Business owner turned Business Broker Tom Boyd sits down with ROI Corporation President Gary Rayberg and talks about his experience selling his transportation business in 2019.
Tom Boyd has always had an entrepreneurial streak. At age 17 he opened a small breakfast and lunch restaurant prior to starting his senior year of high school and then sold it to his head chef as he was graduating. After serving in the U.S Coast Guard, he worked as a delivery driver part time and was inspired to begin his own transportation business. Thus, East Branch Delivery in Maine was established in 1992. 27 years later He sold the company.
I would like to understand what brought you to the decision to sell your business.
It was always my intention to sell right from the start. My goal was to build a company to be big enough to afford the management it would take to run it. I wanted an above average income and to retire early. My original goal was financial independence by 55.
I came up on 55 and had not yet reached my financial goals. So, I made a decision to create an exit strategy with the following goals: Eliminate all debt, renegotiate my long-term contracts such that all vendor and customer contracts would all expire about the same time a couple of years after my target date of 2020.
Did you consider an inside sale?
I had two individuals I thought would be candidates for an inside sale: my general manger and another long-term manager. My general manger had 25 years of experience and all the right skills, but he had no money and insufficient credit. The other had other interests and I did not believe he had the right administrative skills. The only way that would have worked is if I self-financed it and remained a part of the company which I did not want.
What hurdles did you experience personally and professionally?
My greatest concern was keeping the business moving ahead the whole time while keeping all of my employees onboard. I was very close to my managers and made it know to them that I was working on an exit strategy. For a long time, it was far enough away so they didn’t worry about it. I did talk with my top managers about them possibly taking over. However, I knew it wouldn’t work without me being involved and financing it. Ultimately it was just a backup plan if I couldn’t sell the company.
Did you do research in choosing a broker?
I spoke with my accountant; he had told me he sells businesses. And I contacted a Maine brokerage firm. However, I was reluctant to hire a local brokerage firm due to nature of small states like Maine, New Hampshire and Rhode Island. I was worried about confidentiality. So, I did an internet search in Massachusetts and Connecticut. Searched terms like business broker RI & business broker MA. I also looked nationally for business brokers that specialize in transportation companies. I came up with three and contacted each of them including ROI. I made with a list of questions I would ask each of them and noted the responses.
The key questions were: How much do you think East Branch is worth? How would you go about marketing the company? And do you have any experience selling transportation companies?
My accountant had no answers for any of them. The local Maine broker was kind of flat lined about selling it and with a brief conversation and review of the numbers threw out a number I thought was low. Neither showed any sign of passion or confidence they could actually sell my company. Nothing resulted of my search using the term business broker RI.
Gary, on the other hand, had all the answers, he went straight to advising me on what it could be worth. He had experience in transportation companies and spoke to exactly how he would market the company. I hadn’t heard of a controlled auction and liked the sound of courting multiple buyers and accepting bids with no asking price. I always thought that East Branch was worth more to an industry buyer than the numbers I was producing would yield. ROI received three offers for my company and their process netted more than any of my advisors had indicated the value would be!
The other business brokers I spoke with spent the majority of my call blowing their own horn until I was ready hang up the phone! All I heard was; I,I,I.. We, We, We… never asking much if anything about my company. That’s how I settled with ROI Corporation and Gary Rayberg.
Did you attempt to sell without a business broker?
I contacted two trucking companies, each of which I knew and believed would benefit by acquiring East Branch. After speaking with each of them I felt I went there “hand in hat”. They both seemed interested but never followed up. I went to a Chamber of Commerce seminar on exit strategies and listened to a speaker who explained that brokers generally get you more for your company than you would for yourself. And I did research which indicated that same thing. Instead of searching for things like business broker RI, how to sell my business, I turned to professionals.
What was the experience of selling it like compared to what you thought it would be like? Did it take longer? Shorter?
The experience was very good. I had been advised that listing in Dec meant a delay in response due to the holidays. There was a delay but sure enough by Jan. going into February we had a lot of interest in the company. By March we had a couple of offers and the whole thing went down in a much shorter time than I thought it would. I expected a year or more and we closed in 9 months from initial listing.
What were the hurdles that you came across that you did not expect during the process?
Initially ROI offered an asset sale but the buyer chose to make a stock purchase offer. East Branch had racked up some bad insurance experience 2-3 year earlier causing our Insurance rates being so high it was really hurting profits. This history would be directly assumed by the buyer in a stock sale. However, we were going on a second year of low loses so the projections were on the upside. Then during the process, we had another major accident which totally blew that to hell. I thought sure the buyer would back out. But, with some coaching from
Gary, the buyer went back to his board of directors and they decided to make it an asset sale and made a new offer.
What difference did a broker make in the process for you?
Personally, I would never recommend anyone selling a company themselves unless they have a buyer come to them and make a high offer. Even then I think I would recommend they hire a broker, as a consultant, to manage the process. The process of using a business broker was an invigorating experience for me. I suspect I was much more involved than the average client. In fact, if building East Branch was my greatest achievement to date selling East Branch barely took second place.
What would you do differently next time?
I told my top managers once I had a firm offer and I would not do that again. They were great about it, but we couldn’t help but talk about it and that is not a good thing. I did give them an opportunity to make me an offer to buy the company but with no owner financing and they did not pursue making an offer. So, I offered them cash incentives to stay on board at least 90 days and that was enough such that they were motivated to help make it work. I also worked with the buyer to ensure they would have continuing employment. Regardless, if I had to do it again, I’d be less open during the ongoing process.
What would have made the process better?
The sale went so smoothly that I can’t think of anything that would have made it better. It is too bad that something can’t be done to make the due diligence process less of a burden. Accepting an offer and taking the company off the market does not mean the buyer can’t back out should they find something during due diligence they don’t like. This is out of the control of the broker and it is in the hands of the buyer’s attorney just how in-depth and/or difficult they may make the process. I can see that kind of deep dive into every document concerning every action covered by the statutes of limitation on any give area for a stock sale. However, when doing an asset sale, the process should be greatly stream lined.
What made you decide to become a Business Broker?
As a result of the experience of successfully selling my business and I was very impressed with the way ROI Business Brokers managed the sale of my company. The end result was that I got more for my company than I anticipated, which more than covered the sales commission. In fact, I was so impressed that I told Gary that I was interested in becoming a business broker and he offered me a position with the firm. Now it is my goal to bring this type of success in selling businesses such that I can help others achieve their goals in selling their businesses and strive to get them the highest price possible.
About ROI Corporation
ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI, ME and CT with two divisions; a main street division serving smaller businesses as well as their middle market M&A division. Their Marietta, Georgia office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. For more information, please visit us on the web at www.roimergers.com or call (781) 682-6209.