HERDING GAZELLES | Karl Stark and Bill Stewart

Get an Offer That's Just Right

Finding the perfect investor can be a Goldilocks-type challenge. Here's how one company found that 'just right' investor.

 

Here's a tale of a business that was looking for the "just right" buyer. This manufacturing company in the aerospace industry was lost and had wondered completely off the growth track.

This company had developed a strong track record of supplying metal component systems for the big aircraft engine manufacturers, such as Pratt & Whitney. One of the aircraft they provide parts for is the FA-18. The previous owner, in his advancing age, began to manage the business for cash and delayed investment. Although the business had many strategic growth opportunities, it was never able to pursue them due to the previous owner’s mindset and personal goals. The management team became frustrated with their inability to grow the business. Their best option was to find new owners that had the appetite and ability to invest in profitable growth.

As a variety of financial buyers (e.g., private equity groups) and strategic buyers looked at the business, they realized the problem: the business required significant investment in its plant and equipment to continue to serve its customers. The previous owner had not maintained the business well enough to support sustained growth. In addition, there were some investments required to maintain environmental standards. One by one, many of the interested buyers dropped out of the bidding.

The eventual buyers, who  partnered with our firm, were two former entrepreneurs who had previously built and sold a successful environmental services business. They were comfortable with investment required to meet environmental standards, and they were able to quantify the capital that was required to transform the business into a growing company. They agreed to pursue a bid for the company, and developed a plan for incremental capital investment.

Because the other bidders had walked away, the two entrepreneurs were able to buy the company for  substantially less than the initial asking price. Now, the new owners are investing in growth, including possible acquisitions. As a result of the new investment, customers have increased their activity with the company and committed more orders to the business. The investors are now looking at new acquisitions, and plan to continue to target companies that may be unattractive to those unwilling or incapable of taking a longer term view and can be acquired at a reasonable price.

Do you have a story of a company who found or is looking for the right investors?  Share it with us at karlandbill@avondalestrategicpartners.com.

Karl Stark and Bill Stewart are Managing Directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself, and is ranked No. 95 on the 2011 Inc. 500 list. @karlstark