Jordan Gerber, Managing Director at Caber Hill Advisors recently advised on the sale of K-Display Corporation. Jordan describes the development of this deal from his perspective and how he worked out an unusual deal. Read the full story below.
Introductions
Caber Hill Connection: How K-Display Found the Right Advisors in 2022
In late 2022, Jordan Gerber, Managing Director at Caber Hill Advisors, received a call from a friend who is a CPA. He told him that one of his clients was looking to sell their manufacturing company. The clients were three brothers who started the business with their late father 40 years ago. They did not have a third generation to take over the business and were looking to retire. The company, K-Display Corporation, is a metal manufacturing company focusing on producing metal cabinets and display cases. The three brothers had tried to sell the business in 2019 and were not successful. This is when they started talking of involving an advisor to support them in selling the business.
Sellers’ Must-Have Terms
After several meetings with K-Display Corporation, Jordan Gerber was officially hired in February 2023. He learned after numerous conversations with his client that they really cared about what would happen to their employees and the legacy of the business they started with their father.
Launch
Navigating Offers and Decisions with Caber Hill Advisors
With the help of the Caber Hill team, they went to market in April of 2023. The response was mixed but mostly the message was the same from potential buyers: “We like the company but there has been no growth, and the owners do a lot of the work.”
The Caber Hill team continued to work to find the perfect buyers. Over ten offers were received and numerous groups were brought in to meet with the three brothers. When the process was nearing completion, they had to decide between the four best offers.
The Buyers’ Pool
Buyer #1
A small private equity group in Chicago that wanted to consolidate K-Display’s operations into one of their portfolio companies.
Buyer #2
A family office in St. Louis that wanted the owners to stay on for three years post-close.
Buyer #3
An individual who was the CEO of another manufacturing company. He was looking to purchase his own company and had some investors but the team was not convinced that he had enough funding to complete the deal. He was a great operator but needed some help with the financials of the company.
Buyer #4
Partners in a small consulting firm. They were looking to diversify their interests and wanted to start purchasing manufacturing companies in Chicago. The firm had some investors but the K-Display team was not convinced that they had enough funds or experience to complete the deal. This consulting firm, though expert in helping companies from a strategic and financial standpoint, had never purchased a manufacturing company or had operational experience.
Discussions
Finding the Perfect Fit: Challenges and Creativity in K-Display’s Buyer Discussions
Jordan led discussions with K-Display and all four buyers over the following weeks. As conversations continued, it became clear that buyers #1 and #2 were not the right fit. With buyer #1 wanting to consolidate operations, K-Display worried about their employees and the legacy of the business. With buyer #2 wanting the owners to stay on for three years post close, the sellers were not excited about that opportunity. The K-Display team liked buyers #3 and #4 the best but had concerns that either could close the deal.
Over the next few weeks, Jordan joked with the Caber Hill team that the perfect buyer for this transaction would be a combination of buyers #3 and #4. He dismissed that idea as crazy but kept thinking the combined buyers of #3 and #4 would be the perfect scenario for K-Display. But he wasn’t sure how he could pull this off.
A rule in the advisor world, which Jordan knew well from years of experience, is that advisors never discuss buyers with other buyers. But the opportunity seemed too good not to explore.
Introducing the Buyers
Jordan’s Unconventional Approach to Uniting Buyers
Here is how Jordan approached this unusual tactic:
First, he needed to get approval from the K-Display team. They were skeptical but liked the idea.
Next, Jordan had to figure out how to introduce the two buyers without sabotaging the entire deal. As it so happened, fate stepped in at the VIA golf outing in June – both buyers happened to be attending this same outing. After a round of golf, Jordan got the courage to introduce the two buyers.
Over the next several hours and days, conversations commenced about how a combined buyer could materialize and what it would look like.
The Offer
Sealing the Deal: The Successful Merger of Buyers #3 and #4
After a couple of weeks of discussions, buyers #3 and #4 submitted a combined offer to buy K-Display Corporation. This offer had a similar valuation and a stronger group of investors, operators, lenders, and consultants to get the deal done.
A LOI with the new combined buyer group was signed on July 31st.
After several months of diligence, the company closed the transaction with the new combined buyer group in November 2023. The K-Display team was very appreciative of all the hard work Caber Hill Advisors completed and applauded the creativity displayed in getting the transaction closed.
Client’s Reaction
“Jordan and the Caber Hill team were amazing in getting this deal done. Their hard work and creativity allowed us to sell our family business of 40 years,” said K-Display Founder Len Kubacki.
The clients’ satisfaction with the deal was also summed up in an email from the K-Display team’s attorney, which read:
Dear Jordan:
Now that the K-Display closing has been completed, I extend to you my sincere thank you for all of your hard (and creative) work on behalf of the nice folks at K-Display. It has been a pleasure working with you, and I hope to work with you again in the future. I have added your name and Caber Hill to my firm’s list of approved referrals. When next I, or my partner, Kelly McGinnity, are in need of a broker to represent a client in the sale of a business, we will feel very comfortable giving you a call.
Warmest Regards,
David A. Schlack
Schlack & McGinnity, P.C.
