Like many business owners, Jim Rose knows more about building a company than selling it.

After decades of experience working for major oil and gas companies in engineering and management roles, Rose knew his way around the oil patch.

A self-described builder of “stuff,” he designed and patented a containment well cellar that makes drilling operations safer, smoother and more reliable. In 2006, Rose founded Cellar Tech to bring the product to market.

The business prospered, but eventually Rose struggled to find sufficient manufacturing capacity. After a seven-month sale process that was more work than he expected, Rose sold the company in May 2018 to National Oilwell Varco.

“Holy crap, it’s a painful process,” he says. “It’s just painful for me to do that kind of stuff. We had a company that was growing extremely quickly, and to maintain the company’s growth and then dedicate the resources to fulfilling all the data requirements, it took a lot of resources.”

Searching for a buyer

When growing Cellar Tech, Rose stuck to the basics. He patented a solution for a problem that everybody else had been stepping over for years. He didn’t borrow money, and the company was profitable in its first year, helped in no small part by a lack of competition.

Cellar Tech also never sacrificed quality, and for 13 years never delivered late to a customer, which Rose says is unheard of in the industry.

However, after the business rode out a downturn, its manufacturing challenges concerned Rose.

“We were tapping out the resources for manufacturing product,” he says. “What we ultimately needed was a partner that could take this to the next level because my position is that manufacturing capacity has come first. We have no difficulty selling the product. In fact, I didn’t even have a salesman until two or three years ago. It would grow without sales efforts. I just couldn’t keep up with the demand.”

Determined to find a buyer on the market’s upturn, he reached out to some strategic advisers. These service providers helped him through the painful process of getting the paperwork ready and marketing the business for sale.

“Probably one of the things I didn’t do a good job at was maintaining resources commensurate with our growth,” Rose says. “It’s hard to find good people and I ended up finding myself working seven days a week to keep up.”

That work was compounded during the sale process. However, he says it’s easy to sell something that’s growing rapidly, doesn’t have debt and has few blemishes.

“The strategic advisers went out to maybe 40 or 50 different companies,” he says. “They brought us maybe 12 or 14 interested buyers.”

Those numbers were whittled down further after the first meeting.

“They either couldn’t afford the company or they didn’t feel like the value was there,” Rose recalls. “Or, there just wasn’t a synergy there. We ended up negotiating with four or five companies.”

The mix of different types of buyers included private equity firms and strategic acquirers, but Rose ultimately chose National Oilwell Varco. He liked that it had a global reach that gave it the ability to launch the product internationally. In addition, as one of the largest oilfield supply companies in the world, it had the resources to support growth. Private equity buyers wanted growth, too, but Rose felt they couldn’t deal with the manufacturing struggles as easily.

Looking forward (and backward)

After the sale, Rose had a transitional contract. He took a lower level role to advise NOV’s senior managers who wanted to fold Cellar Tech into the larger company’s way of doing business, with the goal of launching it globally.

In retrospect, he wonders if he should have held on to the company for another six months.

“I’m a pretty conservative guy,” he says. “I felt like the time was right. We had a good offer. It made sense to go through with the deal. In hindsight, we could have held on to a little longer and got some higher valuations. We’ve nearly doubled in the year since we did it, but our history has been almost doubling every year with the exception of the downturn years.”

Regardless of whether the timing was perfect, Rose is proud of what he helped build, and he’ll be on to other ventures once his time with NOV is up.

“I have some other interests,” he says. “They’re not in the energy sector. Like I said, I’m good at designing stuff. I like to build stuff. So, if I build screwdrivers, they’ll be good ones.”