The Transition Companies

The Transition Companies (“TTC”) is an international investment banking firm that offers financial advisory services to middle market companies. The firm provides mergers and acquisitions, corporate finance, restructuring, business plan development, and strategic growth consulting and advisory services. Additionally, it offers company valuation and divestiture advisory services. TTC was founded in 1988 and is based in Dallas, Texas with additional offices in New Jersey, Florida, and California.

The Transition Companies was founded as a consulting and Mergers and Acquisitions (M&A) firm called Succel Inc. (”Succel”). Succel originally provided turnaround consulting expertise to increase the value of private-held companies. In the mid 1990’s, Succel expanded into a full service M&A and consulting professional services firm that maximized the value of privately-held companies through an M&A sale or consulting services.

In mid 2008, The Transition Companies was formed through the merger of Succel with InterPrise M&A LLC (”InterPrise”). InterPrise, founded in 1994 with 3 US offices and 1 European office, was a leading nationwide middle market M&A firm that specialized in the sale of privately-held companies. The Transition Companies is the pre-eminent professional services firm providing complete exit and transition strategies for owners of privately held companies seeking to maximize the proceeds from the sale of their companies or increase value prior to going to market.

Contact:

Richard D Parker

Executive Director

Phone 972-450-3100

Fax: 972-450-3101

Web: http://www.TransitionCompanies.com

The Transition Companies (”TTC”) empowers owners to sell their companies and transition at the right time, under the right circumstances and for the greatest return on the investment of their life.

Each situation is different: Custom M&A Strategies swiftly executed custom to each individual client’s goals. Or take advantage of The Transition Companies 3 to 1 ROI for on site consulting to increase your profits.

The Transition Companies Toughest Decisions

A Business Owners Toughest Decision is deciding to sell. In many cases he ignores some market dynamics that fortell difficult times ahead. Those difficult times often result in a significant drop in the value of the business. This article will help you identify some of those signs.

For the past 20 years you have built your business. Your company has become part of your identity. Even when you are not at work, you are working, thinking, planning. You never stop. If you sell you are leaving behind much more than a job. In this article we will discuss some signs that might indicate that it is time to exit your business.

1. Late in your working life you are faced with a major capital requirement in order for your company to maintain its competitive position.2. A large competitor is taking market share away from you at an accelerating pace.3. Your legacy systems, production capabilities, or competitive advantage has been “leap frogged” by a smaller, nimble, entrepreneurial firm.4. A major company in a related industry just acquired a direct competitor.5. Your fire to compete at your top level is not burning as brightly as it once did.6. Your kids are not interested or are not capable of running the business.7. You have had a health scare and have decided to smell the flowers.8. You have lost a major client of a key employee.9. The market is hot and you decide to take some chips off the table for asset diversification.10. You exit in an orderly fashion and from a position of strength as you intended.

Lets look at these in a little more detail.

Major Capital Investment Required – You are supposed to be diversifying your assets, not concentrating them even further. Think about a simple payback analysis. Does that extend beyond your retirement date? You want to be able to defend that investment with the energy and intensity you devoted when you were originally growing your business. Maybe it is time to bring in an equity partner with smart money, an industry buyer with the management depth, infrastructure, or distribution network to protect that investment. You might consider selling not with a three year employment contract. Let the new owner defend the required capital investment.

A Large Competitor is Taking Market Share Away from You – Believe me, the news is not going to get better. As an investor you would probably sell the stock in a company you owned if Microsoft or GE decided to assume a presence in that market. Business owners often struggle with objectivity when a similar event takes place in their own company’s industry.

Your Legacy Systems have been “Leap Frogged” by a Nimble Entrepreneurial Firm – This happens all the time and can cause an erosion of your customer base. Your inertia will sustain you for a while, but eventually you will begin to experience customer defections. You can either rewrite, acquire or sell. If you decide to sell, do so before losing too many clients.

A giant company in a related industry just acquired one of your major competitors. Watch out, they did not make this acquisition to maintain status quo. They want to grow their market share. They will be coming after your clients. The good news is that as a defensive measure, one or more of their competitors will be compelled to make a similar acquisition. It is best to be aggressively ahead of the curve and get acquired while the market is hot and prices are being bid upwards.

Your interest and competitive fire is eroding. Let’s face it, if you are not growing, you most likely are contracting. Your competition was tough when you were on your game. Your family’s net worth is under attack if you are no longer fully committed.

Your original plan was to turn your business over to your children. They may not be interested or capable of competing at this level. Perhaps the greatest legacy you can leave to your kids is to convert your company into a diversified portfolio of financial assets that are far less risky than turning the company over to inexperienced managers.

