When an Unsolicited Offer Turns into a Successful Sale

Ronnie Kent closed a fantastic deal to sell his business, and it all started with an unsolicited offer. I recently had the opportunity to sit down with him to go over his story and uncover insights for other entrepreneurs who dream of making an elite exit.

How are you feeling today, Ronnie?

I’m doing great. We’re six months out since closing, so life is good. Looking forward to fall and football season.

How did attending the Business Owner Academy shape your journey?

Well, I think one of the things I came to realize is that I couldn’t do this myself. It would take a lot of professional people who do this for a living to understand the nuances of the contracts, what everything meant and what the future of it would be. I just didn’t have the experience to know exactly which way to go.

I understand that you also worked with John and Emmett at Practical Growth Advisors.

That’s right. They helped us identify a lot of places where we could gain some additions in our operation, mainly through inventory and opportunities in sales. It was easy to go in and do all the what-if scenarios, throw in their numbers, see what expenses we were going to build up and do a cash flow analysis and sales projections based on the combined companies.

We were able to really knock out some good EBITDA projections. We focused on operational efficiencies and got a lot of that stuff cleaned up so that when somebody asked us a question about our inventory or our terms, we were able to answer intelligently and have the right statistics.

What happened when you got the offer?

We had actually talked to a company called Brady probably two years previously. Then they combined with another company called IFS, and the new entity, BradyIFS, got private equity behind them, and they started going out and acquiring different companies.

They called us to find out if we would be interested in having a conversation. And, of course, we were open to that. Our deal team, which included Nathan Corbitt from CI Brightworth Private Wealth, said that we needed to entertain offers now if the idea was to exit in a three-to-five-year window.

How did the conversation start out?

The tone was very cordial, very friendly. The gentleman I was dealing with flew out from California a few times just to meet with me to see where I was in my head, where the business was and where it was going. He went out to dinner with my wife and me to make sure she was on board with everything and see how she felt about selling the business and things like that, which was very comforting to me.

What happened next?

We signed an NDA in May and started sending them fairly generic information: employee count, locations and three years of financials. That was pretty much about it to start with.

In September, we received the first letter of intent (LOI). That’s when I jumped on the phone with you, Nathan and John and started having to engage an attorney to look over everything. That took about a month. We went back and forth on the LOI verbally and in writing, and it was maybe the second week in October before we signed and agreed on an LOI.

When you saw the offer, were you surprised there was an earn-out rather than just a payout?

Well, I was hoping for full consideration at the closing table, but that’s not always the way it works. One thing I have learned through this process is that everything is negotiable. I had some previous LOIs from other companies, so I knew there could be some holdback or earn-out. So, it’s one of those things where it’s always trade-offs. You want to get everything, and you want it all upfront, but then you’re just probably not going to get as much.

How did your deal team help at this stage?

It helped me feel good about the process, knowing that I had some people who had done this before, who had experience and who had seen a lot of different transactions—having a deal team, somebody who doesn’t directly have a dog in the hunt, that can sit there and guide you.

People can get upset during negotiations, but at the end of the day, when all the papers are signed, they’re gone, and it’s me and them, the acquiring company, working together to make things better and move things forward. And so that was very helpful because if there was something that wasn’t so positive, then we let it get delivered by somebody on the deal team so that it didn’t come back on me, and it wasn’t a personal reflection, and they didn’t take it personally. And unfortunately, I think that can happen in a lot of cases.

So, the team helped a lot, not only in going through the transaction but also just in choosing the right partner. Because as I said, I had other LOIs and was approached by many other companies in the past. Part of it, I think, is just getting to the right partner whom you feel comfortable with going through this process.

Did the deal team help you manage the emotional aspect of the process?

Yes, and it was the most emotional thing I believe I’ve ever been through in my life. I think I went for probably six months with very little sleep. It’s just a trying time. And so much of it is the emotional part of it.

I think a lot of it changed when we all agreed on everything, and we got kind of the thumbs up from the due diligence accounting people that everything was good to move forward. And then when we started to enter into the legal phase of it, I think, is when things started getting a lot tougher. When you start putting everything down in black and white, that’s when I think probably the tone and everything changed a little bit.

Tell me about getting to the close.

We kept getting the closing pushed back. Even on the day of closing, we had it pushed back four times. It was obviously very emotional because you keep thinking that you’re almost there, and then other things come up. And so, it has a tremendous effect.

Thank goodness for the people like Rob who say, “Unless you tell me, we’re just not agreeing to this. This is where you need to be firm, and this is what you need to do.” And so that was extremely helpful.

I don’t think the delays were malicious. I think, at that point in time, they wanted to do it as badly as we wanted to do it. And we both had a vested interest in getting it done. So, there was give and take on both sides in the last two weeks just because I think we wanted to get across the finish line.

Is there anything you would have done differently?

TI think the thing that I would have done differently was probably worked a little bit more diligently about cleaning up the inventory, cleaning up the books and doing much more of the planning even earlier than a year or 18 months prior to the deal. If we had been in a position when we started considering offers of not going through that but having already done it, I think we would have looked a lot better, looked a lot cleaner and had some good history behind us.

But it’s also one of those things where business has continued to be great. Part of me wonders, what if we had waited another 12 months? But I try not to look in the rearview mirror because so many unforeseen things could have happened that didn’t.

The good thing is that we got it all closed. We have a great partnership, and the business has continued to grow at a phenomenal clip. I think we’ve had a record every month for the last 11 months. So, it’s been a tremendous way to go out, and I feel good about the transaction and where we are today.

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