Collaborating is often the key to success when owning and running a business—and transitioning to the sell phase of owning a business is no different! In this episode of It Figures, CRI Partner Jen Christensen is joined by CRI Capital Advisors Partners Joel Sikes and Paul Evans as they reflect on one of their most successful sell transactions and an overview of the steps business owners should take to prepare for the sale of their business.
From Carr, Riggs & Ingram, this is It Figures: The CRI podcast, an accounting, advisory and industry focused podcast for business and organization leaders, entrepreneurs, and anyone who is looking to go beyond the status quo.
Welcome to another episode of It Figures: The CRI Podcast. And we’re excited today because we’re actually doing a co-branded podcast between Carr, Riggs & Ingram and Jennifer Christensen and CRI Capital Advisors with Joel Sikes. So Jennifer is partner-in-charge and she’s a planner with the ability to proactively consider opportunities, potential issues. She leverages this characteristic with more than 20 years of experience in certified public accounting for the greater Orlando, Florida area. Jennifer’s accounting career is focused on serving service industries, including nonprofit organizations, school districts, service providers. Jennifer specializes in providing audit review and compilation services to our clients, and she also serves as a member of CRI’s executive committee and is a mentor at the UCF School of Business.
Joel Sikes is the managing director of CRI Capital Advisors. It’s a division of Carr, Riggs & Ingram Capital Group. He offers diversified experience applicable to many types of mergers and acquisitions transactions. This includes the sale of a company, recapitalization to financial private equity groups or strategic corporations, both domestic and internationally, privately held and publicly-traded acquirers. Joel leads the CRI investment banking team on each transaction from initial analysis, preparation and underwriting, deal marketing, negotiation of transaction price and structure, as well as guiding clients through the process of financial legal due diligence and final closing of the transaction. Jennifer and Joel, thank you so much for coming out today.
Thank you, Paul.
So today what we’re going to be doing, and I’m Paul Evans, host, I’m also a member of the CRI Capital Advisors team, we’re going to be discussing a majority sale of Kymberly Solutions Group and the owner, Phil Martina. This was a co-effort between Carr, Riggs & Ingram, Jennifer leading the cause on the CPA side, and CRI Capital Advisors and Joel leading this team as well. And it’s been such an incredible journey to have so many incredible and strong and capable partners in the firm that allow us to have such confidence when it comes to going to market. So Jennifer, what services did CRI perform for Phil’s company, and what was the trigger that caused you to feel that the time was right to make the introduction to CRI Capital Advisors?
Well, CRI had worked with Phil for over 10 years. We started out performing reviews on Kymberly Group’s financial statements for those first few years that they were in operations. And then as his company grew, he had a need for audited financial statements, so then we started performing annual audits for them. And one time we were out in his office performing our audit field-work, and Phil and I started talking and he mentioned that he would consider selling the company in about five or so years down the road. And then he looked over at me, and knowing Phil the jokester, he made a little joke and said, “Maybe I would be willing to sell even earlier if the price was right.” And at that point I said, “Okay, it’s time that you need to talk with CRI Capital Advisors.”
I know the team at CRI Capital Advisors and so I’m comfortable with them, and I knew they would take care of Phil and they would take the time to educate him on the process and also provide him with a current market analysis of what his company was worth. And I also knew, and this was important to me and important to Phil, that CRI Capital Advisors would not put any pressure on him to do something that he wasn’t ready to do. And so, talking to Phil a little bit about CRI Capital Advisors and what they do, he agreed to that initial meeting.
It’s such a great point about the pressure piece, and it’s another reason that we love working with CRI, because Phil even acknowledges that in that initial meeting, he was expecting some big sales pitch and pressure to go a certain direction, but honestly, we’re there to listen, and we know that you are representing the client. You’ve worked with him for years, as you have many of your clients, and our goal is not to go in and sell them anything in particular. It’s to listen to determine what are the needs of the moment, whether that’s a sale that’s going to be immediate or one that’s going to be five or ten years down the road. And so we certainly appreciated that introduction. It made all the difference in the world to have that relationship be the foundation of that initial conversation. It made it just incredible to not only work with you, but to also be able to work with Phil. Joel, what was it about Phil’s company that was attractive? Was it the industry? Was it the financial strength of the company?
