- Key Features
- Experience Driven
- Buyer Requirements
- Owner Requirements
- Sample Buyer Profiles
Maxi-AUCTIONsm RECAP (Non-Control)
For the owner who is not ready to give up CONTROL but wants to take some chips off the table to diversify their asset holdings or do some estate planning, the equity re-cap Maxi-AUCTIONsm is an excellent solution. This pool of proven institutional investors focuses on the long-term and understands that to build TRUST with the owner they must demonstrate their willingness to be a partner first by buying a minority stake in the company.
Maxi-AUCTIONsm RECAP (Control)
For the owner who desires to bring in an investor/partner to acquire a competitor, buy-out non-active family shareholder(s), or both and wants to reinvest a meaningful equity amount along side of the new investor, the Maxi-AUCTIONsm RECAP (Control) is an excellent option. This structure requires a transfer in ownership control to the new investor but the owner (or his designee) retains operating control and now has a financial partner at the table with him. This option allows the owner to take some chips off the table but roll some of his equity into the acquisition entity on an equal footing with the new financial partner and get a second bite of the apple.
When the owner has decided to sell but does not feel comfortable with hiring an Investment Banker, the proprietary Maxi-AUCTIONsm SALE establishes a fair, swift, uncomplicated, competitive and VERY confidential sales process for qualified sellers. It provides the pool of financial buyers an exclusive “first-look” at an opportunity to pursue a transaction with a motivated seller that meets the buyer’s investment criteria.
All auction success fees are borne by the investor/buyer.
QUICK – 30 DAY Market VALIDATION! Within 30 days of the buyer pool being notified of the opportunity, the owner must receive at least one Letter of Intent ("LOI") that meets or exceeds the owner’s “Essential Requirements” as to price and terms or the owner is released from any further obligation to the M&A MARKETPLACE by cHcsm. Closing MUST occur within 90 days of signing LOI. Thus, the TOTAL TIME required is 120 days versus nine to twelve months (or more) in today’s economic environment. See typical "Broad Auction" process.
CONFIDENTIAL – All buyer pool participants must execute a Non-Disclosure/Non-Circumvention Agreement prior to knowing the identity of the seller. Additionally, since the total time from start to closing is only 120 days and the universe of investors/buyers is very limited, confidentiality is MUCH easier to maintain. This degree of confidentiality is virtually impossible to achieve with a “Broad Auction” process where 100+ potential buyers are contacted and the process can take up 12 months or more.
COMPETITIVE – This CRITICAL ingredient keeps the process FAIR for the business owner. Every buyer wants to have a negotiated transaction with the seller where NO other suitors are competing for the opportunity. This is the WORST possible scenario for the seller in achieving a fair financial result. With a LIMITED number of pool participants, each investor/buyer knows their odds of success are infinitely better than competing with 100+ other buyers. By only providing them, ONE chance to bid they also must put their BEST offer on the table up front. Thus, they take every Maxi-AUCTIONsm opportunity seriously and know the seller’s “essential requirements” up front. From the seller’s perspective, they only need one LOI to receive the deal they have previously agreed to accept. As occurred in the actual case study, this competitive process generated THREE offers substantially above the two prior failed attempts at one-on-one negotiations by the seller.
While the past is not a promise of future performance, competition in anything helps keep everyone honest.
To learn if your firm potentially qualifies, CLICK HERE.
The proprietary Maxi-AUCTIONsm was the result of an actual transaction where the owner of a very profitable, $200+ million revenue distributor of a niche product to the residential and commercial construction trade refused to hire a professional intermediary. After TWO failed trips down the aisle, the owner approached a partner of Nixon’s and indicated he was a seller if a Letter of Intent (“LOI”) from a buyer could be delivered within 40 days that met or exceeded the $115 million purchase price and terms of the best offer previously made, but not closed. The seller REFUSED to retain Nixon’s firm or pay its fee but agreed to an exclusivity period of 40 days to produce a buyer. Additionally, the seller had major deal fatigue and required that the buyer diligence and documentation be performed simultaneously to achieve a closing within 90 days of signing the LOI.
A limited number of financial buyers were approached on a no-name basis with a one page “Teaser” highlighting the three essential deal points of the seller along with summary financial results for the past three years. Six buyers signed the confidentiality agreement, five visited the company and THREE submitted offers with better price and terms within twenty-one (21) days of receiving the “Teaser”. Two buyers offered a price equal to 30% more than the seller had agreed to accept just six months prior from a strategic buyer. A winner was selected and all diligence and document negotiations were completed within the 90-day requirement.
