A High-End Retail Business
 
has been sold.
 
The undersigned advised the seller in this transaction.

Crallé & Company

The Situation     Restructured and expanded four years earlier upon investment of an operating partner, the store had established a premier presence in this up-market residential community.  Occupying two thousand square feet of prime, main-street retail space, the lease gave the owners the right to assign the remaining term to any party they wished.  Only two years remained, however, and renewal beyond that time was contingent upon the property owner’s acquiescence, by which provision it had maintained an unusually high standard of retail tenants among its several properties.

Even during recent recessionary years, revenues had been stable at more than $800 thousand annually.  A sub-chapter S corporation, the partners together were attributed more than $200 thousand EBITDA before their own compensation and distributions.

The Process     Without experience in selling a business, and wanting to avoid disruption and general public awareness of a pending sale, the partners engaged Crallé & Company to manage the process in confidence.  Crallé advised that prospective buyers be screened up-front by their ability to finance 100% of the price entirely in cash at closing.  Mindful that the property owner would not extend the lease to any buyer judged unlikely to succeed, Crallé also frankly assessed interested parties’ retail sensitivities and “fit” with the community.

Crallé prepared a selling memorandum that would satisfy prospective buyers’ basic due diligence, both in order to speed the decision making process and maintain confidentiality.  Included were facts and analyses needed for a buyer to efficiently value the business, including the nature of the retail concept, competition, expansion and growth possibilities, a reconstructed earnings analysis and fair market valuation of tangible assets.

Recognizing that the most likely prospective buyers would reside locally, advertising was limited, and no broker-listing services were used.  Amongst a discrete group of personal and industry contacts that would respect the desire for confidentiality, the owners solicited other interested parties.

Crallé initially distributed only a “blind” executive summary (without identifying the name of the business) and screened out a number of prospects who were unwilling to discuss their means of financing the purchase.

The Outcome     Crallé fielded a score of inquires but entered into substantive discussions with only those few that had passed the qualifying screening.  Parallel negotiations and assurance to the property owner had honed his expectation that the change of ownership and extension of the lease would be fully in his best interest.

Price and other terms with the ultimate buyer were agreed upon early in negotiations, with goodwill representing a 40% premium to the fair market value of tangible assets.  Both sides and Crallé coordinated closely to assure an event-free closing in late November and a smooth transition during the busy Holiday season.

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Crallé & Company, Incorporated
Bronxville, New York
914-779-3331