Yeah, so Phil’s company had a lot of really exceptional attributes. I think it had all the hallmarks of a truly well-run company. He had profitable growth over several years. He had longstanding customer relationships, but the customer base was well-diversified. He wasn’t dependent on any one major customer or handful of major customers. New customers were being added at a fast but a manageable pace. Phil had his business in order. I think Jennifer helped him a great deal in keeping just the financial side of the business in order so that Phil could see very clearly and could very closely the financial performance of the company, and make corrections when necessary or capitalize on opportunities when those presented themselves. So just overall, Phil’s company was just a really strong well-run company.
I think really the one attribute that made the company so attractive was really just Phil, and alongside that was his vision for the company. So Phil is super driven. He’s highly energetic. He was by no means finished in the business. He was looking toward the next phase of the business, and he knew his business inside and out, but he also was not afraid to ask questions. He was not against having experts and advisors around him. And he would quite often look to others that were perhaps had a different specialization than he did to say, “Hey, what do you think about this? What do you think the next right step is?” So he had a great vision for the growth of his company. He knew he could replicate the current success of the company on a much larger scale. But he also knew he needed help to do that. So I would say that just the combination of Phil creating a solid company, along with his energy and vision and that discernible path forward for the rapid growth of the company, is part of what made it so attractive to a prospective acquirer.
You make an important point that often when it comes to selling a company, a lot of people feel like they’re going to do it when it is time to retire. But Phil’s story is one of growth, and it was the perfect timing for him to move forward. You were able to recognize that and to lead him down a path that was going to be best for him in the long run. Jennifer, you were incredibly instrumental in helping Joel and the team really get our arms around the financial aspects of Phil’s company. Why is having a committed and capable CRI CPA critical to a transaction like this one?
Well, since I was Kymberly Group’s auditor and their CPA, I had the historical knowledge of their operations over the years, and I had the years of experience of working with Phil and his staff, and so we had a good working relationship going on. And so I think it really enabled us to work well with CRI Capital Advisors in Kymberly Group together as a team and make the transaction run pretty smooth because, as I mentioned, Phil’s familiar with CRI, and so we were able to really transition that team and include CRI Capital Advisors pretty easily. Now, once the due diligence process started, I was able to assist Phil, because there might have been information that was needed, financial information that was requested of him. So I would work with Phil to see what information he wanted us to be able to work with CRI Capital Advisors with and provide to them. And so that helps really him save some time and some effort of having to go through and dig out certain financial information that we have readily available.
So, I think just having that in-between, that liaison, between CRI Capital Advisors and the client was extremely helpful. Again, the client felt very comfortable, because he knew with his experience with me, that I wasn’t going to steer him in the wrong direction, and I was very comfortable with CRI Capital Advisors. So it was just a great way to link the three parties together to work together.
One of the things you mentioned that is so critical and important that we often forget is not only did you talk about the finances, but you talk about that relationship. And to us, what a key element, because it was not a cold introduction. It was a very friendly and warm introduction. And you knew not only the company, but you knew Phil real well. Joel, share a little bit about the process and what it looks like to take a client to market.
Sure, I’d be happy to do that. It is rather long, and it’s a complex process. There are several different steps to it. Each one has to be navigated pretty carefully. Jennifer alluded to the first phase, which was the assessment. That’s where our team, the capital advisors team, comes in, and we take a good look at the company. We collect a good bit of information, and we talked with Jennifer, we talked with Phil, we did general market and industry research. And we were able to come back to Phil with an assessment of what a likely market price could be if he were to decide to sell either in part or in whole. We talked through various transaction options. We talked about what the likely terms and conditions would be on a transaction of each type and for a transaction of this size.
So, the assessment piece is really part of our team becoming more thoroughly educated on the client’s company, but it’s also part of setting expectations with the client, helping him or her understand what he or she can expect out of the process as we move forward. I think one of the most critical pieces of the assessment process is just helping a client understand their options. A lot of people think when it’s time to sell their company, that they just want to sell it and that’s really the only option that they have. In Phil’s case, he was far from being done. He had a great vision for his company, and what he really needed was the opportunity to recapitalize the company, to monetize a portion of the years of hard work he had invested in the company, but also to find that partner who could help find and help execute the continued growth of the company.
