John McInerney thought Keystone Printed Specialties was headed in a positive direction with its market niche in 2005. But his two silent partners were ready to move on.
“That's the reason that drove the sale of the business,” McInerney says. “That's when we engaged an investment banker and looked at private equity firms because I did want to roll my equity and at the same time be able to have liquidity for my partners.”
McInerney worked with Griffin Financial Group to develop a strategy for taking out his partners and bringing on a new investor: Would the investor be a strategic or financial buyer?
“I was very insistent that the company had a great opportunity going forward,” he says. “From that perspective, we decided to focus on private equity buyers and [Griffin] structured the process around entertaining opportunities from various private equity firms to see which was the best fit for us.”
Although he was aware of the negative opinion some CEOs have of PE firms, McInerney ultimately ended up partnering with St. Louis-based Thompson Street Capital, “which was an awesome partner.”
The deal was part of McInerney's early education in M&A and running PE-backed companies. During his career, he has been involved in 14 acquisitions, seven of which he led, and helped grow a portfolio company from $50 million to $350 million that was sold to a Fortune 100 company for $550 million.
Now a managing partner at executive search firm Hobbs & Towne, he talked about that early experience selling Keystone at the ASPIRE Dealmakers Conference earlier this year in Philadelphia.
Picking the right partners is a crucial aspect of selling a company, McInerney says. When the company he was with prior to Keystone went to sell, it worked with Goldman Sachs, which turned out not to be ideal.
“Goldman Sachs sent in a 20- or 30-year-old kid to run the process,” he says. “That was the attention we got at that level. I understood that the quality of expertise I was going to get from a large investment banker wasn't going to be that great.”
When putting Keystone on the block, McInerney says he went with Griffin Financial Group, which he said offered the level of attention they needed, which resulted in both a good offer and a smooth deal process.
Because Keystone wasn’t a very large company, its management team wasn’t necessarily well-positioned to manage the sale process. Fortunately, Griffin and senior managing direct John Lee were.
“John’s people came in and were able to professionalize, from an investment perspective, the opportunity of the company,” McInerney says. “When we went out to buyers, they saw a really positive and really professional picture.”
What you don’t know
Of all the lessons McInerney learned from the Keystone sale, the most important was that having a great law firm is critical.
“There are things in the purchase agreement that you may not understand at first and, as time plays out, you find out are more important than what you originally thought,” he says
There were things in the purchase agreement that he learned over time were not what he originally thought. Having someone with that expertise available to help sellers understand the implications of the language in a purchase agreement is key to a successful deal.
“Understanding that over the long-term is critical,” he says.