This case study highlights the success of an M&A transaction involving selling a professional services business — in this case, an automotive repair facility. The transaction was facilitated by Walden principal Dean McDonald and can provide useful insights for owners who are considering the sale of a professional services business.
No matter how well you know your company and industry, selling your business and planning your exit will always be an intensive process including a lot of unknowns.
Success is only possible if the buyer and seller are compatible. These relationships are crucial and require a level of mutual understanding regarding the company’s value and future prospects.
The powerful influence of stakeholder alignment on successful transactions was clear in a recent Walden transaction, which involved the sale of an automobile repair facility early in 2024.
The Seller
The owner of a Georgia-based automotive repair facility was ready to sell his shop and retire.
The business was poised for continued growth with a successful business model, a dedicated management team, and a prime location in North Georgia that included an exclusivity agreement with the county preventing additional auto repair centers in the area.
The owner, who was involved in overseeing management but not day-to-day business operations, recognized the need for a strategic exit plan to maximize the value of his investment and ensure a smooth transition for his employees and customers.
Partnering with the Right Advisor
The owner understood selling his business would be a complex undertaking and had engaged an M&A firm to begin the process but pulled out due to an unsatisfactory experience.
An attorney the owner knew recommended Walden Businesses and principal Dean McDonald to restart the process and secure the outcome the owner needed.
McDonald saw a number of positives in the business benefitting the transaction from the outset. The automotive repair facility was in a great location and operated well by the management team, with a strong community reputation and high levels of repeat business. Further, the fact operations were successful without the owner’s day-to-day involvement made the company a more attractive asset to potential buyers.
The owner was hesitant to engage at first, but Walden’s transparent approach, open communication, and commitment to client satisfaction quickly alleviated his concerns.
“I think I just approached things differently than he’d experienced before. I was very good about keeping communication open and keeping him informed about everything. I would quickly relay buyer feedback so we could make adjustments in either the price or terms. I also set expectations early by explaining how I worked and what our process was. We stuck to it, which made a big difference.”
— Dean McDonald, Walden Principal
Identifying the Ideal Buyer
Walden employed a multi-faceted approach to identify potential buyers, including:
- Targeted Outreach: Contacting strategic buyers in the automotive industry directly who were actively seeking expansion opportunities.
- Industry Networking: Leveraging Walden’s extensive network of industry contacts to identify potential acquirers.
- Online Marketing: Reaching a broader audience of potential buyers through confidential online platforms.
Walden identified a pool of potential qualified buyers quickly, but it became evident a strategic buyer with a strong operational presence in the automotive industry would be the best fit for the business as the market developed.
After fielding several less-than-ideal offers, McDonald and the owner accepted an enhanced proposal from a buyer already established as an auto repair provider in the Midwest and looking to expand operations into the Southeast. The location and existing operations made the business an excellent fit for the buyer.
Navigating the Due Diligence Process
The due diligence process was a critical phase in the transaction. Walden worked closely with the seller to prepare a comprehensive information memorandum, which included detailed financial statements, operational data, and legal documentation.
“Advanced due diligence work makes a tremendous difference. We have a saying in our business–’we go ugly early.’ If there’s something unattractive about a business, disclosing it upfront is key. If it’s disclosed up front and the buyer is aware of it, then there usually is a way to work around it.”
— Dean McDonald
McDonald also assisted in coordinating the due diligence process by addressing the questions and concerns raised by the prospective buyers.
Addressing Challenges
While the overall transaction was smooth, the owner’s legal counsel was overly cautious initially, which slowed down the negotiation process. Walden worked closely with the legal team to address their concerns and expedite the deal.
Another potential challenge was the vision for the company’s existing employees. The owner was concerned about protecting the management team and other staff members, but the buyer saw the existing team as a positive feature who made their purchase more valuable.
“Most buyers do not want to replace the employees — they want to keep the employees who are in the business when they buy it. Part of what they’re buying is employee retention. What is attractive to a buyer is a fully-staffed company with longevity that can keep people in place. This really made the business attractive.”
— Dean McDonald
Also, maintaining confidentiality throughout the process was crucial to avoid disrupting operations and impacting employee morale. Walden implemented strict confidentiality measures to protect sensitive information.
McDonald’s experience, negotiation skills, and attention to detail ensured all parties were able to overcome these challenges and secure a favorable outcome for the seller.
Securing a Successful Outcome
The inherent benefits of the auto repair facility allowed McDonald to negotiate a higher-than-industry-average multiple for the seller. Additional terms included an all-cash deal and 30 days of transition time.
“It was a really great deal for the owner. The business cultures meshed very well in how the original owner and the buyer ran their companies. It’s really nice when everything comes together like that.”
— Dean McDonald
The owner was extremely pleased with the outcome of the deal, both due to the final valuation and the seller’s commitment to keeping the existing team. The buyer also disclosed their intention to expand the business and add more service technicians, which dovetailed nicely with the seller’s desire to ensure the company’s continued success and maintain a positive community reputation.
McDonald emphasized how the combination of Walden’s proven processes, open communication, and buyer fit made this transaction an exceptional one for all of the stakeholders involved.
Private equity groups and buyers are actively seeking opportunities to purchase businesses in the Southeast to capitalize on local growth and a beneficial business climate. Contact the M&A team at Walden Businesses to learn more about selling your company.
