Mergers & Acquisitions for the Middle Market


Success  Stories


Our client was a foreign marketing corporation that engaged our firm to divest its US manufacturing subsidiary. The subsidiary's products were sold to end users in the US and a number of other countries. In addition, the subsidiary also sold a significant percentage of its products back to the parent company, which in turn marketed them along with many other products. Due to the nature of the industry, confidentiality was of the utmost importance to our client. Once we understood our client's goals, we prepared materials to document the complex intercompany arrangement, and marketed the business worldwide. Ultimately the divestiture was accomplished successfully with a multinational corporation as the buyer. As an added bonus, the seller received the contract to market its former subsidiary's products. In addition, we were engaged by the owner, to sell a second subsidiary.


Our client was a distribution company that engaged our firm to market a subsidiary that manufactured products that were not related to its core business. The subsidiary had been acquired 3 years earlier and was highly leveraged. The subsidiary was taking resources away from the parent company because servicing the subsidiary's debt was cutting into the parent's credit line. In addition, management at the parent company was allocating too much time to the subsidiary, and not enough toward taking care of its primary business. Ultimately the subsidiary was sold to a private equity group that owned several portfolio companies in allied industries. The buyer had been looking to expand into the same industry in which the subsidiary operated. The divestiture of the subsidiary provided our client with a substantial amount of cash, and freed up financial and personnel resources that had been devoted to the subsidiary. The owner was very pleased with the results and engaged NBS to sell a second subsidiary.


Our client was an educational software company that was owned by a large children's photograph and portrait chain. This subsidiary was treated like a step-child, and was losing $1,000,000 per year. However, the subsidiary has a cadre of brilliant people and outstanding products. Our buyer search discovered that one of the largest educational companies in the country had a major problem. Whenever the company had to change the online curriculum for a course, it would take more than a year and several million dollars to accomplish the change. Our client's technology could accomplish the results in a 90-day timeframe at a cost of less than $50,000. Because it solved a major problem, the company was sold at a large premium comprised of 75% cash and 25% based on future profits. All parties, including the parent, the subsidiary and the buyer came out winners.


Restaurant chain. The owner built 6 franchise restaurants in two states. None were in the city where the owner lived, thus he operated them absentee with managers in place at each location. The demands of his primary occupation became too burdensome for the owner to oversee the restaurants, so he decided to sell them. We sold the restaurants in two stages, three in one state to one buyer and three in the other state the next year to a different buyer. The owner was relieved of debt caused by rapid over expansion


Our client was a successful manufacturing and distribution company. The owner was still relatively young (around 40) when he engaged our firm to market his company. The owner made a good living from the company. However, nearly all of the owner's net worth was tied up in the business. We contacted a wide array of prospects, and the owner received offers from both financial and strategic buyers. While the strategic offers were at good valuations, in the end the owner accepted an offer from a private equity group. Under this structure, the owner was cashed out for a majority of his stock, and retained a significant share of the company. The buyer provided both expertise and capital to help the company grow to the next level.

The goal was to ultimately take the company public or sell it to a major strategic buyer. At that point the owner’s retained shares should be worth far more than the shares he sold. This option allowed the owner to 'have his cake and eat it too'. The cash portion of the transaction was more than enough to secure the owner's future. At the same time he was able to participate in the company's growth and help create a second payday. The owner has referred two other business owners to NBS.


Our client was a well-known computer services and systems integration company and had an excellent customer base in the government, education and corporate markets. The company was growing very rapidly and, as a by-product, cash flow became its primary problem. The owner/CEO spent long hours and tried various avenues to alleviate this situation to no avail and the decision was made to sell the company.

A large ($500 million) strategic player was selected as the buyer and the deal was structured as all cash plus a mandatory 4-year employment contract for the CEO. In addition, there was an open-ended earn out based on sales with the expectation that the CEO would earn an additional $150,000 per year. After the transaction was closed, the buyer decided to centralize all financial and administrative functions and let the CEO concentrate on building revenue. As a result of the CEO being freed up from the headaches of finance and administration, he was able to devote full time to sales and marketing. The earn out turned out to be almost $500,000 per year and the CEO retired after the fourth year.


