Mergers & Acquisitions Case Studies

Selling a Business for Maximum Value

Below are select examples of how we have confronted difficult situations and delivered optimal results for our clients.

Preemptive Offer Provides Exceptional Results

 

Client Profile
Private Software and Media Company

 

Situation
The Owners had decide that the timing was right to sell the business. They had experienced double-digit growth for several years an, rather than take the risk of a potential downturn, wanted to capitalize on their positive momentum and sell the business. Their question: would the business be worth enough to support their desired lifestyle for the rest of their lives, and would they be able to.

 

Solution
DCA asked the owners what their “wildest dreams’ number for the business was. With this knowledge in hand, DCA approached two “violent competitors” in their industry that DCA believed would have an interest in the Company. DCA informed each of the two companies that we were talking to their competitor - as well as others in the industry - but that we would be willing to cease all negotiations and terminate the auction process if they would be willing to put forth a compelling preemptive offer.

 

Result
DCA was able to negotiate a preemptive cash offer that was 20% higher than the shareholders’ “wildest dreams” number, with an additional 20% earn-out opportunity on top of that. The knowledge that the other competitor was out in the wings also helped to keep the buyer honest and deal momentum brisk. The owners have since retired, and are enjoying the fruits of their prior labor.

 

Can we do this on our own?

 

Client Profile
Private Marketing Services and Software Company

 

Situation
The Client had received an unsolicited call from a Private Equity-backed company looking to do an IPO in the next 2 years expressing an interest in buying their company. The Client had known the principal of “Preemptive Offer Provides Exceptional Results”, and, as a result, called DCA to see if we could help him to deliver a similar outcome for them. There were there partners in the business, all of whom had differing interest levels in selling. One of the partners wanted to try to run the M&A process on their own, thinking “after all, THEY called US.”  Unfortunately, because the Company was not planning to sell, their internal systems, regulatory compliance, and governance systems were a mess.

 

Solution
The Client ultimately engaged DCA, who went to work understanding the unique assets that the Seller provided relative to Buyer’s product gap and strategic issues the Buyer needed to solve to have a successful IPO. With this knowledge in hand, DCA aggressively negotiated on behalf of the Sellers to highlight their unique offering and strategic (non-economic) value.

 

Result
DCA successfully helped get the Seller’s house in order and aggressively negotiated the purchase price with Buyer – even though the Buyer knew there was not a competing offer. As a result, the Seller’s received a final purchase price 40% above the Buyer’s initial offer. Equally important, we were able to negotiate highly-favorable payment terms and security structures, providing enhanced certainty and security for the selling shareholders.

 

The 7–Day Deal

 

Client Profile
Private Software Company

 

Situation: Seeking DCA’s counsel, the Company contacted our Firm one Friday concerned that it was not going to meet payroll the following Friday. They asked DCA if there was anything we could do to help them save the Company.

 

Solution: Later that same day, we introduced the Company to a strategic acquiror that we thought should be able to leverage the client’s customer base, technology and personnel.

 

Result
Working through the week, the parties were able to negotiate terms of the deal, document the transaction, complete limited due diligence with expanded reps and warranties, and actually closed the deal the following Friday, allowing the Company to fund that day’s payroll. Total elapsed time from introduction to closing… 7 days.

 

Strategic Buyer Offers Attractive Alternatives

 

Client Profile
Private Software Company

 

Situation
The Company had developed interesting technology, but did not have adequate resources to commercialize the technology.

 

Solution
DCA worked to help merge the Company into a Company with pre–existing relationships with the client’s target customer base.

 

Result
Client’s software company has been able to leverage these longstanding relationships to gain market traction and is well on its way to becoming a leader within its niche market.

 

Strategic Buyer Offers Attractive Alternatives

 

Creative Deal Structure Nets 60% Higher Value

 

Client Profile:
Diversified Public Company

 

Situation:
Company looking to divest non–strategic business unit in order to raise cash and focus on core business units. This business held two key assets, but no prospective buyers were willing to ascribe meaningful value to both assets.

 

Solution:
DCA packaged the business as two separate business segments and sold each segment to two separate buyers. DCA also negotiated the terms of joint use of certain shared assets between the two new owners.

 

Result:
Increased Purchase Value by over 60% above maximum purchase price offered by any single purchaser for the combined business.

 

ESOP Provides Ideal Liquidity Strategy

 

Client Profile
Private Company with minority shareholders

 

Situation
Several minority shareholders were looking to get liquidity from their ownership position. Unfortunately, neither the Company nor the majority shareholder had the cash resources to buy out these older shareholders and the majority shareholder did not want to sell the business.