So, whether it’s a full sale or a partial sale or some other form of partnership, those are the options that we try to help a client perform during the assessment and during the discovery process. Once the client is committed to moving forward, to go into market, and then we would enter the packaging phase of the process, and that’s where the capital advisors team, along with the help of CPAs like Jennifer and other professional services providers for the client, that’s where we do an even deeper dive into the company to gain a more full understanding and to prepare us in the process and the client through the process, and to prepare the company to be able to answer the seemingly endless number of questions that a prospective acquirer is likely to ask. So in the packaging phase, we’ll prepare a summary overview document, which is usually 20 to 30 pretty data-intense slides, let’s think of it in terms of a slide deck, that really tries to encapsulate the core elements of the company. And then along with that, we prepare financial exhibits and compile operations data. Again, that’s going to try to satisfy that rather large appetite for data that acquirers are going to have. And while we’re putting all that together, other members of our team are carefully researching a list of prospective acquirers to which we would intend to present the company when it is time to take it to market. And we have some pretty robust research tools and spend many, many hours examining and either qualifying or disqualifying potential acquirers.
And so, once that phase of the process is completed, we move into the marketing phase, and that’s where we’re reaching out to prospective acquirers. And that involves just a lot of phone calls and emails and outreach to those potential acquirers, working our way through those organizations to get to the right contact person, and really just trying to have preliminary conversations with acquirers, to get them as quickly as possible to a decision of, “Yes, we’re interested and we’d like to take a deeper look,” or, “No, that’s not quite the right opportunity for us.” So, the whole point of the marketing process is to narrow the field of acquirers down to those that are truly interested, that have the funding to make the acquisition, that have a compelling reason to make the acquisition, and also, and perhaps most importantly, that they’re indicating the right valuation and structure that will meet our client’s needs. And so when the appropriate acquirer, or in Phil’s case, the appropriate partner, is identified, from there, we turn directly into the due diligence and closing phase of the transaction. And quite honestly, that’s where a lot of the heavy lifting is done. And that’s when it really becomes clear that a seller, or someone seeking a partner in a transaction of a significant size and magnitude, truly needs a team around them. They need a CPA like Jennifer. They need a firm like CRI Capital Advisors to help navigate the very rigorous diligence process as well as to help and support the legal teams as they prepare all the documentation that goes into to a transaction like this.
So, several different steps we go through, a lot of work in each of those steps, and the overall the process can take several months to a full year in some cases. So it’s definitely not something the clients should take lightly. It’s not something we take lightly, because it’s an extreme commitment of time and effort from all parties. But the idea is to go in well-informed and with a specific outcome in mind so that that time is put to good use.
Thanks for that overview, and maybe there’s some questions, those of you who are listening, that you want to dive into that a little bit more. Feel free to reach out at criadv.com. We can answer any of those questions. Now, working with somebody like Jennifer actually helps our job and our role become easier, because we’re able to lean on her expertise, and it’s a great advantage for us. On our side, we are the investment banking division of Carr Riggs & Ingram. And Jennifer, when it comes to your perspective, what are some standout points that come to mind when working with a group like ours, CRI Capital Advisors, since we’re on the same team, but we’re different divisions?
Well, I see CRI Capital Advisors as a great resource, and we’re fortunate to have them so that we can share their knowledge and their talent with our clients to assist them in meeting those life goals that they have. A lot of times, business-owners give thought to what their transition plan is, but it can be so overwhelming that a lot of times they just push it away and delay it and say that, “We’ll go ahead and start thinking about it next year,” and then it’s next year. And so they delay that part that I call the pre-planning phase of just trying to think, “Okay, what is it that I want to do over the next five to ten years?”
And in today’s environment, there are so many businesses and business owners that are in that phase where they need to start thinking about what their transition plan is, and oftentimes, including with Phil, he was thinking, okay, when is the date where maybe he wouldn’t be involved in the company any more? And he thought, “Okay, that’s going to be five, ten years down the road.” But what he wasn’t thinking about is that there’s sometimes a partnership that happens now, something that can happen now, so that Phil could use some of the great qualities he has.
