Falcon Advisors, LLC - Q&A with Thomas Whipple

What size of businesses do you typically represent?
We represent middle market companies with annual revenues of $5 million to $50 million.

Does your firm focus on a particular industry or sector?
Generally not, but we have significant experience in manufacturing including medical equipment, electronics, plastics and services such as staffing, PEOs, architectural and engineering firms in addition to technology related businesses.

What geographic region does your firm cover?
Our firm focuses on the United States with a concentrated interest in the Midwest.

What are the components to your compensation for your service?
Compensation is determined by the project, but most often the components include a retainer with a significant contingent payment.

How many M&A professionals are there at your firm?
Three accomplished dealmakers (managing principals).

Describe the main service that your firm provides.
Our firm provides exit strategy and liquidity events for owners of privately held lower middle-market companies.
 
What other services are provided by your firm?
We also offer corporate finance, acquisition advisory, special strategies such as management buyouts, succession planning, and advisory for troubled/distressed situations.

What have you found to be the single largest factor in getting the highest price and terms for your client?
A competitive advantage that supports growth is the largest factor in obtaining a high price and favorable terms.

What is a common misconception that you find among your clients?
Business owners often have unsupportable valuation expectations.

Describe a successful transaction.
We represented an electrical contractor whose ownership included a family trust, family shareholders outside of the trust, an ESOP, and a CEO who owned stock inside and outside of the ESOP. Additionally, our client had a significant customer concentration in the public sector, a unionized workforce and a significantly under-funded pension liability for the staff. Valuation was a critical issue. Negotiations were a bit complex and several legal issues required significant expertise but after assembling the right “deal team” we closed the transaction.

Discuss a difficult-to-close transaction and what made it difficult.
Recently, we represented a profitable, privately held professional services company with $11 million in sales and our client, the original owner, was not accustomed to sharing confidential information with anyone. His reluctance to share information was misinterpreted by Buyer A as intentional concealment of critical information and the deal came apart in due diligence. After much counseling and patience with the seller client and devising an incremental approach to due diligence disclosure, we were able to close the deal with Buyer.

Describe a tense moment at the closing table.
A few years ago our client’s team and the buyer with his team, probably ten people in all, were making a final review of the terms of the deal prior to an anticipated uneventful ceremonial close. The buyer stopped me at a point in the review I was presenting, looked me right in the eye and announced that he didn’t think we had a deal. He went on to explain that he had just realized a key internal issue on his side had been overlooked and he couldn’t go forward.

We deliberated on the issue and once understood, I asked that the buyer team adjourn to another room so that each side could have a chance to assess and reevaluate. After two hours of shuttle diplomacy, we were able to reach agreement on structural revisions that preserved the essence of the deal. The attorneys revised the documents with a great deal of effort while we all waited and we closed about an hour later.

How do you protect a client from a fraudulent buyer?
One of the most important services an intermediary or broker can provide for a client is research and qualification of prospective buyers prior to releasing any confidential information.

What can a client do to maximize their company’s valuation or enhance the business sales experience?
Two things:  first, create “bench strength” by building a quality management team. Second, upgrade the financial reporting to include monthly statements and a year-end independent CPA review or better yet, audit. Accrual basis is preferred to cash basis.

What should a business owner do if they are potentially interested in using the services of your firm?
Contact us so that we can have a confidential conversation about the objectives you wish to achieve.