You have a health scare and all of a sudden you start thinking of all the sacrifices you made and all the things you want to do before it is too late. Your list of goals is immediately changed from financial in nature to family, friends, travel, experiences, philanthropy, etc. You might want to listen to your heart this time.

You have lost a major client or a key employee. That can be a real blow to a business. The owner, by nature, is optimistic and believes that the lost business will soon be replaced and does not ratchet down the expense level to match this new sales level. If he does cut, inevitably, it is not fast enough and not deep enough. Maybe it is time to seek a buyer that could replace that business before your company’s value is severely impaired as your profits erode.

The market is hot and you decide to take some chips off the table for diversification. You may be thinking of retiring in four years, but a consolidation is occurring in your industry and valuations are up 20%. Sell at the top and sign a four year employment or consulting contract. The odds are that if you exit on your original schedule, valuations will have settled back down to the norm.

You ring the bell and exit on your own terms, from a position of strength, exactly like you planned. You are well aware of the competitive forces in the market and the relative strength or weakness in valuation multiples. You have prepared your business to be attractive to a strategic buyer. Everything is going your way. You hire a good M&A advisory firm to present you confidentially to the most likely buyers. Several recognize your value and show interest. You are able to get a little competitive bidding going. Your transaction value rises and your terms improve. You pull the trigger and complete the sale. Mission Accomplished.

The Transition Companies Toughest Decisions

Seller Earn Outs – An Intermediaries View

Thanks to The Transition Companies

Contrary to what many sellers believe, an earn out component to a business sale is not necessarily a bad thing. As an M & A firm, we see the incidents of bad buyer behavior, but if properly used an earn out can be an excellent tool to maximize seller proceeds. First rule of earn outs – if you do not trust the buyer, there is not enough contractual language available to protect you. I will go one further. If you do not trust the buyer, do not do any kind of deal with him.

If you are negotiating the sale of your business, you want an earn out to be structured so that if the guy you negotiated with and was the deal champion gets “hit by a truck’ his replacement can not interpret the agreement to your detriment. If you can, you want to have your earn out based on top line sales as opposed to division profits, for example. It is amazing how an overhead allocation from corporate can wipe out your division’s earnings.

So once you have your earn out based on top line revenue are you safe? What if your company’s product were added to the acquirer’s suite or products? What if your product were used as a loss leader to help sell the other products? Just like that, your earn out revenue disappears. The way to protect yourself is to establish a minimum sales price for your product for purposes of your earn out calculation. You don’t want to try to dictate pricing to the new owner. You simply want to be given fair credit for the revenues that would have resulted had your product sold at historical levels.

In spite of the risks, however, there are many reasons a seller would want to employ an earn out to maximize his business valuation. Here are a few:

1. The seller has several big deals in the sales pipeline and wants to get paid for them. The buyer is going to heavily discount those forecasted deals if he is backed into an all cash at close structure. If the seller is willing to share the risk for those deals closing with an earn out component tied to the deals, the buyer will be much more generous. If the deals don’t close, it costs the buyer nothing. If they do close, he is happy to write you the earn out check.

2. The seller anticipates that product sales will explode once the buying company integrates it with their distribution network. If the seller does not have strong sales or profits, but has a great product, it will be difficult to get the optimal selling price using historical sales and profit figures. Rather than take a low price based on those numbers, it may be better to bet on future performance and base a major component of transaction value on sales generated by the much larger company. Receiving 20% of a 10 times greater sales number as an earn out is a big win for the seller.

3. An earn out can help bridge the value gap between buyer and seller and be the needed catalyst to getting the deal completed.

The use of an earn out can be appropriate as a way for a seller to maximize his sales proceeds in the right circumstances. Just remember that the buyer champion that has established a relationship with you and is compelled to honor the intent of the earn out agreement will most likely be transferred or promoted before your earn out term is completed. You now are in the position of having this agreement interpreted by a person who has no connection or loyalty or knowledge of the intent or the agreement. His mode will be to interpret the agreement in a way to “minimize the expense of the future payment.” Just make sure that interpretation cannot destroy the economics of the deal you originally negotiated.

Ways to mitigate risk for earn outs include indexing the performance gates for partial payouts or bonus’ and or mandating GAAP accounting consistent with prior years performances.

The Transition Companies Earn Outs

The Transition Companies advises Windo-Shade Distributors Inc. on Sale to Innovus Investment Holdings.

The Transition Companies LLC announces the sale of Windo-Shade Distributors Inc. of Galveston, Texas to Innovus Investment Holdings LLC.

