Selling a Family Owned Business: A Construction Company Case Study
Allegiance Capital specializes in representing family owned businesses in the sales process. Here’s an example of how, despite a number of challenges and obstacles, the Allegiance Capital team led the successful sale of a family owned business, a construction company in Arizona.
The majority owner and CEO of this family owned business was the founder’s son. He had fostered the culture instilled by his father and built a strong management team to execute what had been a very effective growth strategy. His direction had resulted in approximately $250 million in annual revenue by the year he decided to sell.
After some consideration the owner decided to hire Allegiance Capital to represent him in the endeavor of selling his company. During the engagement the transaction was placed on hold for a period after the founder succumbed to a protracted illness and was delayed again while the company closed an acquisition.
Once Allegiance Capital was given the green light to resume the marketing efforts in earnest, the outlook for the company had become more downbeat. The U.S.economy had fallen into what has become known as the great recession, a prolonged downward trending economy that had had a particularly negative effect on the construction market. The appetite for heavy civil contractors by private equity groups interested in the infrastructure play largely dried up, and expected activity from the economic stimulus package did not materialize. One particular private equity group that had produced an offer to buy this family owned business ultimately decided that they couldn’t support the valuation that they had put forward or anything near a number that would be acceptable to the construction company’s ownership, so Allegiance Capital focused on the strategic acquirers.
Allegiance Capital marketed the company on an international basis in order to find the right fit and the best possible acquirer. We helped the ownership and management team position the company toward a large construction concern based in Madrid, Spain, that had a U.S. strategy. We convinced them that the Arizona firm and its management team would be a good platform to pursue its strategy in the western United States. Once the acquirer decided the transaction was strategic, they didn’t look back despite a dwindling backlog and a worsening outlook for the U.S. economy and construction. In fact, the acquirer brought capacity and capabilities in the way of additional bonding capacity and the ability to bid on a broader scope of work as a means to weather the economic downturn.
In the end, the owners received full value for the family owned business in a transaction that was ninety five percent cash at closing — despite a low backlog and a poor economic outlook — while the management team gained the support of a larger organization to strengthen its ability to get through the recession and return to building its business.