Value Creation – Transition Planning – Exit Planning – Transaction Advisory Services

Case Studies - Business Transition and Exit Planning

Case 1

Issue: Very profitable, multi-million dollar photographic processing company owned 50%/50% by two founders. One founder was prepared to retire and sell out to other partner. Remaining partner wanted to transfer ownership to children while minimizing taxes

Capitus Solution

Members of Capitus Group:

  • Negotiated between partners to structure transaction
  • Developed a financial model
  • Re-structured all debt and raised additional debt to fund buy-out
  • Worked with tax/legal advisors to minimize tax and obtain inter-generational transfer
  • Acted in an advisory role post-transaction as CFO
  • Positioned company for renewed strategic focus and growth

Case 2

Issue: Management team of large, financial products firm wanted to buy-out company from financial owner.

Capitus Solution:

Members of the Capitus group:

  • Interviewed ownership and management to understand positions and issues
  • Negotiated buy-out terms
  • Obtained and negotiated financing for buy-out
  • Developed Operating Agreement for new entity
  • Managed legal, tax and accounting professionals to facilitate transaction
  • Advised company post-transaction to manage business

Case 3

Issue: Minority owner wanted exit strategy to sell shares but still maintain a supplier relationship, which provides continuity in operations for remaining owners.

Capitus Solution:

  • Assisted all owners establish a fully functioning Advisory Board.
  • Assisted all owners identify candidates, interview and hire a new financial officer.
  • Assisted new officer in efforts to attract and solidify new loan that funds all requested provisions in sale of minority owner shares to remaining owners.
  • Assisted minority owner in establishing a new company with contracts to supply goods and services to remaining owners.

Case 4

Issue: Owner of a professional services company wanted to plan for an orderly inter-generational transfer and renewed profitable growth.

Capitus Solution:

With assistance from members of the Capitus group, owner was able to:

  • Re-structure existing ownership to facilitate eventual transfer
  • Develop a financial model to aid in strategic & tactical planning
  • Re-structure bank debt
  • Develop new organizational structure and fill a critical position
  • Begin process of developing an Advisory Board
  • Position company for renewed strategic focus and growth

Case 5

 Issue: Owner of a for-profit educational institution wanted to evaluate potential exit scenarios and develop financial resources to continue growth to increase corporate value.

Capitus Solution:

Members of the Capitus group:

  • Interviewed ownership and management to understand positions and issues
  • Did research on industry to understand benchmarks and opportunities
  • Provided counsel on Business Plan and financial model with regard to options for exit
  • Provided input on decision making process for next steps and strategic direction
  • Are in process of developing an Advisory Board to aid in ongoing decisions and strategic focus
  • Raised debt for company to facilitate continued growth

Case 6

Issue: Owner of a manufacturing company needs to regenerate focus, enhance EBITDA and evaluate potential exit or intergenerational exit strategies.

Capitus Solution:

Members of the Capitus group:

  • Evaluated the company’s current position in their corporate lifecycle and examined their financial standing.
  • Aided the owner in determination of where he stood with regard to risk tolerance, personal lifestyle wants/needs and timeframe.
  • Provided counsel on developing a business plan and financial model.
  • Developed an Advisory Board to aid in ongoing decisions and strategic focus.
  • Are helping the owner to evaluate a potential intergeneration transfer.
  • Are providing ongoing input on the decision making process for next steps and strategic direction.

Case 7

Issue: The owner of a specialty transportation construction company was not currently interested in selling the business but wanted to reduce his work load to no more than 50%, reward a key employee and plan for a future transition out of the company.

Capitus Solution:

Members of the Capitus group:

  • Interviewed the owner & management to understand personal positions and issues in order to develop a needs analysis
  • Evaluated the company’s position on its lifecycle and determined that it needed to re tool for growth to meet demand opportunities presented by the aging transportation infrastructure
  • After it was determined that the company needed a COO, aid was given in the interviewing, negotiating and finally the hiring of a very experienced person.
  • Developed the transition team including the company’s CPA and lawyers to tax efficiently change the corporate structure and ownership to incentivize the new COO and another key employee.
  • Aided the company with acquisition of a new bank relationship to support their future cash needs given the expansion opportunities in the marketplace
  • Continue to act in an advisory role to support the profitable growth of the company

Case 8

Issue: Owner of a software company wanted to free-up time to focus on another company he owned. At the same time, he still needed to position the company for growth and position it for a potential future liquidity event

Capitus Solution:

Members of the Capitus group:

