Gipo is the largest player on the Romanian market for outdoor sports products. Gipo imports, distributes and retails a large variety of outdoor sports products. Some of the products traded are their own brand, manufactured in various countries, including China.
The two owners of Gipo had worked really hard to turn a corner-shop business into a multimillion company. After many years of hard work, the two founders found it increasingly difficult to agree on the future of the company, starting with the overall strategy (which was non-existent) to the smallest tactics within the firm. One shareholder wanted to take the company more towards outdoor sports (camping, skiing) and the other wanted to maintain the company’s focus on fishing.
It had become increasingly difficult for them to reach agreement, which in turn created a difficult working environment for the 100 employees. Thus, they talked to us, and they agreed to sell the company. The realisation that they would not have Gipo was not an easy process for the two founders, as they understandably saw Gipo as their baby.
Two owners, two opinions, two advisors. Neither founder trusted the other. Thus, each founder had to bring an advisor that they would trust. We were brought in by one of the founders, and we were in direct competition with the advisor appointed by the other founder. We usually do not accept mandates where we are not mandated exclusively, but in this case we realised that an exclusive mandate would have not been possible. Thus, we designed an action plan for the two of us, such that we would not approach the same potential buyer, which would have decreased the chances for Gipo to be sold. The other advisor provided a list with all the potential buyers they wanted to approach, and we had exclusivity for anyone that was not on that list.
We had analysed the situation, and designed a plan for our approach. Our main question was who would buy this company and why. We concluded we would have the following categories of potential buyers:
- Strategic buyers = companies from the same industry. Here, we included:
- developed chains of outdoor sports that might have considered enlarging their reach, by expanding into a country where they did not have a presence. We approached companies from Europe, as well as from the US and Canada
- resellers and distributors of outdoor sports equipment, which might be interested in having their own shops and outlets
- manufacturers of sports goods, especially of fishing articles, that may consider expanding their business into distribution and retailing.
- Financial buyers = financial institutions that invest money in order to double their money within 3 years. Typically, they buy a company, on which they perform various changes meant to add value to the business, and then they sell for a large profit. This category mainly consists of private equity firms. We had carefully selected those private equity firms that are interested in our Target’s geography (Eastern Europe), in our Target’s sector (distribution, retail, sports), size of the deal (cca EUR 5 million) and in the type of deal (buyout).
We drafted a teaser (a short presentation of the opportunity), which we sent to four hundred selected potential buyers. We followed up and talked to the majority. After the first three months, we received some positive feedback; however the real interest took longer to be confirmed. In the end, we had three financial buyers interested, of which one was already present in Romania in the sports sector.
We drafted an Information Memorandum (a document presenting a detailed description of the business and the opportunity), we organised a Data Room and meetings with the company owners. We assisted the potential buyers in their due diligence. The other advisor, appointed by the other shareholder, took part in some of the meetings, in order to ensure the shareholder that the process was undergoing its normal course. He was also involved in the analysis of the offers received from the interested parties, to ensure he was treated fairly.
The winning offer had 2 options. One option was for the owners to sell the entire company, with a high value being placed on the real estate assets of the company. The other option was for them to only sell the business itself, and keep the real estate assets to lease back to the business. The price offered for the business alone was only 25% of the entire price offered, which determined the owners to not even consider that offer. However, with our help, they realised that the second option was better for them, and they sealed the deal. Even though our commission was lower (as the deal size was lower), we recommended to the client what was right for them.
With our assistance the owners chose the option that made much more sense for them. If they sold the entire company with the real estate assets included, they would have received a large amount of cash, which they would have then invested in real estate, as this was their preferred investment option. With the new proposed deal, where they kept the real estate, they not only retained assets that would generate lifelong income, but they also achieved a tax efficient and high return on their money.