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A Sale That Made Winners of Both Buyer and Seller

The partners of a highly successful, single-market firm wanted to sell the firm as a means of extracting some of the considerable value that had been created. They also wanted to gain the organizational and managerial support that they hoped the buyer would provide. They asked for our help in finding the buyer and in structuring the deal.

We documented a profile of the firm, developed a valuation, and described the various attributes of the "ideal" buyer. Then we started looking. We also posted the opportunity on our website.

About a dozen firms surfaced as potential candidates, all but one through our research and our networking efforts, and not surprisingly (since we have consulted with over 1,800 firms), we already knew all of them as our clients.

Through discussions about the respective firms' goals, resources, and interest, we whittled the list to three, all of whom we then engaged in discussions and visits with our client. One of the three opted out, and the remaining two presented offers.

In both cases, we positioned ourselves in the center, with the realization that a truly successful merger or acquisition satisfies and energizes both firms. We advocated for a financial deal and terms that would recognize the extraordinary value of this particular firm while also being affordable, in terms of the acquisition's profit potential, to the buyer.

Both firms were clearly in the running, and we were able to avert what might have become a "bidding war," which might have enhanced the short-term benefit of our client (the seller), but all agreed that an over-priced deal would sour the relationship — and the success — quickly.

Ultimately, the seller opted for the buyer that it felt would offer the stronger support and synergy. The principals of the selling firm had offered to remain involved for three years, with the option of continuing longer. The buyer required five years. The term hasn't yet expired, but the level of professional satisfaction and the success of the practice suggest that they will remain beyond five years.

The entire process, from beginning the search effort to consummation of the deal took about 12 months. It might have been a bit shorter, but those whose participation was critical to creating the deal had other ongoing obligations, mostly related to serving their respective clients.

Some observations:

  • A good deal is one that is good for all parties in a merger or sale.
  • Price in an outside sale is almost always higher, by a factor of at least two, and in extraordinary situations, the factor can be as much as eight.
  • Time to reach closure in a sale or acquisition is rarely measured in weeks; more likely, it is measured in months.
  • Leaders in practice, particularly those with important marketing roles, on average are required to remain in place for at least five years.