Strategic Negotiation and Value Enhancement in Outdoor Retail
Written by Adam Pettinella
Client Overview
Our client sought to acquire a local Rochester outdoor supply retailer. The original owner was approaching retirement and was looking to transfer ownership.
The Opportunity
Through analysis, valuation, and cash flow projections, RDG + Partners found that the purchase price being offered was slightly overvalued. We negotiated with the seller to reach a common ground where each party was comfortable with the deal. The goal was to provide more protection for the acquiror, ensuring they were not stepping in and feeling immediate cashflow restraints with their new business.
During this process, an overall understanding between each party was realized, allowing us to develop an earn out strategy to place on the purchase agreement.
The Solution
To show the seller the projected cashflow issues we would run into, we held a number of negotiations with the buyer and seller. During this process, an overall understanding between each party was realized, allowing us to develop an earn out strategy to place on the purchase agreement. This offered protection to the buyer by reducing the purchase price if the post-acquisition financials did not meet the earn out targets. The earn out strategy protected the buyer by ensuring the seller still had a vested interest in the success of the business post acquisition.
The Outcome
As a result of the engagement with RDG + Partners, the client realized several positive outcomes. First, both the seller and the buyer were able to gain clarity on the logistics of the deal and an understanding of each other’s goals. Through matching the opportunities, the needs were met for the buyer and seller. RDG + Partners’ valuation and cash flow analysis helped our client by adding a layer of protection. The engagement allowed the acquiror to gain more confidence in moving forward with the transaction.
Through negotiation of the purchase price and commitment to increasing the value of the deal for our client, RDG + Partners was able start the foundation of a long-lasting relationship. This in turn opened opportunities for additional consulting projects and tax compliance needs.