In past articles we have described one type of deal structure: the partial sale. This deal structure is used primarily by equity firms, and it encourages existing ownership and management to stay with the acquired entity post-acquisition. They are “encouraged” to do this by retaining an equity stake in the company (usually less than 50%). This allows them to participate in the growth and expansion of the company without assuming 100% of the risk going forward. It is also beneficial because typically the equity firm will provide professional management, financial engineering, and marketing/sales talent that the original entity would not have had access to.
But, most importantly, it also allows existing ownership and management teams to participate in a “second bite of the apple” later when a much larger organization is either taken public or sold again. This secondary liquidity event can be quite profitable for original owners. So it is a great structure if you have plans to grow your business but need access to capital/talent to do so.
According to their website, Beekman “is dedicated to bringing capital and operational resources to small and middle-market companies through its team of seasoned private equity professionals and experienced industry operating partners.” Essentially Beekman is an equity firm that specializes in investing in small privately held companies with the goal of helping them grow.
Here is the description of the philosophy that guides them in their acquisition plans:
“A critical component to our investment philosophy is developing and maintaining a true partnership with management. The Principals of our firm along with our Industry Partners bring over 250 years of management, operating and financial experience to our portfolio companies. Together with existing management, we will endeavor to create long-term, sustainable value by actively working with and supporting our companies in four critical areas: Strategy, Management, Operations, and Finance.”
I have highlighted the phrase “true partnership with management” for a reason. Beekman, like hundreds of other equity firms that specialize in investing in smaller companies, do so by partnering with businesses that have maxed out their growth potential internally and need the expertise and capital these firms bring to their investments. If this describes your situation, then finding a partner like Beekman could be very beneficial.
NorthStar “is a leading provider of residential security alarm installation and monitoring services with more than $1.0 million of recurring monthly revenue. Founded in 2000 and headquartered in Orem, Utah, NorthStar has grown rapidly in recent years, and is currently one of the 40 largest security alarm companies in the United States.”
According to the press release, Beekman has been interested in the security alarm industry for several years. They obviously did their homework during this timeframe and looked for a platform company like NorthStar that although is obviously healthy and growing, still has significant growth opportunities in front of it.
The key phrase in the press release, though, is this:
“Company management participated on the deal, and will maintain a significant ownership interest.”
As I described earlier, this deal structure is a true win-win for both parties. Beekman now has a partner that allows it to expand further in the security alarm industry, and NorthStar founder Jason Christensen, as well as his management team, now has the capital and professional leadership needed to reach the next level in the company’s growth.
Many entrepreneurs who attend a Generational Equity M&A seminars assume that a 100% sale is the only route they can take. In fact, quite often when we take clients to market, they are pleased to learn that there are buyers who are willing and interested in allowing them to stay with the company for 3-5 years to help it continue growing.
We meet business owners all the time that are from one end of the spectrum to the other in terms of motivations for retaining us. Some folks are just tired, burned out, and ready to retire and move on. If that describes where you are in life, we can help you.
Others, though, come to the realization that they really would like to help their legacy reach its potential and decide that working alongside a partner would be quite rewarding, both emotionally and financially. If this is where you might be, we likewise can help you.
Generational Equity is the leading lower middle-market M&A advisory firm in North America. Don’t just take my word for it, look at the latest M&A ranking tables compiled by Thomson Reuters. Chances are good that our M&A professionals can help you find buyers and/or investors for your business as well.
Of course not every business is a likely candidate to be acquired by a private equity group (PEG). However, without the aid of an experienced M&A advisor, you could be missing out on all sorts of buyer groups. Don’t make that mistake. Contact us and we will help ensure you don’t!
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
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I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.Betty L. Brennan, President, Taylor Studios
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.Rick Greene of Dobbs Equity Partners LLC
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!Tom Currier, Former President & CEO, Rackmount Solutions
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The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.Caroline Connelly, CEO, OptoTest
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We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.Shane and Johanna Kline, Owners of Vision Upfitters
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.JoAnn Ellis, Owner of Fondren 5 Star Kennels
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.Salvo Stoch, Founder and CEO of Sleeping Partners
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!JoAnn Ellis, Owner of Fondren 5 Star Kennels
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
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