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Results: Successful Merger

Navigating a Merger: a Win-Win with Help from Carlson

CHALLENGE: A client had been facing challenges of growth and profitability for some time. While they had great production capabilities and a good reputation, the demands of running and building the company were a real challenge to the firm’s owner. He had neither been successful attracting solid managers or a sales force to assist him. However, the owner located another firm with a sole owner, a good sales force, and a history of profitable operations but which had limited production capability. The firms were in the same geographic area and had significant overlap in the locations of their customers. Services provided by each company were different, so they rarely found themselves in direct competition. In fact, they shared some customers, providing different products to the same customers. Both firms were looking for a way to address their problems so they could achieve growth and a more stable place in the market.

SOLUTIONS: We took the best of both companies and combined them into a new firm. However, there were obstacles to achieving this, among them financial constraints and concern by each owner that they were losing control. Carlson implemented solutions to each of these areas of concern such as:

Problem: How to share control as equal partners.
Solution: Voting and non-voting stock effectively separated value and ownership.

Problem: Both companies had equipment debt needing refinancing, neither had a line of credit, and there were going to be significant costs in the planned combination, including relocating to one location.
Solution: We helped the client develop detailed forecasts, defining the cash requirements. We then located a bank and negotiated both term debt and a line of credit with SBA support that met all of the owners’ financial needs. Careful tax planning on both sides was also required to avoid a possible major tax bite even though neither owner would receive any cash from the transaction. We also helped the companies blend their accounting systems, workflow procedures and production management systems.

RESULTS: A merger is difficult to accomplish successfully — yet it was positive for both owners. In the years since, the firm has expanded its services and maintained profitable operations. Both of the owners continue to work together and have become good friends. In fact, both owners are transitioning ownership to the next generation, moving forward into their retirement. This merger resulted in a successful and profitable firm, which we believe will continue for many years to come.