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Strategic Equity Investors do a lot more than provide capital. Here's an example of a transaction that one of our clients did. Notice the owners had two key objectives they wanted to solve. Neither of them revolved around getting the highest price for the business. In fact, the owners wanted to continue to grow the business. If you would like more examples of Strategic Equity Investments, subscribe to our case study newsletter.
A management team bought a division of a larger corporation. They financed the acquisition with some help from a local group of wealthy individual angel investors. After five years, the investors decided it was time for a liquidity event. But, the management team wanted to continue to grow the business and provide for retirement.
... is a manufacturer of rotary and centrifugal compressors used in a wide range of industrial applications. For over 50 years, it has manufactured industrial compressors. And it has significant market share in all of its served markets. With a strong branded product, high barriers to entry and high technical sophistication it is the low-cost producer in the market.
The company generated $20 million in revenue and consistent EBITDA of $2 million. The year my Strategic Equity Investor became involved, they were forecasting $7 million of EBITDA. Our client paid $28 million for the firm. One third went to the management team which reinvested part of the proceeds for 25% of the newly formed company. They were looking for another payday in the future. And they knew they needed to team up with sophisticated investors who had a committed equity fund. They needed to know that new equity for additional acquisitions would be available. With our client's strategic guidance and capital, the management team grew the business to $75 million in revenue and $15 million in EBITDA over a three year period. The second bite of the apple generated $75 million for the firm and enough money for the management team to retire.
Personal proceeds of $28 million in 3 years for a management team used to working for a salary of $150 thousand per year, now that's a retirement plan!
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