By Chris Stark and Craig Berry, Stark Capital Solutions
Through our years in the industry, we have been involved in and completed hundreds of billboard transactions. While most of them are fairly “standard”, we’ve encountered some with unique stories, interesting details and complex backgrounds.
We thought it would be interesting to share details from time to time of some of the more “unusual” transactions from our past. The following story is true, but for confidentiality purposes, we have left out certain details, such as names, and changed the location of the company.
BACKGROUND
This deal involves a large, multi-generational billboard company in Oklahoma. The majority ownership was held by the mother who was still alive but suffering from dementia and no longer involved in the management of the company. The children owned the remaining shares, and several were active in running the business. The oldest child was acting president, and several of his siblings worked inside the business with him.
THE PROBLEM
The siblings had differing opinions on what they believed their mother wanted to do with her shares. The oldest believed she wanted him to have majority ownership since he was the president of the company. The other siblings believed that she intended all children to share equally in the ownership. One day, the oldest sibling showed up to work with a stock transfer agreement signed by the mother that gave him majority ownership, and he fired his siblings. Needless to say, the other siblings did not feel their incapacitated mother would have agreed to this, so they decided to go to court and fight for an appointed guardianship. As the siblings go to court on the guardianship matter, the oldest proposed to buy the shares from the mother and siblings to get full control of the business. They all agreed this might be a good approach if a fair price could be agreed upon. The oldest sibling hired a prominent, well-known accounting firm to perform a valuation of the company’s fair market value. The firm assessed the company as a service business, took the financial statements at face value and created their valuation for the oldest to make his offer.
As the siblings considered taking the deal, their attorney, who had a connection to Stark Capital Solutions, suggested they have a billboard expert analyze the valuation to ensure it was reasonable and accurate.
ENTER STARK CAPITAL SOLUTIONS
We reviewed the valuation, and after looking at a few key figures, stated that the accounting firm’s valuation was not accurate. In fact, we believed the company was worth 5-6x higher than what was offered. The siblings’ legal counsel had us complete our own expert valuation on the company and it turned out to be about 500% higher than the original valuation and offer.
Of course, these differing valuations end up in court for quite some time with the judge ruling that the best option was to sell the company and have the proceeds split among all siblings.
Stark Capital Solutions had the honor of representing the family in the sale of the business and was able to help them ultimately sell for 7x more than the original valuation!
CONCLUSION
Family drama aside, this experience shows us what we see time and time again: legitimate valuations can differ and stray greatly. In this case, by 700%!
While the oldest siblings used a large, well-respected firm that specialized in complex valuations, they were not experienced in the billboard industry. This led them to not only look at the business incorrectly as a service business (which trade at much lower multiples of earnings), but also miss making standard industry-accepted adjustments to the reported financial statements, thus making the earnings look lower than a buyer would calculate.
If you’re looking to sell or want an accurate, true market valuation of your billboard business, let’s talk. With more than two decades of experience in the billboard industry, we know what to look for to craft the most accurate assessment to help you see the highest return on your selling venture. To start a conversation, call us at 317-546-6036 or email cstark@starkcapitalsolutions.com.
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