Acquisition Opens More Doors
Shaun Hoskin owns and operates HDS (formerly Huntly Door Systems), Waikato’s leading manufacturer of pre-hung doors. Since Shaun acquired the business in 2012 it has grown substantially and operates throughout the Waikato (where it is the market leader), Bay of Plenty and Auckland regions, marketing pre-hung doors, door hardware, stairs, and wardrobe systems.
As part of his long-term strategic growth Shaun identified the Auckland market as being the key area for growth in the medium term. He and his team undertook a review to understand the different options to attain their growth goals and settled upon acquisition as being the most effective.
MyAdvisor was engaged in July 2020 to work with Shaun on the acquisition project.
This project had a number of distinct stages, each of which required successful completion before moving on to the next. Initially a process was undertaken to develop acquisition goals and develop Shaun’s investment and acquisition profile. Once this was completed, a thorough process to research the market was undertaken, the findings of which were discussed to garner Shaun’s feedback.
Three separate potential vendor parties were engaged through a negotiation process simultaneously to establish pre-due diligence viability to progress to an offer stage.
MyAdvisor then worked with Shaun and the potential vendor through a series of meetings and negotiations to allow the development of a buyer’s report, culminating in a conditional offer for the acquisition of the business. Upon both parties signing the sale and purchase agreement, MyAdvisor undertook the due diligence process on behalf of HDS, and the acquisition settled on 30 June 2021.
This process was undertaken as a consulting project not on a success basis.
For Shaun, being able to stay focused on running his existing business while the project was being undertaken was invaluable. As you can see it is not uncommon for these projects to take six to twelve months to conclude and taking your eye off the ball in the main business could be calamitous. Additionally, developing an investor profile and having clear acquisition goals up front allowed real focus for both Shaun and MyAdvisor while engaging the market. Finally, by working on a project basis rather than success fee, both parties can be confident that outcomes are aligned and there is no success-driven selling taking place.
NOTE: This case study was approved by Shaun Hoskin, CEO, HDS
The Last Straw
Bernie and Jeanette Kant acquired Profile International in 2013 with a view to building a business that could be sold to fund their retirement. The business manufactured and distributed plastic drinking straws and imported and distributed bamboo disposable catering products.
Shortly after acquiring the business a significant rent rise took place that meant that the business was marginal from a profitability perspective.
My Advisor was engaged in 2014 to work with the owners to develop an exit plan and help with the implementation to ensure the project stayed on track within the desired timelines.
A strategic plan was established identifying the key initiatives for focus to drive both profitability and increase the capital value.
As is well known, during the execution period (the business was sold in 2020) there was significant adverse publicity regarding single use plastic straws. Fortunately, due to the focus on growth of the sustainable bamboo products, signed contracts with major clients on the drinking straw front, and work with suppliers on alternatives to plastic straws, the business was able to be broken into two parts with different risk profiles and sold separately.
The net position for Bernie and Jeanette was that they achieved their desired outcome and are now enjoying their retirement, having sold the combined parts for five times what they paid for it.
Bernie and Jeanette had the good sense to start their process with a significant period of time before they actually wanted to exit. This allowed them with guidance to develop and implement strategic initiatives that greatly enhanced the business value, despite the setbacks and sentiment facing the industry overall.
Furthermore, they were also able to maximise their profit on their journey by making decisions with the clarity on where they wanted to be and when.
NOTE: This case study was approved by Bernie and Jeanette Kant
Management Buy In Option
Graeme and Shirley Bunker formed Installation and Piping Services Limited (IPS) in 1996 when Graeme took over the projects side of his then employers’ business. The business specialises in stainless steel fabrication and installation within the food and beverage sector, providing site supervision installing specialised plant and equipment, as well as workshop fabrication services.
The business has served them really well and rewarded them for the years of hard work and dedication that they have put in, by providing a great income and return, and in 2019 Graeme wanted to start planning for his retirement by understanding his options and what they could look like.
My Advisor was engaged at the end of 2019 to work with the owners to provide a formal valuation and establish exit options and associated risks. Right from the start it was Graeme and Shirley’s desire to give their key management team the option to buy into the business. Obviously, this comes with a number of risks not least of which is that if staff cannot raise sufficient capital to do so they may become unsettled and leave.
Initial discussions with key managers identified three key people that wanted to buy-in with 3 others that were appreciative of the opportunity but felt business ownership was not for them. Obviously, the early part of 2020 was disrupted due to the nationwide lockdown and although this business traded as an essential service, many large projects were delayed or cancelled. This meant that the project was slower than first envisaged as Graeme wanted to ensure the legacy he had established was protected.
Eventually a process was undertaken which saw two of the managers each take a 25% stake in the company and a plan put in place to sell down the balance over the next three years. Graeme has now retired and provides mentoring and advice whilst chairing the newly established board.
Graeme and Shirley had the good sense to start their process with a significant period of time before they actually wanted to exit. This proved to be critical with the unexpected events brought on by the Covid-19 pandemic which dramatically affected their industry and short term confidence of all stakeholders. This allowed the business to come out of the other side and Graeme to use his 25 years industry knowledge to guide the business through a difficult period. Although in this instance it was the pandemic, unforeseen circumstances often occur which cause time frames to be disrupted, and so early preparation is key.
It also helped that Graeme and Shirley were very clear about their goals and although they potentially could have achieved a higher price by going to the market, they feel entirely comfortable with their succession plan, and that the key people that have worked long term with them will be taking over the mantel and leading the business into a bright future.
NOTE: This case study was approved by Graeme & Shirley Bunker, owners of Installation & Piping Services