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Last week some of our team spent the week in Austin, TX at two different business conferences with heavy focus on acquisitions. At these events, we pitched Westbound Road (and all of the businesses it represents) to hundreds of highly qualified potential buyers. We also had dozens of conversations with business owners who are interested in selling their business (that means more awesome businesses for you to acquire!) Here is a picture of the team that is working hard for you…  L to R: Bill, Becky, Marty, Steve So why this is important for you:
We view our role as not just service providers but as partners in your success. By investing in conferences and networking, we aim to provide you with the additional support you need to stay competitive and seize growth opportunities in the ever-evolving M&A landscape. We want to take a moment to express our gratitude for your continued trust and partnership with Westbound Road. Your success is our top priority, and we're constantly striving to enhance the value we bring to you.
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Today, Reuters published an interesting article about the recent $9.55 Billion acquisition of Subway, the global sandwich franchise. A few fascinating takeaways from the article: ** Seller expectations: “The families were hoping to fetch more than $10 billion for Subway based on its strong brand and international growth, but the private equity firms countered it was worth less because they deemed “its U.S. business saturated.” That's right. What a seller WANTS and what the market will bear are usually two different things. The sellers wanted $10 Billion. A nice, round number. We see it all the time. But it was a number that was not realistic.. One bid came in at $8.25 billion, and the other at $8.95 billion. That's the market (buyers) telling the sellers what the business is REALLY worth. The real value was over $1 billion LESS than the sellers wanted. ** Enter the “Earn-out” According to this Reuters article, “...a so-called earn-out agreement that was key to Roark clinching a deal for Subway.” So the winning buyer threw in an earn out to get the numbers to a deal. But the business has to hit certain milestones before the earnout kicks in. “Earn-out structures, while uncommon in the consumer and retail sector, are increasing in frequency in a challenging market for mergers and acquisitions as a way to reconcile price differences.” Bottom line: In 2023, earn-outs are almost MANDATORY to get a business sold...no matter what size. ** Break up fees: According to the article, “Roark, which owns other restaurant operators and franchises, including rival sandwich chain Jimmy John's, will pay Subway's owners a break-up fee equivalent to 4% of the deal's value should antitrust regulators thwart the deal. In other words, if the deal goes south, the buyer is paying the seller for their time and expense of the acquisition, even if the acquisition doesn't close. Expect to see more of these type of break up fees, even in smaller SMB deals. What takeaways did you learn from the Subway acquisition? #subway #acquisition #reuters #earnout #dealstructure  |
AuthorThe Team at Westbound Road specializes in helping you buy and sell digital businesses such as e-commerce, software, SaaS, marketing and business services agencies, and more. Categories |
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