Seven-Year Glitch: Patience and Other Lessons
In the winter of 2011, I received an inquiry from three brothers who owned an irrigation company. They had come off another monster season of installing and servicing systems (and then plowing snow to continue to pay the bills) and they were wiped out. Already having surpassed 20 years in business together – and far more than that in the industry – it’s easy to understand the “enough already”
emotion of wanting to sell and move on to something new. One problem: these guys, along with their little sister who runs the office, were mere babies at the time, all in their 40’s and (as we soon agreed) not yet financially prepared to sell.
Zoom ahead nearly five years. The customer base has swelled to about 2,000, all of whom had various needs along the install-open-repair-replace-close expanse (with many, dare I say… demanding?). Several more years of trenching alone will have you focused on a career change that’s not so hard on the aching back (and, as some of us surely know, turning 50 – as the eldest sibling had at this point – is a factor as well). Upon refreshing the valuation, it was clear that the company was worth more but not enough to immediately proceed with a confidential sale process. Dig deep (so to speak), set some additional growth & profit goals, and round out another record year. Done. The mission was set to find a deal and – just as with hiring labor in the construction field – not just any deal; the right one.
Frog kissing late in 2016 led to weak, eye-rolling offers from bottom-feeding industry buyers, nothing anyone wanted to accept. Months later, my phone rings and it’s the buyer of a former client’s manufacturing business from two years’ prior, inquiring about this completely unrelated irrigation company. Because like so many good buyers, he’s interested in recurring revenue in a society where home-and-business owners have neither the time nor the inclination to figure out how to fix a broken head or blow a system out. He made an attractive offer which was initially accepted, save for the fact that it was at the worst possible time: March. As I came to learn, in the seasonal world of irrigation, owners dig deep in preparation for start-up, and money is headed only one direction in early spring: out. They had to realize some profit from the investment in inventory, equipment maintenance, staffing, etc. Delay. Ouch.
No problem, the thinking went. We’ll take the pressure off, ease up on the buyer’s due diligence schedule, and make our way through summer toward an early autumn closing. But much to everyone’s dismay, it became clear the worst month to acquire such a company is October, as the register will be very quiet with the only exception being unpredictable snowfall. Delayed again. At long last, just after New Year’s 2018, with all t’s crossed and i’s dotted, the sale was complete seven years after that first analysis. In a final twist, the family held onto a minority ownership position to help grow this newly managed entity and sure enough less than 90 days hence this energized group is making its first additional acquisition, buying out a local retiree’s assets and customer list. Exciting stuff.
It was a long road getting to the finish line and well worth it. As with any good deal, everyone walks in the others’ shoes, makes reasonable concessions, and knows that good things come to those who wait.