You are the owner of a successful but trending downward printing company that is well respected in its local market. The company is not formally "for sale", but you've been approached by a competitor who is seeking to grow by strategic acquisition. Negotiations have progressed to the point where a "tweak" of the "price" and "structure" is not out of the question.
But while you are negotiating the sale of the business, your largest customer ($600,000 out of $3.0 million annual revenues) has announced it is pulling the account.
And your top sales person is balking at signing on with the potential buyer of your business. Oh, by the way, the 600K customer is a big chunk of the sales person's revenues.
So now what?
The owner in this case (no names, but, yes, this is a "live" situation.....our client is the strategic acquirer) is pushing for an increase in the price and a greater percentage of guaranteed money.
Your reaction is probably the same as my client, who said, "Huh?"
I know it makes no sense.
But having thought about this over the past few days, the owner may actually be on to something. We're running numbers now to see the impact of less revenues and less commissions/sales expense. Maybe $2.0 million in annual revenue without the sales person is worth more in this case, because the reduction in volume could open the way for further cost eliminations.
Keep in mind, $2.0 million of annual revenues from sheet-fed printing should throw off $500,000 in incremental profit for the strategic acquirer IF this is a "pure tuck in" of sales and the buyer has excess capacity.
But at $3.0 million in annual revenues, the buyer will need to acquire some of the seller's infrastructure assets, which lowers the expected incremental profit, thus lowering the transaction price.
So, with the big customer saying good bye, and the top sales guy making noises about going away, maybe the owner is not crazy to think that "less is more".
Will see how it goes......stay tuned.
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