Meet tall and clever Simon Seller
Simon is a long, thin clever boy with a passion for Latin Jazz. He dreams opening his own nightclub one day, somewhere hot and steamy where he can stand at the bar while his favourite band plays, clicking his fingers and drinking Cuban rum.
But Simon knows that having a dream and making it happen are two different things entirely (well, we did say he was clever!) so he plans away each night and works hard all day, merrily dreaming of the moment when he swaps his spreadsheets for a white hot smoking jacket and a pair of two-tone jazz shoes.
O’Byrne and Kennedy met Simon when he was attending one of their “Building a Saleable Business” seminars some years ago. He quickly understood the approach so they started to meet him on a regular basis. This was to design and implement his exit strategy – and to listen to some Latin Jazz records of course.
Firstly OBK analysed Simon’s business, they were looking for opportunities to enhance the value of the business and to identify potential buyers. Being very clever he had built up a very stable and profitable business but together with OBK he identified five objectives to enhance its value.
“What are they?” asked Simon, looking curious and excited.
“Well,” said OBK, “these include an increase in gross and net margins, much stronger credit control and a reduction in buyer’s risk. You already have a growth plan, but as a result of our analysis the focus of this growth strategy should change with a view to further reducing a buyer’s risk.”
“Nice,” said Simon.
“We’ll also start to collect data that will be required for a buyer’s Due Diligence exercise and store this in an electronic data room,” they replied.
Simon smiled and moved over to the record player to flip sides, clicking his fingers in in zealous approval.
OBK short listed 10 potential buyers and identified an agent who could guarantee to get them to see the right person within the target list of potential buyers. With the agent’s help they approached these potential buyers on Simon’s behalf and prepared and presented a “teaser” document to attract interest in Simon – making sure that they signed a Non-Disclosure Agreement.
Simon Seller’s name and his company name were withheld whilst OBK invited the potential buyers to make indicative offers and they were left with three seriously interested parties.
Over an espresso, with a rare live session of ‘El Makanito’ playing in the background, OBK explained to Simon that it can be in the interest of potential buyers to be vague at this stage to give themselves wriggle room further down the line. But they pressed all three organisations to be very specific about their offer and after some considerable negotiations formal Heads of Agreement were signed.
OBK assisted Simon with providing the due diligence information and dealt with queries arising. They suggested Simon use a lawyer they had worked with on similar deals and together steered Simon through the conduct of the transaction. The Share Sale Agreement took some considerable negotiation but they had prepared Simon for what to expect and he remained strong. Afterwards he said he even enjoyed the process!
A significant part of any share deal is the “Debt / free cash adjustment” and OBK dealt with a big four accounting firm working for the buyer. They were very professional and OBK were able to agree all but a few issues very quickly. The remaining issues took longer but were eventually resolved as everyone had hoped.
OBK looked at both a “Completion Accounts” method and a “Locked box” method to agree the free cash position but opted for the “Completion Accounts” method after the buyer agreed to an unusual but generous variation to the method in Simon’s favour.
They completed on the deal but there was an element of deferred consideration and we stayed involved until Simon received his full consideration some 18 months later.
Simon was delighted with the deal getting much more than he ever thought he would get.
“You know,” said Simon, heading for the exit with a plane ticket in one hand and a suitcase in the other, “I want to acknowledge the significance of the work we did together a full two years before I sold my business.”
“Gosh,” OBK blushed.
“And I want to act as reference for you for the rest of my life. Tell other clients who are thinking of asking for your help in this area to come and see me. I’ll be at Simon’s Jazz Club, 1143 Rio de Janeiro. I’ll be the one by the bar in the white hot smoking jacket.”