 

Solution
DCA recommended that the Company consider forming an ESOP in order to: (i) fulfill management’s commitment to share the Company’s success with the employees, (ii) generate a non–cash deduction from the contribution of Company Stock to the ESOP each year, and (iii) use these tax savings to buy back the "maturing" shareholders’ interests largely with "Uncle Sam’s" dollars.

 

Result
The Company has put in place a multi–step plan to position the Company for a tax–advantaged ESOP buyout within the next two years. This plan will meet all shareholders’ objectives, including the majority shareholder who will enjoy a smooth transition into retirement, gradually taking some "money off the table" while receiving favorable tax treatment and remaining in control of the Company the entire time.

 

In Negotiations: Knowledge is Power

 

Client Profile
Minority Shareholder of Closely–Held Business

 

Situation
The Majority Shareholder approached the client to buy out his minority position. The Minority Shareholder wanted to get a sense for what a fair value for his portion of the business might be.

 

Solution
DCA conducted a comprehensive, yet cost–effective valuation summary and provided this information to the client, who then used this information to successfully negotiate with the Majority Shareholder from a position of strength.

 

Result
The client was able to objectively respond to the buyout offer and avoided selling out at an unfair valuation.

 

Strategic Acquiror Saves Troubled Company

 

Client Profile
Private Manufacturing Company

 

Situation
The Company was reasonably successful, growing 100% per year for each of the past 3 years, but had recently made several poor—and expensive—decisions. As a result, they were insolvent and faced losing their Workers’ Comp insurance within 2 weeks. They also had a sizable Payroll Tax Deposit to make at the same time. The owner contacted DCA at this point.

 

Solution
DCA put together a Business Opportunity Summary and coached the CEO on what to do in order to attract and select a strategic acquirer.

 

Result
The CEO was able to identify an ideal strategic acquiror who purchased 51% of the business, relieved the former owner of all personal guarantees on the Company’s obligations, and provided an ideal platform for future growth. The Company continues to grow nicely, and the CEO remains active in the business.

 

Buying a Business

Below are select examples of how we have confronted difficult situations and delivered optimal results for our clients.

 

Creative Deal Structure Allows Company to Buy Strategic Asset with No Cash

 

Client Profile
Public Company

 

Situation
Company looking to acquire a strategic product line from an R&D Company. The R&D Company was asking $16 million cash for its technology rights. Client did not have sufficient liquidity or meaningful dollars so as to be able to afford this type of transaction structure.

 

Solution
DCA developed a creative deal structure allowing our client to acquire this strategic technology with approximately $2 million in the Company’s stock and a royalty on future sales.

 

Result
The deal was completed and the company preserved its cash for product marketing and other strategic priorities.

 

Professional Approach Yields Unprecedented Success

 

Client Profile
Family Owned Business

 

Situation
After years or unbridled growth of both revenue and profits, the Client’s business began to taper off, due in large part to an underlying systemic decline in the size of the market in which they did business. Unwilling to accept having a declining market size dictate a decline in their business, they set a strategic goal to grow their business by 40% over 2.5 years- mainly through acquisition. Historically they had managed acquisitions internally- with mixed results. They elected to interview several high-quality M&A firms, and ultimately engaged DCA to spearhead their aggressive growth strategy.

 

Solution
DCA put together a highly-professional, 16 page position paper on the future of the industry, the challenges it was likely to face, the risks to owners who continue to operate independently, and the benefits of selling to DCA’s client.  We then selected the few dozen top strategic targets and conducted a highly-personalized, multi-faceted outreach program.

 

Result
The outreach program was so successful that we assembled a sufficient pipeline to meet the Company’s 2.5-year growth target within the first 5 months. The first transaction closed within 7months of starting the process, with several more queued up to follow in the coming months.

 

Next time, please hire us first…

 

Client profile
Large, closely-held business

 

Situation
The Company had done a series of acquisitions that had not worked out the way they had hoped, and the deals had been structured in a manner that threatened the viability of the underlying businesses.  They asked DCA to help them analyze the deal structures and attempt to renegotiate the transaction terms with the Sellers to help make the businesses more viable. DCA agreed to do this ONLY in hopes that the Company would instead hire DCA up-front the next time the Company sought to acquire a company, so that we could help prevent situations like this from recurring again.

Solution
DCA was able to identify a weakness in the Sellers’ position and, with this knowledge in hand, was able to secure meaningful concessions from the selling shareholder group.

