Case Studies

Office Supply Company

The owners of this company had retired from IBM prior to starting their business, so it really was a lifestyle business more than a for-profit business. They housed the business in a large, expensive office in a Class A office building that was located conveniently for them. They each worked about half time in the business, sharing the president job.

The business had revenues of about $1.2 million but was only marginally profitable. They asked me to evaluate their business, tell them what it was worth and help them sell it. After examining the business, I found that most of their office space was being used to store excess and obsolete inventory. The actual space used by the staff was only a fraction of the rented space. 80% of the sales were going to one customer. The business had no website or marketing initiatives other than an occasional cold call or referral from a happy customer. Using standard business appraisal methods, I advised them that their business was only worth a couple of hundred thousand dollars.

I outlined a plan to build value in the business as follows:

  • create a good e-commerce website
  • hire a salesperson
  • create some lead generation initiatives
  • move to a smaller office in a less expensive office class
  • acquire enough new customers such that the largest customer was less than 40% of sales
  • get rid of excess and obsolete inventory
  • examine the product offering to determine which products were generating the most gross profit dollars and emphasize the sales of those products
  • get the company’s books and records up to date with all statements reconciled and keep it current within a month trailing
  • stop taking personal expenses out of the business and writing them off as business expenses

About 18 months later I got a call from one of the owners. He said they had implemented all of my ideas and a few more of their own. Both were former professional salespeople from IBM, so they had the skills and knowledge to go and develop new customers. Sales had increased to over $2 million, they had eliminated the excess and obsolete inventory, they had moved to a smaller less expensive office, and they had developed quite a few new customers, but the large customer was still about 50% of sales. They had cleaned up their accounting procedures and had excellent books and records that were current within one month of each month end.

We listed the business for sale, put together a professional marketing package and advertised the business extensively. We had several offers within a few months and the business was sold for $600,000, or about three times what it had been worth 18 months before.


Our firm listed the business for sale, put together a professional marketing package and posted advertising.  As one of over 90 selling agents in the company, I had the opportunity to sell the business so I researched the industry and developed a list of corporate acquirers to target. I sent over 300 letters to these companies and made several hundred phone calls. Other agents in the company also made a lot of calls, some of them to the same buyers.

The company was a well-established service business specializing in semiconductor test and certification. It had a beautiful 30,000 ft.² facility with several million dollars of very new, high end test equipment. It had several large anechoic chambers and a robust IT system. There was a good management team, a well-documented infrastructure and the firm was ISO 9000 certified. The company was profitable and had minimal debt.

My first choice as the best company to acquire this testing company was Underwriters Laboratories. I sent letters to several C level executives but did not get any response. I called UL many times, but the receptionist would never put me through to any of those executives. UL has a very strict screening process, designed to eliminate salespeople who are cold calling to sell something to the company. I did further research and I found more detailed contact information for a person in their business development department. I was able to connect with him and initiate a discussion about this acquisition offering. Several others in my firm had attempted to connect with UL but no one had succeeded.

We had to negotiate the terms of a confidentiality agreement, because UL is a very large company with a very extensive legal department. Large companies such as UL tend to be quite bureaucratic and sometimes difficult to work with. We successfully negotiated a confidentiality agreement, delivered the pre-due diligence information, and followed up with the business development manager. UL liked the offering very much and proceeded to work on the acquisition. We held some conference calls with the semiconductor test company’s management, which was quickly followed by a letter of intent from UL.

At this time there were eight other letters of intent on the table from other suitors. Knowing this, UL offered a premium price substantially higher than the value at which the company had been appraised a few months earlier. UL won the deal, completed its due diligence and legal documents within 60 days and closed the transaction before December 31, achieving a goal set by UL’s Board of Directors for its management.

The sellers were ecstatic at receiving a premium price for their business which we were able to create by developing multiple offers at the same time and by connecting with a strategic buyer that was a perfect fit with this company.


The company was a small, entrepreneurial business with a few employees in house and several outside contractors working as consultants. The company’s products consisted of highly specialized software and databases designed for large capital investment decisions by global companies. The software was so complex that it had to be run on a group of PCs that were ganged together with proprietary software created by the company to enable it to function like a supercomputer. Most of the revenue generated by the company came from licensing agreements with global companies in the energy industry such as Exxon, PG & E, Consolidated Edison and a long list of oil, gas, oil and electricity companies. One characteristic of this software was its complexity, which required the licensees to hire expensive consultants in order to get the desired results. The company maintained working models for local, regional, state, national and global energy markets in oil, gas, coal and electricity industries. These models were updated constantly with purchased data sets from third-party vendors.

It was obvious from the beginning that this company should be sold to a strategic acquirer, who could leverage this software to deploy consultants and who already had customers that were global national and regional energy providers for oil, gas, coal and electricity.  The company’s value to a financial acquirer would only be a fraction of its value to a strategic acquirer.

After putting together a professional package of information to market the business for sale, we researched global consulting firms and targeted about 250 firms. We sent letters and made phone calls until we exhausted all possibilities. One of the big four accounting firms responded because they were building an energy consulting group to deploy their army of consultants. This company was a strategic fit and they moved forward through pre-due diligence and presented a letter of intent.

The letter of intent was not entirely acceptable to the seller because the bulk of the compensation was contingent on future business performance, a.k.a. “earn out”. We negotiated for over one year, and the buyer did not go away. Finally, we reached an agreement for a cash price that was all the seller ever expected to receive plus an earnout for substantially more based on future growth of the business unit after the acquisition. We then entered another negotiation over the seller’s employment agreement that lasted for months. Finally, the seller agreed, even though he hated working in a large company bureaucratic environment. His rationale was that just the cash portion of the purchase price was all he had ever expected, anyway. This is a good thing because after about six months of employment he quit, citing his frustration with all the bureaucracy and red tape of the large accounting firm. Still, he was quite happy with the results.