Linn Star Transfer Acquired By Forward Air

Industry: Final Mile
Business Location: Cedar Rapids, IA
Tenney Group Role: Advisor to Seller ($90M Final Mile Business)

What were the seller’s motivations in deciding to pursue an exit?
The seller believed that the final mile space offered tremendous growth opportunities in the coming years. To stay at the front of the pack, the seller believed he would need to invest significant capital and scale the business. Rather than double down, he chose to use his current position as an industry leader as a stepping off point.

What challenges were unique to the seller as they entered the marketplace?
The seller had very high customer concentration with only one customer (90+%). Further, there was uncertainty surrounding the California independent contractor laws and how that might affect buyer interest. Finally, with the company being a market leader, confidentiality was extremely important due to the identifiable nature of the business.

How did Tenney Group maneuver around the challenges?
We ensured that the parties committed to a purchase price and terms that were contingent on satisfying the buyer with the transition of the #1 account (so to not disrupt the client relationship unnecessarily). Then we created a thoughtful way to get all parties comfortable with transitioning the business/key account. As for the California piece of the business, it was agreed upon by both sides that it would be carved out from the transaction.

For confidentiality purposes, we limited the marketing efforts to roughly 30 targets that we felt would be most likely to meet the client’s financial objectives. The research from our proprietary database helped restrict the flow of sensitive information from interested parties who would not be able to compete with the top buyers. This helped stabilized the sale effort and avoided the spread of competitive intelligence in the market.

Key Takeaways for Other Business Owners:
The goals of the seller evolved as the deal progressed. The seller ultimately chose a buyer that had the best post-transaction strategy for protecting his people – even though the buyer’s offer was not the highest presented to the seller. Further, the seller had excellent command of financial reporting and their highly efficient internal organization undoubtedly affected the quality of offers and interest of buyers. Finally, the gap between the lowest and highest offer was $40M. If you are looking at only “one” offer from a buyer, you must ask yourself, “What might I be leaving on the table if I don’t force others to compete to buy my business?”

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