Situation

• Second generation Utah business led by four brothers who had grown up in the business and were concerned about the potential impact of an economic downturn on federal and state road & highway contracts along with concern about a potential change in the federal capital gains tax rate.
• The Wadsworths had been approached a number of times in the past by Sterling Construction. Wadsworth Construction had an impeccable reputation throughout the Inner Mountain West for high quality services in designing and building roads, highways, and bridges, and Sterling was seeking greater product and geographic diversity.
• While the Wadsworth family felt comfortable with Sterling as an acquirer and were not interested in soliciting other bidders, assuming they could obtain a transaction price and terms that were fair, as well as reasonable employment and non-compete agreements, they wanted an investment banking professional with deep experience by their side to provide advice and counsel to ensure they avoided costly mistakes and the deal would be completed to their satisfaction.
• The Wadsworth brothers were in their 40s and willing to execute multi-year employment agreements as none was prepared for retirement and all were open to the concept of a deal requirement by Sterling that obligated the family to keep a minority ownership position for an agreed-upon, post-closing period.

Transaction

• Only days after being recommended by the Wadsworths’ trusted accountant, the De NES Partners principal flew out to Salt Lake City, met with the family to introduce himself and discuss critical components of a potential transaction, including possibly bringing in other acquirers, and was hired on the spot by the Wadsworths.
• After subsequently being informed that the buyer would be coming to town in three days, the De NES partner changed his return travel plans so that he could prepare for and attend the meeting, and immediately began conducting in-depth research, quickly getting up to speed on industry competitors, valuation and operating metrics, and completed industry transactions.
• Following a successful meeting that resulted in reaching agreement on broad terms of a deal, the definitive purchase agreement between the parties was executed only 49 days following the letter of intent, which was unusually quick considering the deal required challenging negotiations in a difficult M&A environment.
• Given their confidence in the business, the Wadsworths agreed to retain a 20% equity interest that was to be sold to Sterling three years later at a pre-determined sale formula, including a specific multiple of average, recurring earnings before interest, taxes, depreciation, and amortization (EBITDA) over the following three years.
• Since the purchase price had been largely negotiated prior to his involvement, the De NES partner placed particular emphasis on negotiating suitable balance sheet deliverables due to project bonding requirements that required the company to maintain an unusually high level of cash on the balance sheet to support sizable projects.
• Through effective negotiations regarding working capital deliverables, the De NES partner was able to make the case to Sterling that Wadsworth could operate with significantly less operating cash and was able to obtain additional proceeds for the sellers.

Post Transaction

• The client was very pleased with the services provided and shared the following:The De NES partner was the ultimate professional providing us with the insight and expertise needed to consummate a profitable transaction. He spent numerous hours reviewing and analyzing all aspects of the transaction to ensure we made the best deal possible while taking on the lowest amount of risk. I would recommend the De NES Partners principal without hesitation.”

* This transaction was completed by a De NES Partners Principal while at a predecessor firm