Dear BTF Community,
In this interview, Brett Story, co-founding partner of Denver-based investment banking firm Britehorn Partners, and our BTF Denver Conference Chair discusses:
- Taking your eye off what you do best, running your business
- Avoiding a “DIY Disaster,” and
- Allowing transition experts to help find the most optimal buyer.
Wishing all our readers a wonderful holiday season! We look forward to connecting with you at one of our events in 2025.
Enjoy,
Mark
If you’ve done a good job building and running your business, well done ꟷ this is what you’re good at, and have time for.
You then might arrive at the point where you feel it’s time to transition your business towards an exit. So, what should – or shouldn’t – you do?
“Taking your eye off the ball while running a successful business you want to sell is the worst thing that can happen,” said Brett Story, partner at Denver-based investment banking firm Britehorn Partners.
“You can try and chase down interested buyers, who might be interested or are just fishing. You can get 6-8 months into that, and if doesn’t work out, you might have spent money and devalued your business during that time,” he said.
This is an example of what Story says is the “DIY Disaster.”
“One of the most prevalent misconceptions in the world of business is the belief that sellers can effectively manage the sale of their own company. As a trained lawyer, I’ve often likened this notion to the adage that a lawyer who represents themselves has a fool for a client,” Story said.
“Similarly, attempting to navigate the complexities of selling a company without the expertise of a professional can lead to disastrous outcomes,” he said.
Britehorn Partners has been working with families and founders for the past 13 years on their business transitions, where “it can mean that first win, or the second bite of the apple,” said Story.
A common thread among these business owners, according to Story, “is they can become accustomed to wearing multiple hats and achieving success through their own efforts, [and] underestimate the intricacies involved in the sales process.”
Story said Britehorn did a deal with a family-owned title insurance business that had been around more than 80 years. It was run by “a magnanimous CEO” and “there were a few behemoths who approached the CEO [about possible acquisition].
“He spent hundreds of thousands of dollars over 10 months and became so frustrated with the process. He was close to selling for about 5x EBITDA when we stepped in and convinced him to restart the process. We found him a much better fit from a culture standpoint and had a ready-made CEO to step in for him.” The client got 8 x EBITDA, which meant a positive difference of $18 million.
“It’s an overused term, but we really do quarterback the [transition team] – lawyer, accounting, wealth management – it can be of benefit to get well ahead of a liquidity event,” said Story.
“You may own a widget-manufacturing business and may know the other widget competitors who may want to buy you, but you may not know about other potential buyers out there. Buyers can often come from places you least expect, and we spend many hours every week cultivating strategic buyers,” he said,
It gets down to the mechanics on how these deals are run, said Story.
“There are plenty of lawyers who can marshal a transaction through the finish line, but to get a buyer to the LOI (Letter of Intent), for example, there could be a pending or threatened lawsuit, or a tax issue. You need to get ahead of these types of things, because these are issues that can have an impact on the trust with the prospective buyer, and time kills deals.”
Story says that without proper representation, business owners “can risk being manipulated by potential buyers, compromising the competitiveness of the sales process, and ultimately jeopardizing the success of the transaction.”
Story summed things up with a forewarning: “You don’t know what you don’t know. You think it’s like selling a house, but it’s not.”
