The Summit Group
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Sale Of A Business: Wholesale Manufacturing

The clients

The owners of a chemical manufacturing and distribution company in the Greater Vancouver Regional District.

The issue

The owners had been approached by a multinational public company wishing to expand into British Columbia and wanting to buy this company. The owners were not sure how much their company was worth or how to deal with the approach of an aggressive Mergers & Acquisitions Department of such a large company.

The solution

The Summit Group was hired to analyze the company, determine a value, handle negotiations with the public company, structure the deal and liaise with other professional advisers.

When the initial analysis was completed, it was determined that the value of the company was lower than the owners were willing to sell for. After further analysis, the Summit Group worked with the owners to increase the value of the company by focusing sales and operations on higher margin products until after eight months, the value of the company had increased to the value desired by the owners.

The Summit Group opened negotiations with the public company and it was soon determined that the public company could only complete the transaction payments through a combination cash/share payment plan. The owners were not willing to consider this structure.

It was then decided to put the company up for sale to the market place. Over 25 potential purchasers were contacted; 12 expressed interest and proceeded with preliminary due diligence. Five offers were received and very quickly the owners narrowed the offers down to one purchaser with whom they would eventually close the sale.

Of the five offers received, a number of them contained a structure whereby the owners remained with the company for a number of years as minority equity partners, as the owners were of an age that retirement was in future years. The Summit Group had discussed this option and had noted that it was likely some of the offers would contain such a structure.

In the end, the owners received the asking price for the business in cash, were able to retain a minority equity position in the company under very favourable terms and now had a partner with the financial muscle to grow the business beyond what the original owners were capable of.