More than at any time during the 25-years since the founding of Janas, Middle Market Mergers & Acquisitions valuations are strong with high demand for acquisitions. Middle Market companies are in “Sell High” territory.
Janas applies a philosophy for company divestitures designed specifically for owners who: (1) do who want to retire; (2) should diversify their investments; and (3) tap a substantial portion of company value in an excellent market.
“I sold my company, I still have my company, I will sell my company again.”
This philosophy describes company ownership who sell: (1) an ownership interest to a Private Equity Group and retain either a majority or protected minority ownership; (2) Enter into a Management Contract with above market compensation – Success Pays; and (3) Benefit from another liquidity event when the company sells again in the future.
Janas has applied this message for many years to the benefit of clients in several industries. A few examples:
• Olympic Oil Co., Inc. The company had four owners, one of whom wanted to sell his entire ownership interest. Janas attracted The Riverside Company to acquire 80% of Olympic for $20.0 million. The remaining three owners retained a 20% interest, received their share of the proceeds, net of $10 million of personally guaranteed debt and the ownership interest of the fourth owner. The Private Equity Group pursued a rollup strategy and sold the expanded company. The three Olympic owners received more proceeds from the sale of their minority interest than they received from their original majority ownership.
• St. Worth Containers, Inc. The owner and his deceased partner had built the company from scratch. The 50% owner/CEO wanted to cash out his deceased partner’s spouse, and take some of his proceeds off the table, but continue as CEO. Janas identified Spell Capital, a Minneapolis Private Equity Group, who: (1) acquired 85% ownership, (2) entered into a management contract with the CEO; and (3) provided the CEO with protections for his minority interest.
• Sierra Energy, Inc. The Company owned a significant debt to Wells Fargo Bank that it was unable to pay. Janas divided the Company into seven divisions and sold six divisions to a variety of buyers across the region. The bank debt was paid in full and the owner retained the seventh division with an estimated Enterprise Value in excess of $10 million.
• Lubricating Specialties Company. The Company was acquired from the founders with Private Equity Group participation. Growth Partners LCC invested $500,000 for a 15% equity stake. Over four years, a second PEG took out the first and the sponsor’s interest increased to 51% followed by a refinanced by a Commercial Finance Company that acquired the PEG ownership. The sponsor owned 86% and his management team owned 14%. After six years of ownership, Senior Management and another PEG acquired the sponsor’s interest. His $500,000 had increased to $17.0 million.