The above process served as the Genesis of the M&A MARKETPLACE’s “Maxi-AUCTIONsm ” where the family business owner – not the financial world, made the rules.
The Maxi-AUCTIONsm provides a limited number of financial investor/buyers an exclusive “first-look” at an opportunity to pursue a transaction with a motivated business owner that meets the investor/buyer’s investment criteria. In this process, the auction success fees are borne by the investor/buyer. Both participants must be willing to sign the auction participation agreement that spells out the rules and requirements that apply to each in order to participate.
If interested in becoming a member of our Buyer Pool, CLICK HERE to contact us.
Requirements of Investor/Buyer:
- Proven track record of similar transactions.
- Registered with and accepted by the M&A MARKETPLACE by cHcsm to participate in “Buyer Pool”.
- The buyer pays all auction success fees.
- Demonstrate ability to close in current credit restrained capital markets.
- Sign NDA/Non Circumvention and Maxi-AUCTIONsm participation agreements.
- Willingness and ability to submit an LOI within 30 days of initial contact subject only to due diligence, regulatory requirements and execution of balanced purchase documents.
Except in situations beyond the control of the buyer and seller, buyer agrees agrees to close within 90 days of issuance of LOI or seller can terminate process with return of their deposit.
The Maxi-AUCTIONsm establishes a fair, swift, uncomplicated, competitive and VERY confidential sales process for qualified business owners. It also provides a limited number of financial investor/buyers an exclusive “first-look” at an opportunity to pursue a transaction with a motivated business owner that meets the investor/investor/buyer’s investment criteria. In this process, the auction closing fees are borne by the investor/buyer. Both participants must sign the auction participation agreement that spells out the rules and requirements that apply to each in order to participate.
Requirements of Business owner:
- Private Company with minimum of $2 M in Normalized EBITDA*
- Growth or consolidation opportunity
- Good accounting controls in place – audited financials preferred
- Owner must place a “Good Faith” deposit in escrow to demonstrate they are motivated to complete a transaction. It is fully refundable when the transaction closes, a buyer diligence issue prevents a closing or the Maxi-AUCTIONsm fails to produce a successful bidder.
- Administrative diligence fee due upon receipt of a acceptable Letter of Intent (“LOI”)
- There are no customer concentration issues
- Sign NDA/Non Circumvention and Maxi-AUCTIONsm participation agreement and
- Willingness to retain legal counsel or co-counsel approved by M&A MARKETPLACE by cHcsm
Please click here if you are interested in learning more about selling your business.
* Normalized EBITDA – Earnings before interest, taxes, depreciation and amortization adjusted for owner compensation that exceeds market norms and expenses not related to normal operations of the business in the future. Add back all owner compensation/benefits (salary, insurance, auto, profit sharing and one time or non-essential expenses for benefit of owners) less market compensation for services being performed by owner. The M&A MARKETPLACE by cHcsm will assist you in determining this adjusted EBITDA number.
SAMPLE BUYER PROFILES
Buyer 16 – "…. seeks to become long-term partners with family business owners, management teams, and exceptional CEOs who have as their goal significant long-term growth in their enterprise."
"Philosophically, we believe that building a business takes time. We can invest capital in a business for up to ten years, or twice the duration of most funds …"
"We believe in people…we have had the privilege of building trusted relationships with amazingly talented …people of the highest integrity … that do business on a handshake and put the interest of their
employees and partners ahead of themselves.… We treasure the connections that business owners have to their communities as well as their own employees, a connection that makes their businesses great places to work."
Buyer 19 – "We also remove syndication risk by using single lenders or a small group of lenders that we know to finance our platforms. As a result, we have closed over 90% of the Letters of Intent that we have signed in our 20 year history and have never failed to close a transaction due to financing."
Buyer 24 – "…is focused on the lower middle market and invest in a wide range of industries…we target private family businesses with revenue between $10 and $100 million and we strive to be the partner of choice for owners, entrepreneurs and management teams….we partner with management teams where they have limited or no current ownership…work with owners to facilitate generational transition of ownership for estate planning …or to acquire ownership stake of those family members not active in the business."