Avondale pioneered the elevator deal in the SME market.  Elevator deals enable ambitious sellers to sell the company and potentially secure a ‘second bite of the cherry’ by retaining a percentage of the company (less than a controlling interest) or having a very strong earn out structure. They provide a strong exit to growing companies and are more realistic than merger. 

Click here to contact your nearest Avondale office and find out how we can 'elevate your exit'.

"We must become the change we want to see." - Mahatma Gandhi

Of course, there are risks involved. What if the shares drop or the earn-out fails? The seller has to judge that the rewards outweigh the risks. Elevator deals work where the buyer has a strong track record and where the seller is enthusiastic about the buyer's plans for the business. Indeed, that these plans outweigh the risks versus the choice of the seller staying independant. The initial payment has to have an appeal, as does the reduced hours and pressure and the idea that a buyer will take the administration and financial burden from the seller.  Thus, enabling them to concentrate on what they have probably already proved good at, ie. driving and achieving growth in their core sector.

Who should consider Elevator Deals?

• Organisations with underdeveloped profits due to their youth, lack of investment capital or where profits are being used for expansion. Consequently if an outright sale is sought these companies will be under-valued by the market.
• Businesses with a strong track record of growth and with good future potential.
• Young ambitious sellers with more to give who are willing to stay in the business and maximise their future potential.
• Companies where sustainability as an ‘independent’ is questionable due to lack of capital to invest or in a fast moving market.
• Sellers where the fun of the start-up has faded and they want a new challenge but are still keen to liquidate some of their business assets - and probably reduce their working hours.
• Sellers who want to work as a team, share the financial and administration burden and focus on growth.
• Buyers and sellers who relate to each other and have a good track record and exciting future plan. The sellers risks are that the earn out may fail or the shares may drop in value so the plan and relationship with the proposed buyer must be stronger than the risks.
• Buyers who want to get in early and value ‘entrepreneurship’ and seek to bring it in-house and secure growth.
• Parties who recognise that good legal protections will need to be put in place to ensure the minority interests work well in the future and who are prepared to invest the time and dialogue required to achieve this upfront.
• Buyers and sellers who gain synergy and economies of scale (1+1=3); that is, the creation of a larger company with greater profits.
• Buyers and sellers whose profits combined place them in a higher valuation multiple bracket than they would achieve as independants. In other words, the combined profits drive the multiple alone.  Ultimately, larger profits = greater shareholder value. 
  

Click here to contact your nearest Avondale office and find out how we can 'elevate your exit'.