VEER Supports Successful Business Transitions in 2019/2020
2020 has been a tumultuous year so far with unprecedented health, social justice and economic challenges. Despite the turbulent times, many business owners continue to take the necessary steps that lead them to a successful business transition or exit. Here is a look back on some of our clients’ successful business transitions over the last year.
“Bill” was introduced to VEER by his external accountant in March 2017. He was the majority owner of two businesses.
One a value-added reseller of a suite of high-end technical software products and the other a consulting firm that supported clients to optimize the benefits of their technology. Bill had led the businesses for two decades but was losing steam and enthusiasm. An industry colleague had offered Bill $1 million for the businesses and he was leaning towards taking the deal. VEER worked with Bill to review the offer while also analyzing his businesses, industry and market through a Value Enhancement and Exit Readiness Assessment. VEER identified several actions to increase value and also advised Bill that his business was entering a more profitable period . More importantly, a large number of international competitors were also recognizing this trend and were consolidating the industry. Once our recommended actions were implemented, we managed a limited auction sales process among the strategic buyers. This led to multiple offers and, in April 2019, the businesses were sold, with total proceeds nearly four times the original offer. Bill continues to provide consulting services for the business and has a lot more time for travel and bike riding.
“In both transactions, VEER has been professional and provided us with a range of services that we could not have managed without their involvement”
“Greg” owned an electrical contracting business and was introduced to VEER in October 2017.
While the business was successful and growing, Greg had started a separate business venture a couple of years earlier which was now consuming most of his time. The company had several key employees who were interested in owning equity in the contracting business and leading it to continued growth. Greg retained VEER to provide a Transaction Support engagement, facilitating the sale of a majority interest in the business to the key employees. The first step was meeting with Greg, his family and each interested employee to understand their personal, family and business objectives. During this process, a couple of employees decided that the investment was not aligned with their objectives and stepped away from the process. We also determined that, as in most businesses, while the employees understood electrical contracting, they did not understand financial statements and business valuations. So we spent several sessions explaining these concepts. Two of the employees needed external financing, so we introduced them to lenders and facilitated the process. Once the details of a transaction were agreed to, we drafted a Letter of Intent that clearly documented the deal. Finally, we worked with lawyers for both the owner and the employees to negotiate a Share Purchase Agreement and Shareholders’ Agreement. In February 2019, the employee group became the majority owners of the business. Greg still provided strategic oversight as the new owners took on key management and decision-making duties.
“Thanks for your assistance, honesty and guidance through this process. You made every meeting comfortable and productive. I feel like you explained everything with language that was easy to understand which helped me make my decisions confidently”
“John” and “Brian” were friends that started a specialized construction services business in 2007.
The business grew steadily for about ten years, then experienced a “lottery win” contract in 2017. This doubled the company’s revenues and quadrupled its profits. As the company struggled to repeat the contract, the owners were slow to “right-size” the business and subsequently found themselves losing money. The partners disagreed on business strategy and, in December 2018, Brian advised John that he was leaving the business and asked to be bought out. However, in the wake of huge variances in financial performance, they were millions of dollars apart on perceived business value. Independent business valuators and a professional mediator were unable to find a path forward. VEER was introduced to John by the company’s external accountant in February 2019 and was engaged to provide Transaction Support services. They worked with both John and Brian to facilitate a deal they could agree on. After multiple proposals and various earn-out and price adjustment discussions, the parties agreed on a deal structure. We documented this into a Letter of Intent and it was finally signed by both. In August 2019, John acquired Brian’s shares of the business and, nearly a year later, has implemented solutions to restore the profitability of the company.
“VEER supported me through a difficult buyout which resulted in a successful transaction that has allowed the business to thrive. VEER’s creative solutions and broad perspective were essential to creating an agreement and closing this deal.”
“Martin” and “Nora” started a construction product distribution business in the mid-1980’s. After more than 30 years, they decided it was time to sell the business to spend more time travelling and with family.
In June 2018, they were introduced to the VEER team and engaged us to provide a Value and Exit Options Assessment. We provided our report in August 2018, which included an analysis of possible exit options, estimates on how prospective buyers would perceive value, and actions they could take to enhance value and marketability. Martin and Nora were pleased with the report but chose to approach a couple of possible buyers on their own. In January 2019 they received a Letter of Intent from a possible buyer but the deal fell through. In July 2019, the owners approached VEER again and retained us to market the business to a limited number of strategic buyers. This process had immediate results and a Letter of Intent was negotiated in October 2019. However, it turned out that while the owners were trying to sell the business on their own, they took their eye off operations enough that financial performance dipped. By November 2019, the buyer was looking to renegotiate the deal and we were able to structure a revised transaction that included cash on closing, vendor financing and an earnout that would restore proceeds to the original deal if financial performance recovered. The deal closed in February 2020; since then, Martin has helped the new owners to increase sales and profitability and the vendors have a good chance to achieve their initial value objectives.
“We are both extremely grateful for your guidance, patience, diligence, brilliance, resilience, tenacity, positivity, good humour and the time you have spent with both of us. We realize as Business Advisors, the challenges you have encountered to manage us all!”
While these stories represent four typical VEER engagements, no two situations are the same. On every engagement – no matter how big or small – we start with a comprehensive discussion of the personal, family and business objectives of the owners. Only then can we begin to chart a course to achieve those objectives and help realize their transition goals.
The VEER team is currently working with the owners of about sixteen different businesses, all at various stages of their business transition journey. A few will probably exit their businesses in 2020; others are implementing the actions necessary to enhance the value and marketability of their businesses prior to a future exit. And others are working with key employees or business partners to achieve an internal transaction that achieves a “win-win” for both groups. We are honoured by the confidence they have shown in the VEER team and we look forward to celebrating their successful transitions.