He’s able to grow the company. He’s very successful in working with his current clients. And so being able to talk with CRI Capital Advisors and start this process a little earlier than what he thought is actually enabling him to grow the company and to work on that partnership with someone else who can help capitalize this company and really help him to meet his goals of not only down the road, when he wants to step out and step down and be done with the company, but in between. There’s a whole phase in between where he will be working still with the company and helping it to become successful.
So, I think oftentimes, people don’t realize that it is a longer process and it’s not just… Many business owners don’t want to just sell their company and walk out the door. It doesn’t work that way. There is a transition period. So it’s real important, and to be able to have CRI Capital Advisors on our team, I just have to pick up the phone. I can give Joel a call and say, “Hey, I have a client. Will you come talk to them and just let them know about the process?” And no hesitation. I know that he’ll be there talking to them and guiding them through what to expect, again without that pressure of having to make some decisions or do something right now. So I love having CRI Capital Advisors as a resource that all my clients get to use.
Thank you for those thoughts, and we loved partnering with you on this deal. Made it just a great experience all the way around. Joel, final question. What are some next steps that need taking, say an owner is thinking about a sale now, or maybe even years down the road?
Yeah, that’s a great question, and Jennifer used the term, I believe, pre-planning phase, and that really captures what those next steps can be. There are quite a few technical and logistical steps a business owner can take to begin preparing. That relationship with the CPA is critical, and the clearer and the more reliable a company’s financial statements are, the more valuable that company can be. So for years in advance of a potential sale or a potential transition, working with your CPA, even if you don’t go all the way to the audit level of service with the CPA, just having an accounting professional on your team to help make sure your financial statements are really dialed in, there’s real value in that when you do decide to take your company to market. You can make sure your books and records from the corporate perspective are in order. You can make sure that the shares are going to be transferable. You can start having conversations with your business attorney to make sure that there are no high hurdles to get over when it does come time to transition the company.
But I think one of the biggest things, and Jennifer alluded to this as well, is just beginning to have those conversations. You can’t be afraid to start talking about this transition. If we run into business owners who have a second generation in the company, and they are just thoroughly convinced that the company is going to transition seamlessly to that second generation, and there’s not going to be the need for a sale or a transition of some sort other than the one that takes place within the family, then that’s fine. We don’t need to interfere in that. But those situations are rare. More and more, we see entrepreneurs building companies that are not passed down to a second generation.
So for the most part, every business owner is going to face this at some point, with rare exception where those businesses stay in the family for multiple generations. So if you know an event like this is on your horizon, even if you believe it’s five or ten years down the road, it’s there, and it’s never too early to start having those conversations. The day you decide you’ve had enough and you’re done and you want to sell it and you want to sell 100% of it and ride off into the sunset and travel and enjoy life, that’s really not the most advantageous day to call Jennifer or to call us and say, “Hey, I want to sell it. Get it on the market right now.” There is a lot that can be done in the months and the years leading up to this decision.
And we do try really hard not to be a high-pressure shop. We have this strong connection with our CRI CPA partners, and we would rather wait and help a client execute the right maneuver at the right time than rush and potentially have a long-term, valued client of the firm feel like they were pushed into something that wasn’t quite right for them. So I would say the most important next step for an owner would just be to start asking questions early and to start learning about what’s in store, learning what it’s going to take, and let people like Jennifer and us help you start to visualize what the eventual outcome could be.
Super helpful, and always good to keep in mind those next steps and really what needs to be done ahead of time. We’d like to thank Jennifer and Joel for coming out today and sharing these thoughts. Also, those of you who are listening, if you’ve got any accounting question, you can contact cricpa.com. If you have any mergers and acquisitions questions, criadv.com. And a quick little note, CRI Capital Advisors is going to have a new podcast. We’ll be launching soon. It’s called SellAbility. It’s to help you prepare your position and sell for maximum value, and you’ll be able to listen to that wherever you listen to your podcasts, but thank you again for your time. Thank you for your focus. If you have any questions at all, feel free to reach out. Have a great day.
If you want more CRI insights or are interested in learning about our firm, please visit our website at cricpa.com. Thanks for listening to this episode of It Figures: The CRI podcast. You can subscribe to It Figures on iTunes, Spotify, or wherever you prefer to listen to your podcasts. If you liked what you heard today, please leave us a review.