In my last post I described how there are plenty of business buyers out there and we are still getting deals done. But not as many as a few years ago. Here is a story of how the economy put one of our deals on ice.
One of our clients is a sign company, the kind that does large projects like shopping centers and stadium scoreboards. It is a quality company that seemed to shake off the slowdown – until recently. We had a couple of offers on the company early on but they were pretty weak offers. Recently a private equity group (PEG) took a look. The PEG had already purchased a sign company that it still owns, and they are looking to expand in that area by using the knowledge they gained in growing the first acquisition. They made a solid offer that met the business owner’s goal of what he wanted to walk away with.
However, as fate would have it, at the same time that we were talking all this through, the financial crisis was putting a stop on a number of projects that were already on the sign company’s books. For example, the owner of a number of sandwich franchises was going to re-image 30 stores but had their line of credit pulled.
The PEG is serious about getting a sign company, but understandably didn’t want to pay the price they originally offered. So a new offer was made: recalculate a purchase price based on a lower earnings number, or wait until the company is back at the same level whereupon the PEG will pay the original price.
The owner has been at the sign business a long time. He’s been through slow downs and he knows he can get through it and back out the other side. Since he and his wife know what they want to retire with, they have decided to wait and sell later.
We’ve put an enormous amount of time in on preparing the company, showing the company and negotiating. But you know what? I’m OK with their decision. It’s like having a good employee quit to further his/her career somewhere else. You are disappointed, but if it is for the right reason, the best thing you can do is pat them on the back and support them.