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Shaun Garrett Headshot

Shaun Garrett - Advanced Diagnostics

Focused on growth and enjoying their entrepreneurial roles, Shaun Garrett and his co-director didn’t consider selling up their successful key programming and diagnostics business for some time. But following an approach from an interested acquirer, they turned to BCMS for advice on the sale process and maximising the opportunity.

With industry expertise and drawn to the flexibility offered by becoming a managing director of a small business, Shaun joined Advanced Diagnostics in 2004. But he admits he remained a little sceptical about its longevity.

“When I joined, I thought the business would only have a lifespan of five-to-seven years, because I thought the technology would squeeze us out of the industry. I was happily wrong!”

Far from dwindling, the business grew rapidly over a decade. “It all sounds grand, but we became a global market leader,” Shaun recalls modestly. “We developed strong relationships with clients and became known for the quality of our product. We began in the automotive industry but had branched into marine engine diagnostics by 2011.”

“We were all enjoying running the business. We had developed a significant customer base in the automotive sector – representing 85% of our revenue.”

It was with some surprise, then, that it was their global distribution partner in the marine sector that made the initial approach for acquisition.

“Our first response was to decline. But when several approaches were made by the same interested company, we began to consider what it would take for us to agree to a sale.”

“At the end of the day, when a certain number is reached, you really have to start considering the offer – not just for yourself, but for the future of the business”

Eventually, the buyer asked the golden question – how much would it take?

“At the end of the day, when a certain number is reached, you really have to start considering the offer – not just for yourself, but for the future of the business” Shaun reflects.

With a significant interest expressed in the sale, Shaun knew that he needed professional help with the sale process and negotiations to ensure the offer would be the right move for the business.

“By chance, I’d seen a flyer for a BCMS event. I went along with the finance manager to learn more, and we both were impressed; they seemed focused on finding the most suitable buyer for the future of the business.”

The event gave Shaun the knowledge to start thinking strategically about the next steps. “Initially you’re enthusiastic that the whole process is going to start. But sitting down in the cold light of day, the enormity of it all hits home and you realise the amount of work required in ensuring the company is in good shape, and in finding the right buyer.”

Creating a marketplace

A key part of finding that right buyer meant that although Shaun came with an interested party and an offer on the table, he was still advised to take the business to market and consider alternative offers.

As Shaun recalls, “One of the most difficult conversations I had during the whole process was telling the initial acquirer that we’d engaged an advisor, and we’d therefore be open to negotiations with other potential buyers.”

Despite the awkwardness, he knew it was a vital step in order to make the best choice for both himself and the business.

With the guidance of BCMS, they began to put together the necessary information needed to get the business ready, which included not only Advanced Diagnostics in the UK but also their standalone US distribution business. “Our technical director knew his strengths weren’t in admin, so initially it was just myself and the financial manager gathering everything.”

Although substantial, this was easier at the beginning. “When we reached the due diligence stage later in the process, there was a much more intense collation of data needed. This put the pressure on the two of us and gave us a substantial workload. We therefore brought our lead software engineer on board, who advised on technical matters.”

“Although it involved a lot of hard work, our confidence in the experts at BCMS grew throughout the process, and we were able to have candid and open discussions with them. So, it didn’t really feel like a mountain to overcome alone.”

Good business sense

But Shaun believes it made good business sense to let each other play to their strengths and allowed the technical director to remain undistracted from developing software, which was the key aspect of the business. “Although it involved a lot of hard work, our confidence in the experts at BCMS grew throughout the process, and we were able to have candid and open discussions with them. So, it didn’t really feel like a mountain to overcome alone.”

He also saw it as good business sense to have a clear understanding about the conditions of the sale.

“We already knew the minimum financial offer we’d accept, but that’s only one part of it. We set ourselves further areas that had to be satisfied from the buyer; to ensure the business continued to grow.”

Recognising the input many of the staff had on the growth of the business, Shaun also set out clear demands on retention and rewards for staff in both their UK and US operations.

“We also knew we didn’t want a deal based on an earn-out.”

Unless these were satisfied, the shareholders agreed they would walk away from a deal.

He admits this was easier to think at the beginning. “But when the deals start being made, you realise that it has to be the right decision – it shifts up several gears. We went from being not worried about making a deal to wanting to make the right one.”

During the negotiations, it was clear that as well as retaining all the employees, the acquirer wanted to retain Shaun and his co-director for a minimum of three years. “In my mind, this would give me three clear objectives; hit the financial numbers, retain all employees, and deliver the new product successfully to the market.”

Reaching the end

Following 18 months of intense preparation and negotiation, the deal finally concluded. “At 12:17, on a Friday lunchtime, the deal was complete. I put the phone down and that was that – it all seemed a little unceremonious!”

Despite the lack of fanfare, the shareholders had reached the end of an intense process. With clear planning they had secured the right deal for themselves and the business.

The most difficult conversation? “Telling the staff Monday morning!” admits Shaun. But having completed the deal with a clear vision, he was confident it would be a good step for everyone.

Shaun now guides other business owners embarking on their own sales journey as part of the BCMS Fellows programme.

What advice does he have?

“Have a clear idea of what you want, and not just in terms of price; overlay that with your own goals, and your expectations from the acquirer. Treat it like any other business decision. And always be prepared to walk away if it’s not the right deal.”

 

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Company name
Advanced Diagnostics
Location
Midlands, UK
Founded
2000
Business activity
A specialist in the design, development, sale and support of technical diagnostic equipment
Reason for sale
Business growth
Sold
2014
Acquirer
Kaba Holding AG
Advanced Diagnostics