For Robbinex Inc., The Sky's the Limit

EDITOR'S COMMENT: Over the years, M&A Today has interviewed numerous mergers and acquisition intermediaries, often referred to as investment banks. Our objective has been to describe these firms with the emphasis as to what makes them successful. M&A Today had the pleasure to attend The Third Annual Robbinex Workshop in Hamilton, Ontario, Canada this past June. The title of the program was The Sky's the Limit, which is a reflection of what happened when Doug Robbins, the founder, changed the firm's business model a few years ago. At that time, annual revenues were in the million dollar area. After changing the company's business model, revenues grew in excess of 50% each year for several years with revenue projections for 2000 to almost double from the previous year. M&A Today is pleased to share with its subscribers an article on the Robbinex story.

Background

After ten years with Bell Canada and as a franchise manager with A&W Foods, Doug Robbins commenced his business brokerage activity in 1974. The Robbinex business model then was you "eat what you killed," which means that as an intermediary, one handled every phase of the transaction without capitalizing on individual skill sets as exploited by the successful investment banking firms on Wall Street. In these early days, Doug Robbins worked eighty hours a week and closed three to seventeen deals a year. Without having a front-end marketing program at that time, Robbinex reached out and joined numerous trade associations including IBBA, M&A Source, Association for Corporate Growth, and recently International Corporate Finance Group of Brussels.

The break-through for Robbinex came in 1995 when Doug Robbins met with three peers five times for three days each to re-analyze the M&A process. This small group determined that there were approximately 200 individual job functions involved in selling a company including distinct functions, i.e., selling the firm's services, performing for the seller, dealing with buyers, closing, and handling the administration. The conclusion was that to sell a company most efficiently, an intermediary could not effectively handle all the functions himself.

Therefore, Doug made the decision to organize his firm whereby certain people specialized in certain aspects of the M&A process. Doug also implemented a new business model, which will be discussed hereafter.

workshops

The Robbinex business model begins with generating clients at the front-end of the process. Don Forrest is in charge of the workshop and marketing programs and utilizes his 24 years of selling for Bell Canada to full advantage.

Last year, Robbinex has twenty workshops throughout Canada and the United States with future aspirations of conducting forty workshops annually. These one-day events are entitled: Selling Your Business for the Highest Price. Approximately twenty people attend each session and are charged $179.00 plus $49.00 additional for a spouse or partner who might attend. Attendees are contacted by selective mailings or telemarketing to business owners in the particular area of the workshop.

• The premise presented at the workshop is fourfold:
• the sale of a business is a long, complex, and arduous process;
• the selling process is filled with pitfalls that can be avoided;
• two-thirds of sellers do not sell their business for its true value;
• the best results in selling a business occurs when owners start the process early on.

~~~~~~~~~~~~~~~

Last year, Robbinex had twenty
workshops throughout Canada and
the United States with future
aspirations of conducting forty
workshops annually.
These one-day events are entitled:
Selling Your Business
for the Highest Price.
~~~~~~~~~~~~~~~~~~

Don Forrest is very charismatic and has a dynamic personality. His strategy in the workshop is to achieve the following:

• to define true value of a business;
• to identify value enhancements;
• to explain the selling process;
• to show how to identify the right buyers;
• to explore different selling strategies;
• to structure transactions properly;
• to maximize the selling price.

Over the years about 840 business owners have attended one of the Robbinex workshops. Historically, one out of three attendees go one to Phase One of the Robbinex business model. The balance of these attendees, which amounts to 560, are active candidates to continue with Robbinex as well at the right time and at the right place.

For those who for one reason or another do not opt to attend one of the workshops, Don Forrest has implemented a part-day tutoring course for business owners for a charge of $450.00.

Phase One

Phase One is part of a three-phase program before Robbinex takes a company to market for the seller. This segment of the Robbinex business model is managed by Bruce Johnstone, former partner of Price Waterhouse. Phase One primarily focuses on four aspects: business analysis, evaluation, value enhancements, and obstacles to closing.

In a broader scope, Bruce Johnstone's team appraises the strengths and weaknesses of the company, e.g. good management, poor marketing, etc. They recommend enhancements for the company, such as new distribution program or replacement of old machinery. They submit a preliminary value of the company with and without the enhancements; help resolve problems, e.g., implement buy/sell agreement with partner(s), and additionally recommend various options, e.g., sell now, sell to management and/or heirs, or not sell at this time until improvements completed.

