Successful Win-Win Transactions

A longstanding Montgomery County engineering firm client of the Business Advisory Group, well known in its industry and the area, survived the recession and aimed to grow its business. It set its sights on a smaller engineering firm in a different part of the state. Initial talks between the firms were productive, and the Business Advisory Group was asked to step in and take over the negotiation process on our client’s behalf. A term sheet was agreed upon, setting forth the major points of the proposed acquisition.

The client had a significant amount of available cash, and did not want to finance any part of the purchase price. To enable a purchase price that the client could afford without financing, the Business Advisory Group negotiated an acquisition where the owner of the smaller firm received nonvoting stock in the client, and remained an employee with a guaranteed five year term of employment. A number of his key employees were also retained to become part of the client’s business.

The transaction was a win-win, because it enabled the client to expand its business, both in size and geographic scope, and retain a well-regarded individual with a strong reputation and existing relationships in the new location. The seller, not looking to retire, was able to receive money for his business, plus continued employment and a stake in the company that acquired him.

The Business Advisory Group streamlined the process for its client, with creative ideas to structure the deal in a way that made it affordable. The Business Advisory Group prepared the legal documents connected with the acquisition, which were drafted to protect the client from the liability and indemnity pitfalls involved in acquiring another business. Finally, the Business Advisory Group structured the implementation of the seller into the client’s business. The seller joined as a nonvoting minority shareholder, which gave him an incentive to help the client successfully grow its business.