Result
While DCA was able to negotiate meaningful concessions, we were still disappointment by the remaining shortfall; it would take considerable operating improvements in order for the companies to reach long-term viability.  The moral of this story: it is important to do acquisitions right up-front. When done wrong, the repercussions can last a long time, be hard to fix, and be very expensive.

 

DCA Advisors (advisory)

Growth Counseling Leads to Unprecedented Growth (Strategy)

 

Client Profile
Private Business Process Outsourcing Company

 

Situation
Company wanted to raise expansion capital to build its sales and marketing infrastructure.

 

Solution
In assessing the Company, DCA advised the client that they should NOT raise additional capital, as any equity would be too dilutive to existing shareholders. DCA assisted the Company in hiring new management talent in key areas, improving internal processes and financial controls, developing an improved business strategy, and focusing the client’s limited resources toward key initiatives.

 

Result
The Company is experiencing unprecedented internal growth, as well as improved earnings and cash flow, all without diluting the current ownership.

 

Objective and Informed Analysis Helps Company Make Strategic Decisions

 

Client Profile
Public Company

 

Situation
The Company was terribly undervalued, and management wanted DCA to help evaluate a variety of alternative strategies for rebuilding its shareholder value. Options included: (i) a rights offering to raise cash, (ii) a PIPE investment offering, (iii) a spin–off of one of the Company’s existing business units, (iv) a strategic acquisition (or a series thereof), or (v) a sale of the business.

 

Solution
Using our sophisticated database and other Corporate Finance and Market Intelligence tools, DCA was able to provide a detailed and highly–specific analysis of each of the client’s available options. The Company presented this research to its Board of Directors, who made an informed decision as to which course to pursue.

 

In addition, DCA worked with the Company to develop a clear, concise, and compelling investment summary to report to Wall Street, and also assisted the Company in developing a pro–active investor relations and shareholder communication strategy.

 

Result
DCA is now in the process of helping this client execute on its recommended strategy, and implement its proactive investor relations plan. Within just the first few months, the stock doubled in value!

 

Coaching Process Re–energizes Executive  [execution]

 

Client Profile
Private Manufacturing Company

 

Situation
The Business was growing and successful. Despite this, however, the Owner was experiencing burnout and looking to be re–energized and re–directed toward his personal and professional goals.

 

Solution
DCA put this executive through an accelerated version of its Personal and Professional Goal Setting and Implementation Program. This Program defined the Executive’s core values, priorities, and goals, and then provided a roadmap and checkpoints for accomplishing these personal and professional objectives. By achieving the appropriate balance between personal and professional priorities, both aspects of the executive’s life are improving.

 

Result
Using DCA’s proprietary Personal and Professional Goal Setting and Implementation Program, DCA was able to improve this Owner’s time management, his direction and focus, his energy level, and his sense of personal and professional satisfaction. He is well on his way toward accomplishing his self–defined, long–term goals.

 

You Can Sell More Product When Paying For It Is Easy [execution]

 

Client Profile
Manufacturing Company With Worldwide Sales

 

Situation
The Company made a good product but was selling into an industry that was somewhat depressed. To make matters worse, a strong dollar made everything expensive to their overseas customers.

 

Solution
DCA assisted the Company in setting up a variety of convenient financing alternatives for its international customers, including financing through the Ex–Im Bank, GE Equipment Finance, and other creative alternatives.

 

Result
The Company’s international sales are beginning to rebound.

 

How can we possible do all that? [execution]

 

Client Profile
Family-Owned Manufacturing Business

 

Situation
After weathering tough economic times and considerable downsizing, the Company had landed a few large contracts, and was experiencing unprecedented growth.  To make the situation even more daunting, one single contract was considerably bigger than the entire company had been just one year previously; and the contract was to manufacture a product that the Company had never before produced.  This was a bet-the-Company (and make-the-Company) opportunity; they simply could not fail. Management was confident, but the troops were concerned.

 

Solution
DCA conducted a series of one-on-one interviews with management, and quickly identified core action items needing to be addressed.  We then assembled the team for a two-day intensive planning session where the team collaboratively developed a strategic action plan to capitalize on opportunities and shore up deficiencies. They agreed on priorities, allocated resources, assigned responsibility, and empowered one another to hold each other accountable.

 

Result
Within 6 months, the Company had accomplished so many of the identified strategic initiatives, they needed to hold another planning session to take the Company to yet another level.  With visibility on all of the action items that needed to be accomplished, it was no longer daunting. The team was confident, focused and empowered; morale had reached a recent high.  Six months later – with things running so smoothly -  the Company began looking forward, focusing on sustaining this new level of volume, no longer concerned about their ability to execute at that level.

 

 

 

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