About fifty clients go through Phase One annually. In fact, it is so effective that numerous Canadian banks are considering engaging Robbinex for this program in conjunction with their analysis for corporate refinancings. The objective is for Bruce Johnstone's team to flush out all the facts early on so there are no surprises later in the selling process such as environmental concerns. If Robbinex's client in Phase One decides to sell his or her company, Bruce Johnstone's team will have gathered enough facts to assemble a due diligence war-room for the seller. By taking over the management of the due diligence inquiries from the buyer, there is less likelihood of an aborted deal arising from last minute deal killers.

Phase Two

Assuming that the client and Robbinex are in agreement about selling the company with respect to price and terms expectations, then the client proceeds to Phase Two.

Phase Two is market preparation and further analysis of the market and potential buyers. Some owners may enter Phase Two after spending some time digesting the results of Phase One. Accurate financials and up-to-date company records must be provided at this time in order to complete a comprehensive selling memorandum and marketing plan. Part of Robbinex's role is to document a believable financial picture of the company going forward. Additionally, a list of approximately 200 potential buyers will be submitted and qualified.

Phase Three

Potential buyers are contacted. After rigorous screening, of which approximately thirty express interest, around six potential buyers visit the company and about three will make offers. It is important not to "overshop" the seller, and it is equally important to select the best finalist. Phase Three includes the actual due diligence review, negotiating the final purchase and sale agreement and closing.

Internal Operations

Doug Robbins and his team have created an incredibly efficient process. While Doug's early years were admittedly lean, the last three years have been very profitable. Over the firm's 25 year history, Robbinex has sold over 500 businesses. Last year the firm sold 25 companies with transaction values ranging from $1 to $10 million. Currently, Robbinex has 23 companies for sale, one of which could sell for $50 million.

While Robbinex has numerous affiliates, their Hamilton office has the following head-count:

3 rainmakers
4 closers
6 administrators
5 analysts
18 total

While the number and size of the transactions has increased for Robbinex, so has their productivity as shown by the following comparisons in the shaded box below.

	ELAPSED TIME
Marketing
Phase 1	15 weeks
Phase 2	9 weeks
Phase 3	9 months
Total

Affiliates

Robbinex is located in Hamilton, Ontario which is not exactly the hub of North America's M&A activity. In fact, Hamilton is Canada's steel center, an hour southwest of Toronto. Furthermore, the population of Canada is about one-tenth the size of the United States, i.e., 30 versus 300 million. In order to expand Robbinex's reach, Doug Robbins established an office in Buffalo, approximately 60 miles from Hamilton. Additionally, Robbinex has affiliates to implement the firm's various phases as follows:

PHASE ONE	PHASE THREE
Lansing, Michigan Detroit,	Windsor, Ontario
Michigan Vancouver, B.C.	Vancouver, BC

A Final Test

Seventy-five percent of Robbinex's annual revenues comes from the commissions derived from successful closings; the balance of the revenues is received from the workshops and Phase One through Three. Additionally, most transactions take from nine to eighteen months to complete, so an aborted deal due to the seller "backing-out" at the very end can be expensive. In fact, one intermediary in Chicago informed M&A Today that 25% of their deals do not close because of "seller's remorse." Therefore, Doug Robbins has included Dr. Richard Wolfe, a business psychologist from Rochester, New York as part of their process to evaluate their clients. Wolfe conducts tests and telephone interviews with Robbinex's clients to be sure that they are motivated sellers, who have thought about retirement and will be less likely to turn the business over to their son at the last minute. Some people say they are sellers, but if they want a totally unreasonable price for their business, most intermediaries would not classify them as sellers. Dr. Wolfe's ability to properly analyze Robbinex's clients has been most beneficial.

Conclusions

As far as Doug Robbins is concerned, the sky's the limit. In a few short years he has transformed the firm's business. It is not only his enthusiasm and passion for Robbinex, but one can feel the same electricity from his team and affiliates. For M&A Today, a new successful business model for an intermediary like the one described above is totally refreshing. The Robbinex slogan is… Teamwork - Together we can!

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