Vendor getting toward retirement. Purchaser needed plumbing business to add onto drain laying company. Asset sale of 100% of business. Vendor got to keep his job (on the tools), relinquished management responsibility for up to 9 staff and purchase price consisted of fixed price plus earn out. Vendor has stayed on after earn out finished. Role is to mentor next generation of plumbers, train apprentices and ensure skills embedded in purchaser organisation.

Our client

• bought out fellow 50% shareholder when that relationship broke down (for $140k) and

• brought in new potential investor ?on trial? for one year. Provided that new investor met specific financial KPI’S (linked to his sales) our client granted him a put option to buy 50% of shares at a pre-agreed price (i.e. calculated before the increased sales – $1.2m). Pre-agreed shareholders agreement terms. If new investor doesn?t like it, he can walk away. If he does like the business and he is performing, he effectively gets to buy at a discounted price.

Our client

1. shares control (but only after 1 year);
2. takes some capital off the table (about 3 x NPAT);
3. retains 50% of an enlarged cashflow and his job. Business value depends on strength of personal relationships so succession planning essential.

Founding shareholders needed to raise capital to expand business in a way that achieved economies of scale and profitability. Sold 80% to a supplier/partner. Value of business is in IP, not necessarily personal traits of founders.

Family owned business. Vendor is founder. Company was profitable but needed capital to expand into new markets and owner needed to sell down to settle matrimonial property affairs. Value of business in IP, not personal traits/relationships of founders.

2^nd generation company (started by vendor’s father). Vendor has only ever worked in one business. Dysfunctional relationship between vendor and father (father had told son he’d never make anything of his life, son determined to prove father wrong, vendor had health scare, vendor had expensive lifestyle (racing cars, boats etc), vendor using company for private expenses). Purchaser cashed-up, not an expert in the industry, needed vendor to stay in business and do hand-over.