  • Interviewed staff to understand current roles and objectives
  • After determining that the organization needed to restructure its management team, Capitus proposed promoting an existing staff member to President
  • Helped the company focus on sales growth and work with the VP of Sales to develop a sales commission structure that incentivizes the salesforce to reach their goals
  • Aided Owner & President in developing a long term strategic direction
  • Act in an ongoing advisory role to help company execute their strategic objectives and enhance company value and saleability

Case 9

Issue: Owner of a manufacturing company needed to truly delineate costs and restructure company for enhanced profitability and potential succession

Capitus Solution:

Members of the Capitus group:

  • Conducted search and aided in hiring of a new CFO
  • Provided counsel regarding a restructure of corporate debt
  • Participated in annual strategic planning process
  • Maintained ongoing advisory role for both Owner and CFO

Case 10

Issue: Owner of a professional services consulting firm wanted to bring in a new high level person to enhance the EBITDA of the company, reduce future business risk and prepare the company for a sale in 3-5 years

Capitus Solution:

Members of the Capitus group:

  • Met with both the Owner and the new Consultant to determine personal goals and timeframes
  • Met with the CFO to understand the company’s place in its business lifecycle and current financial position
  • Worked with Owner, Consultant and CFO to develop a multi-year strategic vision and financial model
  • Helped to delineate what would be needed to enhance the value of the company and reduce future business risk
  • Developed a “Phantom Stock” model to incentivize the new Consultant to meet strategic goals and prepare the company for sale
  • Led a team including the company’s CPA and Attorney to formalize the “Phantom Stock” program
  • Continue to advise the Owner and executive staff in an ongoing oversight manner to assure the company meets or exceeds corporate goals and properly prepares for a future sale

Case 11

Issue: Owner of a company in a transportation related industry wanted no longer wanted to manage day-to-day operations. He also wanted to establish a plan to reward the existing COO for his increased responsibility and begin planning for a potential succession.

Capitus Solution:

Members of the Capitus group:

  • Met with Owner and COO to formally determine individual goals and timeframes
  • Developed a model to enable COO to buy some stock from the Owner as a reward for reaching profit goals
  • Worked with company CPA to recast financials, evaluate valuation, review tax implications and develop a financial model for the stock purchase by the COO
  • Worked with Owner and COO to examine corporate governance issues and their resolution
  • Assembled transition team including attorney and CPA to develop legal documents for stock purchase and governance/succession issues

Case 12

Issue: Owner of a specialized media company who was 88 years old made the decision to sell his business. He was sole proprietor with no succession plan. Capitus Group was asked to represent this business owner in the sale of his company.

Capitus Solution:

Members of the Capitus group:

  • Re-formatted and prepared financial statements
  • Reviewed and organized all materials necessary for due diligence
  • Prepared an Offering Memorandum package for potential buyers
  • Sourced and qualified several prospective buyers for the business
  • Provided detailed guidance on business valuation and pricing
  • Handled pricing and business point negotiations relevant to an Asset Purchase Agreement
  • Facilitated the deal closing
  • Provided guidance for both seller and buyer on first steps during the integration process

Case 13

Issue: Owner of a software company focused on the banking and credit union market was in the process of completing a major upgrade in system functionality and an expansion of delivery methods for their suite of software products. All product investment was initiated in order to generate rapid growth with the plan to double in size over the next 3 to 5 years. This goal was set to best position the company for sale and maximize business value for shareholders.

The CEO engaged Capitus Group to do a thorough analysis of the sales organization and marketing structure. The deliverable was an assessment of sales personnel, sales processes, marketing and communications programs and a comprehensive report on changes, upgrades, strategy and tactics in these disciplines to hit the aggressive revenue targets within the defined time frame.

Capitus Solution:

Members of the Capitus group:

  • Conducted extensive interviews with all sales staff members to understand current roles, skills, work habits and sales processes.
  • Traveled to each office location to work onsite with each sales rep.
  • Evaluated sales bandwidth and determine how many additional sales headcount would be necessary to meet the sales goal.
  • Reviewed lead generation programs and CRM system use.
  • Critiqued and reviewed all marketing channels including print, website, enewsletter, social media, public relations and live event participation.
  • Studied the client’s Key Opinion Leader position in the market and their role in Thought Leadership relative to published white papers, instructional videos and content curation.
  • Delivered a comprehensive report of findings along with a thorough blueprint of strategies and tactics that the company should consider implementing to reach targeted sales goals in the defined time frame.

