Value
Added Liquidity Transaction “VALT”
For owners interested in creating liquidity from their business
or selling their businesses in the next three to five years, Tunstall
Consulting has developed its VALT transaction which is designed
to maximize the value owners receive for their businesses, create
a near term partial liquidity event, and ensure their remaining
time with the business is spent growing it to its full potential.
To initiate this process, management working with Tunstall, determines
that if the business were provided additional resources it would,
at a minimum, be capable of growing at a sustainable 15% growth
rate into the foreseeable future. Determination of the business’s
ability to grow with additional capital and resources is critical,
as VALT investors are looking for established platforms that can
demonstrate a blue-print for how they could grow with additional
funding, resources, and professional support.
In many situations when owners approach the point where they are
truly contemplating the sale of their business, there can be significant
resistance to purchasing additional equipment, hiring new people,
commencing or continuing R&D, expanding into new territories,
and/or acquiring another company for fear that if something goes
wrong it will negatively impact the income and value of the business.
The counter to this is that deep inside most owners typically
know the steps that should be taken to continue growing their
businesses.
In order to eliminate the risk described above, Tunstall’s
VALT transaction allows owners to monetize a percentage of their
interest in the company based upon a current fair market value,
effectively “taking some chips off the table”, while
retaining a meaningful equity interest and management role in
the Company. From this point, Tunstall identifies an institutional
financial partner capable of executing management’s optimized
growth plan who will provide all of the resources required (capital,
people, systems, etc.) to grow the business to its full potential
over the next three to five years. As such, three to five years
later when it is time for the new financial partner(s) and management
to exit, the owner is able to exit at the same time benefiting
from the recent growth in the business, improved systems and processes,
the introduction of new products and services, entry into new
territories, and refinement of a business model that provides
for a turn-key acquisition by the next owner.
1. Owners are provided a meaningful liquidity
event in the near term tied to a financial institution buying
into the business.
2. Owners also gain the financial and operational
strength of their new partner in executing a growth plan designed
to maximize both the growth and value of the business prior to
their full exit.
3. Lastly, owners achieve a second bite at the
apple based upon a higher enterprise value based upon the execution
of their growth plan. Tunstall will work with existing owners
to ensure their new financial partners builds a second layer of
management over the course of the investment period to insure
management may exit in full when their financial partners does
and not be subject to continuing transition or earn-out plans.
The simple reality is – larger, professionally run Companies
with clearly defined growth plans are worth more. Additionally,
a larger Company is able to attract more potential investors due
to the fact that more institutions exist that invest in larger
Companies. With more competition among institutions to invest,
multiples paid and valuations are pushed higher. As a result,
a properly executed VALT transaction will typically yield owners
200% to 300% or more in total value for their businesses versus
an outright sale.
