Kevin Price, Host of the Price of Business on Business Talk 1110 AM KTEK (on Bloomberg’s home in Houston) recently interviewed Kevin M. Short.
About the interviewee
Kevin M. Short, the CEO and Managing Partner of Clayton Capital Partners, a St. Louis-based investment banking firm that specializes in mid-market sell-side and buy-side representation. Factset Mergerstat, Thomson Reuters and Investment Dealers’ Digest have all ranked Clayton Capital Partners as a top U.S. M&A firm. Recently, Clayton Capital was named a finalist for the 2014 M&A Advisor Award in the category of Corporate/Strategic Acquisition of the Year.
Short is also the author of Sell Your Business For An Outrageous Price: An Insider’s Guide to Getting More Than You Ever Thought Possible. In his book, Kevin synthesizes over 25 years of experience in the middle market where he has orchestrated over $1 billion in transactions. He answers the question of why two very similar companies in the same industry can sell for two dramatically different prices and shows owners how they can position their companies to sell for outrageous prices.
Tell me about your firm (number of employees, location, type of companies you work with, etc.).
Clayton Capital Partners specializes in middle-market mergers and acquisitions. On the sell side, Clayton Capital works with owners (often of family businesses) who want to maximize the sale price of their companies, but also minimize the chances that the transaction will fail to close, maintain absolute confidentiality and work with a reputable, resourceful and active player in the middle market.
To serves its clients across the United States, Clayton Capital has offices in three cities: St. Louis, Denver and Dallas. As an independent firm, Clayton Capital has no conflicts of interest arising from corporate initiatives to sell multiple products. It has 25 employees, many of whom are, or have been, business owners.
What type and size of companies do you have as clients?
Clayton Capital Partners represents both buyers and sellers in the middle market.
Clayton Capital Partner’s clients range in size from $10M – $250M. Companies are in a wide variety of industries and are located across the United States. Recent sales include: All Med, Sterling Aviation, Allied Appliance, MJSI, Inc. and Electric Wholesale Supply.
What comes to mind when you see this topic?
Kevin Short wrote Sell Your Business For An Outrageous Price to answer a question that perplexed him for years: Why do similar privately held companies sell at wildly divergent prices? Why does one sell for at least twice the price of the other?
In answering that question, Kevin first created the Proactive Sale Strategy designed to maximize price and the seller’s probability of closing. As part of that process, Kevin works with sellers to identify the company’s competitive advantage.
Kevin then identified the Four Pillars of an Outrageous Price—those elements that must be present for a company to sell for an outrageous price. Kevin then tested his theory and his sellers yielded as much as five, seven and twelve times the EBITDA multiple of similar companies.
“My goal in writing this book was to level the playing field for owners who have never before sold a company,” says Short.
What are the best practices when it comes to this issue?
The best way for owners to sell their companies for outrageous prices (at least twice the EBITDA multiple of an average company in the industry) is to engage in two processes. In the Proactive Sale Strategy we assess the owner’s and the company’s readiness for sale, then conduct pre-sale due diligence, identify the company’s competitive advantage and identify possible buyers. The owner decides whether or not to pursue an Outrageous Price.
To engage in the Outrageous Price Process, all four pillars must be in place:
1) A competitive advantage that can be leveraged to cause a buyer pain or create significant gain;
2) A deep-pocketed buyer active in the marketplace who is vulnerable to pain or could experience significant gain via the acquisition;
3) A seller who can stomach the ups and downs inherent in these transactions; and
4) A transaction advisor who knows how to orchestrate and Outrageous Sale.