Our client was a technology services provider with good profit margins, but which had experienced flat growth the previous 4 years. However, during those 4 years all of the company's long-term contracts had expired, and the company was successful in replacing them with new business. We made sure to convey this story behind the numbers to all prospective buyers. Our client's price expectation was 5x EBITDA (earnings before interest, taxes, depreciation and amortization).

In the end the owner received six offers. Three of the offers came from private equity groups. One of the private equity groups already had portfolio companies in that industry, and the other two wanted to acquire our client as a platform. In all of these offers, the owner was offered cash for a majority of his stock, and was asked to keep a percentage of the ownership as an incentive to grow the business. The other three offers were from larger strategic buyers. In the end, our client accepted an offer from a strategic buyer, for three reasons: (1) the offer exceeded the owner's price expectations, (2) the buyer only required the owner to stay for a short (2 month) transition period after the sale was closed, and (3) the buyer's excellent reputation in the industry gave the owner comfort that his employees would be treated well after the acquisition was completed.


Our Client was a Vinyl window manufacturer. There were 3 top offers; the winner was from a private equity group (i.e. a financial buyer) that specialized in manufacturing companies. The deal was 5.3 times trailing twelve months EBITDA. This was paid as follows: Approximately 70 % cash, 10 % earn out, 20 % shares in the company going forward split 15% to the younger partner who was staying on full time and 5% to the older partner who was retiring but would keep a seat on the board and consult part time. The buyer put substantial investment into the company (the norm for financial buyers), so the percentages of stock owned by the sellers would likely grow substantially in value. The older partner was able to achieve his goal of retirement.


Our Client was a Promotional Products Manufacturer. Buyer was a strategic buyer in the same business, but based in Germany. Although we quoted a value to the sellers of 5 to 5.5 times trailing twelve months EBITDA, the buyer ended up paying over 6 times EBITDA PLUS an earn out based on growth over the next two years. An outstanding deal that closed in a record 4 month

Competition among buyers worked to get the price higher. The owners were semi-retired parents and 3 sons that worked in the business, however were not capable of managing it. The sons were given 3 year employment contracts to make sure that the company would continue to grow. The transaction was structured to give Seller's maximum tax benefits.


Our Client was a Specialty Pharmaceutical distributor specializing in mental health drugs. The company had a unique business model and clear plan for growth. A Financial Buyer, recognized the opportunity and bought company for 85% cash and 15% equity in the entity formed to acquire the business. Two key employees were given employment contracts and were further incentivized by the 15% equity in the firm.. This company has continued to grow rapidly and 2 other locations have been opened. The owner achieved his goal of retirement.


High Tech Consulting Firm. The company had more than $30 million in sales and an excellent reputation. The owner was recognized as a leader in his industry. He was burdened by a large debt to a German Bank. The bank was putting constant pressure on the owner and he just wanted out. He said he just wanted us to find a buyer to take over the debt. Our Confidential Auction worked and we obtained four offers. The one that he accepted took over all debt and in addition provided the owner with $5 million cash. He said our fee was the best money he ever spent.


Acquisition with customer concentration
This success story was accomplished in spite of difficult conditions. Our client was a manufacturer of an automotive accessory. The company had only three customers. Furthermore, 85% of the business revenue was generated from only one of those companies.

We knew, going in, that finding the right buyer would take a lot of focused research. It helped that our client was the only manufacturer of this accessory in the world and is protected by a web of patents.

Hundreds of strategic and financial prospects turned it down based on the customer concentration risk.  To find this needle in a haystack, we looked for a company that found our client's customer concentration to be a feature, not a liability.  We changed our research to look for private equity groups (PEGs) that already had an auto manufacturing company in their portfolio.

