Transactions
Systemation Engineered Products
Negotiating the sale of a fast-growing company in need of financial and management resources …
“Each shareholder had different objectives and concerns, and Mertz assisted in the communication among us. In addition, Mertz provided professional, objective inputs. The values they obtained were excellent.”
– Mike Nelesen, former Systemation shareholder
“Mertz had to deal with some challenging communication issues with the shareholder group to explain the differences among the alternatives and the risks involved. In addition, Mertz obtained critical insights and background that the clients or other advisors could probably not have obtained. I wouldn't hesitate to recommend a client use Mertz Associates.”
– Larry Burnett, Reinhart Boerner Van Deuren s.c.
Situation
Systemation is a leading supplier of semiconductor chip inspection and packaging equipment. Having experienced rapid growth for three years, the company wanted to explore a sale to a larger firm for financial and management support.
The company’s rapid growth had stressed its physical and financial resources. In addition, the growth stretched the capabilities and experience of the four top executives (also the owners) where they had concerns about growing the company to the next level. The owners wanted to sell to achieve some personal liquidity and join a strong partner to assist the further growth of the company.
Scope of Mertz’s role
Mertz led discussions with one small public company that approached Systemation. Mertz advised the owners that the risks were too great and upside too limited in a sale to this company at the valuations proposed. Simultaneously, Mertz studied the industry and alternative buyers.
Mertz then approached a private equity group that was a logical fit. With Mertz’s assistance, a tax-advantaged structure was negotiated in which a stock sale was converted into an asset sale. This led to a signed letter of intent. However, the deal collapsed when the industry experienced a sharp downturn, and the buyer backed away shortly before closing.
At Mertz’s recommendation, the process was put on hold pending an industry recovery. A few months later, Systemation was approached by another public company. After researching the company and its apparent motivation, Mertz recommended that the owners engage in negotiations with this company. The result was a sale as a pooling of interest less than five weeks after negotiations began.
Mertz’s value add
Mertz, through its role as an independent advisor, determined interest and led the negotiations resulting in a satisfactory value, limited indemnification period and an unusually short period of illiquidity. This was accomplished in an extremely short period of time. Mertz advised against the earlier transaction, and the owners of Systemation ended up with a much more satisfactory outcome.
Mertz not only kept what could have been difficult negotiations on track, but also created great value for the owner of Great Lakes Calcium.