INFINITY TAPE

INFINITY TAPE

Seller:             Infinity Tape, Inc.

Buyer:             Strategic Competitor in Illinois backed by PEG in California

What made the business attractive to Buyers?

  • Steady annual growth revenue and profitability 
  • Consistently improving margins
  • Long-term employees including plant management other than owner. 
  • Diverse Product Mix in specialized niche
  • Marquis clients with limited concentration risk
  • Capacity growth available in term of space and labor

Challenges:

  • Owner wanted to sell real estate, real estate had environmental issues attached and layout was not optimal for manufacturing
  • Equipment was 30” wide and industry had moved to 48” wide
  • Divorce settlement created de facto capital structure issues
  • Real estate loans (via a related legal entity) and business debt were cross collateralized making it difficult to sell only the business.
  • Owner perceived as the driver all process improvement and efficiencies

When did Beacon first meet the owner?

Beacon first met with the owner three years prior at our annual Elements Conference.  He was invited to the conference by his financial advisor who had a long-term relationship with Beacon.

Beacon re-engaged to perform a market analysis seven months prior to the transaction when three companies known to the owner separately expressed interest in acquiring the company

Why did the owners want to sell?

The owner actually did not want to sell.  He had five-plan in place with his financial advisor to achieve his retirement goals by age 65.  Once he received unsolicited interested from strategic competitors he respected, he felt he owed it to himself and his family to explore whether the sale could help him achieve his retirement goals faster while taking risk of the table.

Beacon’s Role and the Process:

Beacon prepared an initial presentation to send to the three potential buyers which highlighted the company’s strengths, growth and improved margins.

Beacon then solicit indications of interest (IOI’s) from the three potential buyers.  After conversations with buyers and providing some clarifying in information, Beacon received one IOI which was interesting based on our initial market analysis and had the potential to allow the owner to accelerate retirement plans.

Beacon introduced the owner to an attorney with experience in M&A transactions who then supported negotiations and finalization of a Letter of Intent (LOI) which was acceptable to the buyer and the seller.   

Beacon managed the due diligence process via a secure virtual data room and weekly conference calls with the company, their advisors, the PE firm and their 6 professional advisory firms over a three-month process. 

Throughout the process Beacon worked with owner’s divorce attorney, and his ex-wife’s attorney to ensure the final agreement would satisfactorily finalize and close out the divorce settlement.

Additionally, since the buyer ultimately did not want the related real estate, Beacon negotiated a new lease with the buyer, and worked with the owner’s banker to modify the cross-collateralization agreements to facilitate the sales.

Result:

The Owners’ successfully sold their business for a premium price (36% higher than our initial market analysis) with 85% cash at close and an additional 15% upside via an earnout over two years.  

The buyer suggested a 7.5% reduction in purchase price due to issues raised during diligence.  Beacon successfully negotiated the reduction into a deferral via an earn out with 7.5% additional upside.  The owner remained with the business and accepted a leadership position with the new owners and an exciting employment package which enables him to benefit from the future growth of the business.   

Postscript: The client earned the first year earnout and is projected to earn the second year earn out in the 2nd quarter of the 2nd year.  All accomplished during the COVID pandemic shutdowns. 

About Beacon Equity Advisors – Since 1985 Beacon Equity Advisors, a leading New England Merger & Acquisition (M&A) advisory firm with offices in eight key New England cities, including in Boston, MA and Manchester, NH has represented owners selling closely held businesses such as Infinity Tape of Lawrence, Massachusetts.  Infinity Tape is a leader in the release tape industry, manufacturing the adhesive and release liner such as the one you might see when you seal a FedEx envelope.  While their manufacturing plant was located in Lawrence, MA, their customers were located across the United States. Beacon Equity Advisors’ experience selling manufacturing companies enabled them to tell an engaging story about this tape manufacturer business.  Highlighting key enterprise attributes enhanced the company’s value as Beacon identified synergistic opportunities for each of the buyers. By matching the right buyer with the right seller, shareholders were able to realize an above market value multiple in the sale of their business in a transaction beneficial for both parties. Beacon represented the Board of Directors and Shareholders in identifying the buyer, negotiating deal terms and brokering the transaction.

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