We came up with two prospects who made decent offers (others that were too low, with fatal flaws, we don't count). The first was a small PEG firm and their offer was right on the mark for our client’s price expectations. But we did better on the second.

The second offer was from a large PEG that had a definite need for this company. They owned several auto manufacturers doing business with other car makers. However they were unable to do any business with our client’s three customers. As they phrased it “we can never get a call back from them”.

It was a definite strategic need and the deal ended up 33% higher than our client's original price expectation. The offer was all cash and contained transition employment agreements for key employees. The deal attained or exceeded all the goals our clients had stated for a sale.


Utilize an experienced M&A attorney.

We recently closed a manufacturing business that should have closed six months earlier. When we were engaged to sell the business, we explained the importance of using an experienced M&A lawyer. We recommended four large firms and two smaller firms, all with excellent M&A experience. Our clients elected not to interview them.

Our clients, instead, interviewed and chose a small firm with two attorneys whom they felt understood their needs. The first lawyer had his specialties listed on his web site and M&A work was listed as his 6th specialty.  The second lawyer had transactional experience and was well known for immigration work. Both lawyers had good qualifications and educations.

Our deal was structured as an all cash Asset Purchase. In addition, the buyer purchased an insurance policy to limit the seller’s liability exposure. An LOI was signed with a proposed closing date 90 days out.

Our clients were risk adverse and their lawyers kept bringing up every possible risk. There were items of risk that we had never seen in our 40 years in business.

It took 10 months to negotiate the Asset Purchase Agreement, along with Employment Agreements and a building lease. The cost of 10 months worth of legal fees were incurred by both buyer and seller.

The buyer really wanted the business and had the experience necessary to hang in until it closed.

The reason for this success story is that it is vital to hire an experienced M&A Lawyer! We hope never to repeat this type of situation.


A Specialty Closed Door Pharmacy located in The Southern USA. The Company specialized in HIV Drugs with the average Rx being more than $250. A Private Equity Group recognized the growth and high margin opportunity. They bought 85% of the company and gave one owner a 15% interest to become the CEO of the company. They added Organ Replacement Drugs as a second specialty and the company grew very rapidly.

There is a second ending to this success story. The PEG bought the Pharmacy for $15 million plus the 15% to the newly appointed CEO. They sold it 6 years later to a large Pharmacy chain for $350 million. The CEO’s share was over $50 million.


Our Client was a Software Solutions company. We brought many offers, but the two highest were as follows. One was a very good all cash offer. Another one was comprised of about one half the cash of the first offer, a very substantial note and a very large block of stock in the newly formed public company that would buy the company. These owners were all under 40, and were willing to take more risk for the higher upside potential.


Software company. The owner built an SAP technology and applications software company with offices in three nations. The software product integrated third party software applications with SAP for large projects. The owner needed a buyer to provide the muscle to grow the business and take full advantage of the substantial market potential of its products. The buyer was a public company based in the US with a larger office in India. The transaction was structured to take advantage of the Owner's technical talents and to assure growth. The deal was comprised of cash, a note, an earn out and an opportunity to obtain stock. The owner achieved his goal of gaining the resources to grow the company.


Our Client was Staffing company. $35MM in sales, but low profit margin. The seller was in his 30's, and was unsure he could maintain the company in an increasingly competitive industry environment and with a large debt load and a questionable relationship with a Factor. He sold 100% of the company to a strategic buyer and competitor, an $800MM company. He had a multi year employment agreement. He was happy to be out of a high pressure situation that entailed headaches, debt, tough relationships and personal guarantees.


Injection molding company. The seller built a good business but did not have the capital to continue operations and was in a difficult financial situation. We quickly found several strategic buyers, and one of them closed the deal rapidly, relieving the seller of his debt and personal guarantees, and freeing him to pursue a new career. The buyer was located less than 30 miles from the business and needed additional space and capacity. The Seller had never heard of the Buyer.

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