Metal Distribution Company Finds the Right Buyer

About the Company:
The owners of METAL CO were long-time business associates (25 years). We sold their fabrication and construction division, allowing the owners to focus on the original core business of metals distribution. Selling a high overhead, project-based construction business can be a challenging endeavor for a variety of financial and operating reasons. Financially, these companies are characterized by irregular revenues and impacted by construction boom and bust cycles. Operationally, the transaction must navigate the complexities of licensing and the assignment or assumption of existing construction contracts. In this case, an employee leasing agreement had to be arranged so that the original entity (OLDCO) could complete certain projects that could not be assigned using the new company’s (NEWCO) employees.

Actions:
It was necessary to highlight the strong track record of construction performance, loyal recurring customers, strong divisional management, and prospective backlog to entice interest in the company. Navigating the divestiture of a division of a small company carries even greater complexities, since all of the assets of the business need to be appropriately allocated between OLDCO and NEWCO. These assets include staff, inventory, equipment, website, company naming rights, and even customers that buy from each side of the business. Working with the transactional law attorneys to formalize the business terms into binding legal documents that adequately protect both parties is an important aspect of our role. In this case, we introduced both parties to their respective legal counsel.

Results:
All of these elements came into play in the successful completion of this transaction in April 2014.

Continuing Involvement:
Sadly, shortly after the sale was complete, one of the partners passed away as a result of a long illness. We continue to advise the remaining original owner on a consulting basis regarding strategic business matters and on issues related to the effective implementation of the buy-sell agreement.