Mergers & Acquisitions

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M&A Case Study: Sale of a Creative Services Firm

Morgan & Westfield helped sell Imago Dei, a creative art service firm with stable revenue growth, using a combination of bank and seller financing.

The company was positioned in the market to target non-industry buyers and corporate executives with management or marketing experience. This allowed Morgan & Westfield to widen its pool of potential buyers. Our marketing strategy generated 106 buyer inquiries, and the business was sold in approximately ten months. Morgan & Westfield’s in-house appraiser increased the sale price by $75,000 by doing an internal review of the business appraisal performed by an independent party on behalf of the bank that financed the transaction.

In this case study, we share with you a comprehensive look at how — and why — that deal went down.


Table of Contents

  • The Seller’s Background
  • The Company
  • The Assignment
    • Seller’s Goals
    • Team
    • Pricing Strategy
    • Key Value Drivers
    • Positioning and Packaging
    • Marketing Methods
    • Process and Results
    • The Deal
    • Conclusions and Lessons Learned
  • Client’s Profile

The Seller’s Background

Jeremy Wells is a serial entrepreneur and an artist who comes from a family of entrepreneurs. He started Imago Dei in 1999 in Ventura, California. He and his wife, also an artist, moved the business to Houston, Texas, in 2001. Jeremy owned and managed Imago Dei for 17 years.


The Company

Imago Dei started by offering murals and fine art. The company later expanded its services to offer decorative paintings and other artwork. Custom murals and finishes became the bread and butter of the business.

Imago Dei offers the following products and services:

  • Finishes. Customers can choose from thousands of unique samples. An average of two new custom boards are being created every day.
  • Murals: Imago Dei designs original custom murals and produces them for installation either with paint on canvas or by printing them and installing large vinyl murals.
  • Art: Imago Dei also sells original and commissioned fine art.

The Assignment

Seller’s Goals

Team

  • Morgan & Westfield
  • Business appraiser (Morgan & Westfield)
  • Seller’s financial and tax advisor
  • Seller’s attorney
  • Small Business Administration (SBA) loan intermediary
  • Third-party lender (bank)

Pricing Strategy

  • Morgan & Westfield normalized the historical financial statements to calculate seller’s discretionary earnings (SDE)
  • A weighted, average figure was calculated for SDE
  • A multiple was applied based on similar, comparable transactions
  • A business appraisal was performed by an independent third party once an offer was accepted and the buyer was seeking to obtain bank financing. Morgan & Westfield’s internal business appraiser reviewed the business appraisal submitted to the bank and spotted several errors. Our internal appraiser then sent the bank a critique of the appraisal. This drove the price of the business up by more than $75,000.

Key Value Drivers

  • 15-plus years in business
  • Significant preparations were made to sell the business, which included adding management systems and infrastructure
  • Bank financing was available to facilitate the purchase
  • Technology automated several key processes in the business
  • Key differentiators in the business prevented the business from being commoditized
  • Stable revenue growth
  • Consistent increase in gross margins
  • Positive cash flow cycles that reduced working capital requirements
  • Large average transaction size

Positioning and Packaging

  • We positioned the company to be sold to a buyer outside of the industry. Selling a creative services business is a unique challenge because these types of businesses historically have a limited buyer pool.
  • Because the seller had installed management systems, this allowed us to market the business to a wider audience of buyers.
  • The confidential information memorandum (CIM) was prepared to highlight the unique advantages of the company and to assuage the fears of a non-industry buyer.

Marketing Methods

  • The company was confidentially marketed through online business acquisition portals.
  • The company was positioned to sell to non-industry buyers and corporate executives with management or marketing experience.

Process and Results

The Deal

  • The business was sold using a combination of bank and seller financing.
  • Morgan & Westfield prepared the closing documents.
  • The seller’s and buyer’s attorneys reviewed the closing documents.

Conclusions and Lessons Learned

  • The period of time after a sale can be used for reflection and discovery.
  • Use this time to explore both the world or oneself. Bring a journal to facilitate the exploration process.
  • Persistence pays off — the seller persisted throughout the process despite numerous setbacks.
  • Deals are always easier to get done when bank financing is available.
  • It pays to have experts on staff. Morgan & Westfield had an in-house business appraiser who was available to question the appraisal submitted to the bank. Morgan & Westfield’s critique of the report likely saved the deal.