1.Client Background
- Sector: Plumbing – 50% service, 50% new construction
- Company Profile: This business was founded by two experienced operators who had previously run successful construction ventures. They launched the plumbing company to vertically integrate and serve their own projects. At the time of sale, it had 8 employees and operated locally in the Brazos Valley.
- Owner Objectives: Because this business was relatively small compared to their other ventures, the owners viewed it as non-core and sought a quick exit to refocus their efforts elsewhere. They initially perceived the sale as a simple transaction rather than a strategic decision.
2.Challenges
- Compressed Timeline and No Valuation: The owners insisted that the business be taken to market within one week; an unrealistically short timeline for any proper sales process. Despite repeated advisement from Capstone to conduct a formal valuation, they declined. Due to shared business relationships and the seemingly minor nature of the deal, Capstone moved forward to be helpful. However, the lack of a valuation would prove to be a costly oversight.
- Lack of Benchmarking Created Misalignment: Without a clearly defined valuation benchmark, the owners had no reference point when offers began to come in. When a Letter of Intent (LOI) was received, the purchase price was revised multiple times as due diligence uncovered issues that would have otherwise surfaced during a proper valuation. This process eroded trust and created growing tension among the stakeholders.
- Relationship Strain: What began as a quick divestiture evolved into an emotionally charged process. Disagreements over price and perceived value led to fractured communication and mistrust that lingered through and beyond closing.
3.Capstone’s Engagement
Despite the owners’ resistance to a full valuation, Capstone conducted limited financial analysis, pulled industry comps, and provided a working value range. Because time was limited, there wasn’t the opportunity to dig deeply into the company’s financials.
The buyer was sourced from Capstone’s existing network—a strategic operator actively seeking opportunities in the plumbing space. An initial full-price offer was presented within six weeks of contact. However, as expected, that offer was reduced following due diligence. Capstone played a critical role in managing the buyer’s comfort level while maintaining deal momentum.
There was little actual competition among buyers, but Capstone carefully managed perception and structure to preserve leverage and avoid giving the buyer excessive negotiating power.
4.Deal Structure
The buyer acquired a majority interest through an asset purchase, while the sellers retained a minority stake to benefit from future upside. Additionally, a Master Service Agreement (MSA)was signed to allow the plumbing company to continue servicing the sellers’ other businesses.
There was no seller financing or third-party lending involved in the deal
5.Results & Outcome
While the transaction formally closed and both sides received what they wanted—ownership and liquidity—the process left deep scars that impacted post-transaction success.
- The buyer entered the market as intended, and the sellers exited to focus on their other ventures.
- However, the deal got off to such a rocky start that relationships between all parties deteriorated, and trust was never fully restored.
- The MSA’s reliability weakened, affecting continuity of business and strategic alignment.
- The company, once poised for strong growth, has struggled to realize its potential due to relational breakdowns and an undermined foundation.
6.Lessons Learned
- Valuations Are Non-Negotiable: Skipping the valuation step was like performing surgery without a diagnostic scan. A proper valuation may seem like an inconvenience up front, but it prevents costly delays, confusion, and erosion of trust later in the process.
- Sellers May Not Fully Understand Their Own Goals: In this case, the owners initially downplayed the importance of the transaction. But when faced with actual offers, they understandably began pushing for maximum value. What a seller says in the beginning may not reflect their emotional or financial reality once the deal becomes real.
- Good Consultants Listen Beyond the Words: Capstone learned that sellers often don’t fully grasp what they need—or struggle to articulate it during an emotionally charged process. A good advisor must listen between the lines, ask deeper questions, and anticipate unspoken priorities. Selling a business is rarely just financial; it’s a deeply personal event that requires empathy, structure, and foresight.