The Transition Companies LLC (“TTC”) is pleased to announce the sale of Windo-Shade Distributors Inc. (“Windo-Shade”) of Galveston, Texas to Innovus Investment Holdings LLC (“Innovus”). TTC acted as Windo-Shade’s exclusive M&A advisor for this transaction.

Michael Ryan, Executive Director of Transactions at TTC said “we opened the market using our proprietary buyer list consisting of 318 prospective buyers. These resources resulted in numerous interested parties finishing with several “finalists”. The shareholders of Windo-Shade were able to choose the transaction with the buyer that best met their personal objectives”.

“The middle markets are still vibrant for profitable, well managed companies” said Gene Sartin, CEO of The Transition Companies.

The Transition Companies is the pre-eminent professional services firm providing complete exit and transition strategies for owners of privately- held companies seeking to maximize the proceeds from the sale of their companies or increase earnings or business enterprise value, prior to going to market.

Originally founded in 1988, The Transition Companies is headquartered in Dallas, Texas with offices in New Jersey, California and Florida. TTC has over 100 Associates nationwide.

The sale of an entrepreneur’s business is frequently the largest and most important financial event of his or her life – for most, it is an opportunity that will be presented only once. The successful sale of a business requires a carefully planned and methodically structured process in which each step is done right – the first time – when seeking to maximize the financial reward. These goals were accomplished in this transaction.

Contact:

Richard D Parker

Executive Director

The Transition Companies

4080 Spectrum Drive, Suite 310W

Addison, Texas 75001

United States

Phone 972-450-3100

Fax: 972-450-3101

Web: http://TransitionCompanies.com

The Transition Companies advises King Oil Company on Sale to Private Investor

The Transition Companies LLC (“TTC”) announces the sale of King Oil Company of Hagerstown, Maryland to a Private Investor.

The Transition Companies LLC (“TTC”) is pleased to announce the sale of King Oil Company of Hagerstown, Maryland to a Private Investor. TTC acted as King Oil’s M&A Advisor for this transaction.

The Transition Companies transactional team included Charles Boyer who advised King Oil in opening the process, Gary  Brown who worked thru the final closing and Brandon Fitzgerald who directed the various marketing activities that produced the successful sale of the company.

Michael Ryan, Executive Director of Transactions at The Transition Companies said “we opened the market using our proprietary buyer list consisting of 157 prospective buyers. These resources resulted in numerous interested parties finishing with several “finalists”. The owners of King Oil Company were able to choose the transaction with the buyer that best met their personal objectives”.

“While the high end, mega M&A market is at an effective halt, demand still exists for profitable, well managed middle market companies” said Gene Sartin, CEO of The Transition Companies.

The Transition Companies, headquartered in Dallas, Texas is a leading Mergers and Acquisition (”M&A”) firm specializing in confidentially opening the market to maximize the value realized by the owners when selling their privately-held companies. TTC also provides consulting services for companies that want to increase earnings now or increase market value for a future sale.  

The Transition Companies, originally founded in 1988, has 4 offices nationwide and a dedicated professional team of over 100 Associates nationwide. TTC’s team of professionals has provided valuation, consulting and executed M&A sale transactions for hundreds of companies across all industry sectors nationwide.

Contact:

Richard D Parker

Executive Director

Phone 972-450-3100

Fax:  972-450-3101

Web:  http://www.TransitionCompanies.com

The Transition Companies LLC to Host M&A Buyers Forum

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The Transition Companies LLC is pleased to invite key executives to an International and Private Equity Buyers Forum in Chicago area in May 2009.

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The Transition Companies LLC  is pleased to announce its International and Private Equity Buyers Forum (“Buyers Forum”) at the Hyatt Regency O’Hare in Rosemont, IL, on Thursday, May 28, 2009, at 9:00 AM.

This Buyers Forum is being held for the express purpose of introducing premium privately-held companies available for acquisition to International and Private Equity Group buyers. Buyers will have the opportunity to screen and learn about (within the bounds of confidentiality) numerous premium privately-held companies that represent quality acquisition opportunities. Attendees will be given advance preview of many premium companies before they are released to the general market.

Learn about strategic acquisition opportunities in the North American middle market. Meet the Dealmakers familiar with these pre-screened privately-held companies to gain insight on the value and opportunity.

This exclusive invitation only event will feature discussion on M&A trends followed by presentation on premium US acquisition opportunities.

The Transition Companies is the pre-eminent professional services firm providing complete exit and transition strategies for owners of privately- held companies seeking to maximize the proceeds from the sale of their companies or increase earnings or business enterprise value, prior to going to market.

Originally founded in 1988, The Transition Companies LLC has offices in Dallas, New Jersey, California and Florida. The Transition Companies has over 100 Associates nationwide.