project was put on hold for more than a year.
In 2006, Miller passed away and his widow became sole owner. She delegated oversight of the business to her two capable sons-in-law. In 2007, Acquisition Advisors was again retained to represent the seller. Offers were secured from strategic, financial and individual buyers. After a national and international search, a local individual, Craig Sutton, was selected as the best buyer candidate for Roto-Hammer and its loyal, talented and valued employees. Sutton intends to grow the business from its longtime location in Sapulpa, Oklahoma.
Challenge #1: Industry is mature, low-growth and relatively small. This presents a challenge to secure a premium price.
Challenge #2: The seller had previously engaged a number of other M&A firms, which were unsuccessful in meeting the seller’s high expectations.
Challenge #3: Roto-Hammer was a C-corporation and, as a result, the seller wished to effect the transaction by a sale of stock (for tax reasons), while most buyers preferred an asset purchase.
Challenge #4: Owner was very active in day-to-day management of the business, which increases risk in transition to new ownership.
Challenge #5: Confusion and loss were associated with the death of the owner and starting the project over with the representatives of the owner’s wife, who had not previously been involved in the business.
An intensive, thorough buyer search was critical to finding the highest and best buyer candidates, as well as showing the seller real “market price” offers. The seller had a fear of selling the business for anything less than the highest price possible.
The seller had hoped that a buyer would come along and just “ignore” the C-corporation issue. Unfortunately, this was not the case for most buyers, so the solution was to get multiple offers and let the seller select the best offer, all things considered.
Due to the extended pause in the process after the death of the owner, the most effective way to ensure the highest and best buyer was to repeat the full selling process and bring Roto-Hammer to market for a second time. The interests of the client and ensuring the highest chance of success must come before considerations of time and energy required to repeat steps in the selling process.
Learning experience of the deal:
Undesirable characteristics, such as C-corporation status and the seller being an active manager in day-to-day operations of the business will inevitably have a negative impact on a sale. If the seller does not wish to take the time to remedy obstacles such as these, the best option is to set reasonable expectations, market the business professionally and secure multiple, qualified offers for the seller to choose from.
Sapulpa, Oklahoma, USA
Tulsa, Oklahoma, USA