Introduction:

I'm going to share with you all the details of business I assisted a client with a strategic restructuring and acquisition of a Mexican restaurant in Salt Lake City, Utah, structured for a client whose wife aspired to venture into the restaurant business.

Preliminary Analysis:

The evaluation of the restaurant involved analysis of various aspects:

Business Motivation & Exit Strategy: Understanding the reasons behind initiating and exiting the business was crucial.
Operational Concerns: Identifying concerns such as management experience, marketing strategies, and financial management was vital.
Financial Health: Assessing revenue, customer base, operating expenses, and debt provided insights into the financial stability of the business.
Growth Prospects: Evaluating the potential for expansion and future growth strategies was essential for long-term success.

Key Findings:

The restaurant demonstrated potential with $250K in sales in its first year.
However, challenges such as high operating expenses, lack of profit, and rudimentary accounting practices were identified.

Negotiation and Structuring:

The deal was structured with a focus on partnership and growth:

Initial Phase (6-9 Months): The new owners would actively participate in daily operations, injecting working capital and implementing marketing strategies to drive profitability.
Valuation & Liquidation: After the initial phase, the business would undergo a valuation based on its earnings, with plans to liquidate 20-25% of the business.
Growth & Final Liquidation: The objective was to continue the growth trajectory of the business for 2-3 years, followed by a final liquidation of 75-80% equity through seller financing. This arrangement aimed to provide the sellers with a retirement plan.

Detailed Deal Structure:

The partnership agreement for the initial 6-9 months included replacing all staff with new hires, as the family-run business sought to disengage from day-to-day operations.
The new owners, a husband and wife duo, committed to hands-on involvement in the business, aiming to achieve profitability within this timeframe.
A key financial strategy involved securing an SBA Express Line of Credit of $250K to fuel growth, marketing campaigns, and potentially open a second location.
Post the initial phase, the business would be revalued based on its performance, with a liquidation plan for 20-25% of the business.
The long-term plan included continued operation and growth for an additional 2-3 years, culminating in the liquidation of the remaining equity through seller financing at a 6% interest rate over ten years.

Negotiation Insights:

The negotiation centered on addressing the sellers' needs for time, money, and the desire to ensure the business's legacy.
The deal was structured to provide value to both parties, with an emphasis on future growth and success.

Conclusion:

This case study underscores the importance of a strategic approach in acquisitions, focusing on growth potential and mutually beneficial deal structures. By addressing the sellers' concerns and positioning the buyers as partners in growth, a successful acquisition and restructuring were achieved, setting the stage for a prosperous future. Key Takeaways:

Customize your approach to each acquisition, focusing on the unique needs and potential of the business.
Negotiate on structure, not just price, to create deals that offer value to both parties.
Leverage your expertise and position yourself as a trusted advisor to facilitate successful negotiations.

Looking Ahead:

As we move into 2024, this case study serves as a reminder of the opportunities that strategic restructuring can bring, paving the way for success in the ever-evolving world of acquisitions.