Exit ramp: Firm succeeds by smoothing the sale process

Florida — and the Tampa Bay area, in particular — routinely pops up on lists of the best places in the country to start a business. All the usual factors — low taxes and unemployment, good weather, a robust and rapidly diversifying economy — are often cited as strengths.

But Aberdeen Advisors, a St. Petersburg-based boutique mergers and acquisitions firm, bucks conventional wisdom to some extent on that theory. The firm contends now is just as good a time to sell a business, not just start one, and if you haven’t begun to plan an exit strategy, it might already be too late.

“If you miss the cycle,” Aberdeen Founder and CEO Emery Ellinger says, “you might not get anywhere close to what you want for your business. Timing is really, really important. It’s a seller’s market right now.”

“If you’re a seller with a high valuation, there are tons of buyers; it’s a great time. But that doesn’t mean it’s going to be easy.” Emery Ellinger, founder and CEO of Aberdeen Advisors

Ellinger, 58, knows a thing or two about selling companies. He built his previous business, Aberdeen Marketing, into a $7 million enterprise before selling it and going into investment banking. In 2008, he decided to leverage the sum total of his prior experience by starting Aberdeen Advisors, whose mission, he says, is to serve companies in the $5 million to $100 million valuation range — a segment overlooked by big M&A firms.

The challenges that come with pursuing that niche are myriad, however. Ellinger and his colleague, Vice President Wendy Andrews-Fine, 48, say the owners they work with tend to be emotionally attached to their companies, overvalue the business and don’t begin planning for a sale or merger soon enough.

And yet, Aberdeen’s “close rate” is well over 80%, which far outpaces the M&A industry standard of 25%. Also its total sales volume is on a rapid ascent, climbing from $25 million in 2017 to $40 million in 2018 and $75 million, so far, this year.

What are some of the firm's success factors? For starters, Ellinger and Andrews-Fine say Aberdeen Advisors — with 10 full-time employees — has a no-retainer policy. That means the firm gets paid only if a deal gets done.

“There are firms in our industry that just take retainers,” Ellinger says. “I don’t want to say they don't care whether they sell or not, but hey, if you're getting 15 grand a month, what's the rush to sell?”

Abderdeen’s strategy, Ellinger says, is to be highly selective about the companies it works with and to make sure owners tidy up operations well before potential buyers get involved. That could mean taking care of capital gains taxes, diversifying the customer base, paying off a mortgage or any number of other tasks that make the business more appealing as a turnkey package ready to produce value for a new owner.

They’re also bluntly honest.

“If an owner has some crazy number in their head, we’ll just tell them, ‘Look, you need to grow [the business],’” Ellinger says. “We don’t want to waste their time. Our job is to get them out, and part of that is they have to be prepared to get out.”

When a sale closes, Aberdeen gets a percentage from the seller’s proceeds. The privately held firm declines to disclose revenues, but Ellinger says its cut of a deal can be “significant." It can also vary wildly depending on the size of the business and how much work is involved in the deal. It’s a big plus, he adds, if a seller’s financials are in good shape and the company has a solid management team — including a CFO, ideally — that can help Aberdeen deal with the due-diligence process.

Aberdeen’s close rate and sales volume are also up because of the types of businesses it represents. The firm has seen a surge of interest in HVAC, lawn care, roofing, plumbing, laundry, cleaning and other service businesses. Medical practices and manufacturing companies are also top targets for acquisition.

Another trend is franchisors buying out franchisees. Aberdeen, for example, recently negotiated the sale of a Clearwater-based ImageFirst medical laundry franchise to its Philadelphia-based corporate parent. ImageFirst Tampa Founder Tim Ryan, who ran the franchise for 20 years, says Aberdeen got him the right price at the right time.

In general, because of the extended bull market, “You have banks lending historic amounts of capital and private equity funds,” Ellinger says. “And they’re looking to put that capital to work. If you’re a seller with a high valuation, there are tons of buyers; it’s a great time. But that doesn’t mean it’s going to be easy.”