We are thrilled and beyond grateful that we had the opportunity to serve the owners of both BDR and BxB as their financial advisor throughout this super exciting journey. We met with numerous high quality private equity firms and ultimately closed this transaction with the strongest partner among the contending firms.
Uplift Partners led this entire process (Project Bright), beginning with the merger discussions between BDR and BxB and ultimately then with a curated variety of high quality private equity firms, Southfield emerging as the strongest partner.
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Background
Business Development Resources, Inc. is a Seattle-based leading provider of coaching, training and events to the residential HVAC and plumbing market. BxB Media is a marketing technology services business providing advertising, website development and digital marketing solutions primarily to the HVAC market as well. Both of these businesses were interested in “joining forces” as they had strong strategic overlap and really terrific cultural and business philosophy similarities.
The Project Bright Process
Our team put together a 12-month process roadmap that consisted of the following key elements:
- Interview and selecting of an accounting firm to provide a quality of earnings on the combination as well as both businesses individually
- Development of all marketing materials, including the Confidential Information Memorandum, the Management Presentation, a model illustrating the combination as well as monthly, rolling LTM financial analyses
- Full build-out of a combined data room with all information needed to close transaction
- Develop list of potential counterparties
- Manage the process of screening, interviewing and then engaging with strong potential private equity firms interested in Project Bright
- Assist the BDR-BxB team as well as the interested private equity firms getting to firm proposals
- Advise and assist the owners of BDR-BxB on the transaction with the strongest private equity firm that demonstrated interest
How We Maximized Interest
First order of business here was to develop the right list of potential counterparties. This element of the process must be done with utmost attention to detail. Our goal is to include all of the “right” counterparties and none of the “wrong” counterparties. For example, to the extent any counterparty has an affiliation, investment or allegiance to a firm that is a direct competitor to our client’s business, then we must tread carefully or avoid altogether. We make sure we are 100% aligned with our client on who to avoid and who to carefully engage before we do any outreach.
Second order of business is to then scrub this list to screen out any potential counterparties that we call “bottom fishers”. While on paper, a particular buyer or investor may look or sound great, we have learned (the hard way) how to spot these so-called bottom fishers. We also need to screen away any potential buyer or investor who has either not been super active in the last 24 / 36 months or may have funding issues. Once we are comfortable with our list, we make sure we have the right people on the distribution. We look for the decision makers as well as highly influential people in that organization.
A Proprietary Deal Outreach Platform
Once finalize our list, we load into our Deal Team / Outreach platform where we not only manage the secure interaction with counterparties, we also use to share updates on the outreach with our client. So they know 24/7 where the outreach stands holistically and individually with each party.
For Project Bright, we were pleasantly surprised how robust the interest was that we generated. Clients benefit from the above strategy because they know they are getting market terms at a minimum and, if we do our jobs well, they can even get outlier terms.
How We Closed
While it takes a lot of work to get to the point where our clients receive credible proposals, we also know the real work gets underway when it comes time to close on the terms we agreed upon. We rely on several best practices to get deals closed.
Know the Financial Expectations All Around
For the buyer / investor, it is critical we align with them before we sign any exclusivity agreement on closing expectations and target deliveries. For example, if the buyer expects to close on a particular multiple of EBITDA that is lower than what is in their proposal, we need to know what that is and whether it is realistic! Too often, we find buyers are willing to “pay up” on a multiple only to then learn that they are expecting EBITDA to expand 10% during diligence and they really expect to close on that EBITDA multiple. Or, we also see buyers wanting to get under exclusivity and then surprise everyone with unrealistic diligence needs. Similarly, we also need to understand and educate the sellers on what the diligence process is going to look like and we need to make sure they have a very strong expectation on the closing proceeds. Only until we have these critical expectations in line does it make sense to proceed under exclusivity.
Manage the Diligence List and Information
We have observed that diligence processes are much more cumbersome and comprehensive than in years past. This is largely due to the proliferation of private equity as an asset class. With more dollars flowing into private equity channels, more vendors and service providers are pitching their wares to private equity firms to deploy this capital more optimally, more safely (theoretically). This puts sellside advisors in a very difficult and laborious position to manage all of these workstreams. Our view is that data rooms have become much more unwieldy. Our team has put significant investment in our processes; we have developed our own data room. This is a differentiated and more effective way to manage diligence processes. With our process, we ensure nothing gets lost, nothing is duplicated, and there is no confusion who is on point for what.
Make the Best Calculated Bet on the Parties
With deal terms set, expectations in line, diligence information flowing smoothly, all that remains to be done is to select the right counterparty to get the transaction done. This can be difficult to predict, difficult to do, particularly because so many things with the market, the business, the industry could happen from when you engage a buyer until close, but it is imperative to do an honest assessment of the rationale of the buyer and seller. If one of these parties is on the fence about the other party, that deal is probably not going to close.
We consider ourselves fortunate to have worked with Southfield Capital, BDR and BxB on this transaction. We never once second-guessed these parties intention to close this deal and work with one another. The integrity of this partnership from the very first discussion through close and beyond has been among the strongest we have seen. BDR-BxB deserved the highest quality PE firm and we are confident they got it in Southfield. We are thrilled to have been part of this.
