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Strategic Equity Investors provide more than capital. Here's an example of a transaction one of our clients did. Notice the owner had one major objective he wanted to solve. It wasn't about getting the highest price for the business. In fact, the owner wanted to continue to grow the business. If you would like more examples of Strategic Equity Investments, subscribe to our case study newsletter.
The founder and owner had grown his business to $50 million. He had sold it once before and had to buy it back. This time, he knew he needed help to take it to the next level, but he wanted to be careful to pick the right group with whom to partner.
... is the market-leading manufacturer of kitchen and bath cabinets sold to commercial contractors and distributors. Its fully integrated, state-of-the-art manufacturing capabilities make it a low-cost producer in the industry. The Company serves five distinct markets nationwide: military and government agencies, builders of multifamily dwellings, wholesalers, select mass merchandisers and, finally, its own retail outlets. The Company has taken advantage of advancing technology to deliver higher-quality products without raising its prices.
The founder had a nice business. He was a regional player in the cabinet business and was doing about $50 million per year with a $7 million EBITDA.
He was approached by several Private Equity Groups and received several offers. After careful consideration he accepted a proposal from a Strategic Equity Investor who offered him $10 million less in cash up front than another group. Why did he leave $10 million in cash on the table? His experience and instinct told him his better value would come from selecting the right group with whom to partner.
Importantly, he chose the offer that allowed him to keep about 40% of the business. He continued to run the business ... still does. With his Strategic Equity partners, he has purchased three additional companies, added several lines and expanded his business nationally. They stick to the niche they know ... producing a full line of products for the trade segment of the cabinet industry. They can now meet the needs of the building and remodeling markets with a full line of kitchen and bathroom products. How successful are they? Well, how about $200 million in revenue with $30 million EBITDA ... in only four years.
By picking the right Strategic Equity partner, this savvy business owner could grow his business with less personal risk, yet retain an interest in the company. His share now was worth over two times what he received four years before. After his second bite of the apple, he chose to reinvest again for a third bite.
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