Case Study

Lumber Operation

Case study

The second-generation owner of a lumberyard realized the third generation did not want to take the business over.  He reached out to us to market and sell his business to fund his retirement.

What made the business attractive to Buyer?
  • Strong brand reputation in the south coast region of Massachusetts, provided a strong geographical expansion for the ultimate buyer
  • Large customer list of local general contractors and homebuilders.
  • Easy access to ferry to expand deliveries to Martha’s Vineyard and Nantucket
  • Experienced sales and yard team in place to facilitate an orderly transfer of operations
  • Company was not part of any buying cooperative which provided acquirer an instant 1-3% in margin improvement due to additional purchasing power and vendor management
Challenges
  • The business had “operating divisions” which were not complimentary to operations of most potential acquirers
  • Real estate had potential zoning / environmental issues due to water drainage/pooling caused by a neighboring lot.
  • Company had lenient credit policies. While they collected nearly all accounts, delays in getting paid could be troublesome.
Why did the owner want to sell?

Business was founded in 1951, 2nd Generation owner had approached retirement age, and 3rd generation had other business interests.

Role

Greg prepared a marketing profile highlighting the upside potential of the geographical location both in terms of growth within the existing footprint and expansion to the Islands. Greg also prepared financial analysis demonstrating the synergistic upside for both increased revenues and gross margins related to increased purchase power. Greg created a list of potential target acquirers of both companies outside the Massachusetts market looking to establish an entry into the market as well as local competitors who did not have a presence on the south coast. After soliciting initial interest from three companies, Greg negotiated and obtained two LOI’s. Working closely with the owner, Greg negotiated a final LOI with one buyer for the purchase of both the real estate and the business. During due diligence, the buyer became skittish on the real estate issues and its ability to upgrade the facilities. Greg introduced the owner to an attorney in our network with extensive experience in conservation and zoning issues with local municipalities to help facilitate a deal structure to assuage the buyer’s concerns.

Results

The owner successfully sold the business and entered into a binding contract on the real estate giving the owner time to resolve a land issue knowing there was a deal. This outcome allowed the owner to transition into retirement and achieve full value for the real estate.