Case Studies - Business Transactions: Acquisitions, Mergers, Divestitures, Deal Integration

Case 1

Issue: Owner of a company in a consumer products company focused in the home décor market wanted to make a strategic acquisition of a distressed company in its market sector to broaden their product line. The business owner had never acquired a company and had no understanding of the process or how to value the potential acquisition.

Capitus Solution:

Members of the Capitus group:

  • Met with Owner and COO to formally review the company’s objective for making the acquisition
  • Evaluated and analyzed all financial and diligence material provided by the seller’s business broker and developed a summary report for the buy-side client
  • Created a SWAT analysis of the target company including tangible and intangible benefits, and projected consolidation savings
  • Worked with Owner and COO to develop a deal pricing strategy as well as a deal pricing rationale to use during negotiations
  • Advised Owner and COO on structure and terms to use in the LOI related to the business points in the deal
  • Provided guidance on how to plan, budget and implement the smooth and successful integration of the acquired company

Case 2

Issue: Owners of two companies in the business and financial software industry were each having difficulty achieving necessary scale and market share to successfully grow their businesses. Capitus Group was engaged to explore the options of a strategic merger and facilitate negotiations between the two company owners.

Capitus Solution:

Members of the Capitus group:

  • Met with software industry experts to explore and validate the concept of merging the two companies
  • Introduced the two business Owners to both establish a personal relationship and to formally review each company’s objective for exploring a merger
  • Developed the due diligence process and timetable, the data categories and information subsets to be reported along with the time table for submission of all diligence material to be provided by each party
  • Served as the neutral intermediary between both Owners and provided guidance on deal structure and terms fair to both parties

Case 3

Issue: The 89 year-old owner of a specialized consumer media company made the decision to sell his company. There were several key challenges to overcome to successfully prepare this company for sale and then sell the business for this client. The owner did not have a succession plan or a manager on staff who could run the business for a new owner. He was the key holder of all business process knowledge and the only sales person. He had also experienced a significant health issue which was concerning for and eliminated many potential buyers once they discovered that they would have to rely on him to transfer client relationships and train them in business process.

Capitus Solution:

Members of the Capitus group:

  • Conducted deep operational diligence into the company’s business processes
  • Restructured and restated all financials reports
  • Developed key metrics and other non-financial benchmarks and measurements to allow a buyer to do thorough due diligence
  • Counseled the owner on realistic pricing for the business based on all characteristics of the business and requirements for successful transition
  • Sourced, pre-qualified and then introduced the owner to an extensive and diverse group of prospective buyers
  • Introduced prospective buyers to financial sources who could finance the deal
  • Acted as intermediary between the final buyer and seller to negotiate both price and business terms of the transaction
  • Advised the business owner on key business points contained in the final Asset Purchase Agreement which saved the owner a substantial amount of money in legal fees

Case 4

Issue: Owner of the largest and most prestigious creative services company in the Midwest wanted to exit. After 20 years of company ownership, this entrepreneur was ready to make a change. However, the business was not properly prepared or ready to be sold. Capitus Group was engaged to package the company for sale establish a value for the company and represent the owner in negotiations with strategic buyers.

Capitus Solution:

Members of the Capitus group:

  • Met with the business owner and spouse to formally review the goals, objectives and expectations behind the desire to sell the company.
  • Reviewed the owner and spouse’s personal life and financial plan post sale of the company.
  • Brought in a financial expert to completely restructure financial reporting including a new P&L format, establishment of balance sheet reporting, cash flow tracking and cash flow forecasting.
  • Established a project management and project pipeline forecasting tool to better forecast sales trends and cash flow to mitigate costs incurred through the revolving line of credit with their bank.
  • Advised on restructuring the bank debt facility.
  • Restated 3 prior years of financials and worked with outside CPA to provide a formal opinion on each year.
  • Engaged a Certified Valuation Analyst to provide a formal valuation on the business.
  • Reviewed and organized all documents and contracts critical to the operation of the company.
  • Wrote and developed all materials required to market the company in a formal Offering Memorandum package.
  • Served as the intermediary and represented the owner in negotiations with a targeted list of prospective financial buyers.
  • Involved CPA in legal and business terms negotiations to minimize the tax impact of the deal for the seller.
  • Developed and negotiated all key business points and terms as part of the formal LOI negotiations.
  • Recruited and lead the deal team including an M&A lawyer, CPA, financial expert, wealth manager, commercial realtor, bankers and outside vendors.
  • Provided the champagne and the key toast to celebrate the successful sale of the company.