Industry/Sector: Specialty chemical manufacturing
Deal Type: M&A – Sell-side advisory
FourBridges Team: Chris Rowe
Client Profile: Based in Decatur, Ala., Southern Water is a specialty chemical manufacturer focused on producing water treatment chemicals for industrial, municipal and commercial applications. The company is a leading producer of aluminum chlorhydrate (ACH) and polyaluminum chloride (PAC), which are increasingly being used as effective and economical technologies for treating and clarifying potable water.
Client Objectives: Owner John Peters, who founded Southern Water in 1989, desired liquidity to facilitate his retirement. He wanted to find a buyer that could provide continued opportunities for his employees, including his two sons, who were minority shareholders and performed key roles in the business as heads of sales and purchasing.
The Challenge: Due primarily to the price volatility of key raw materials, the Company had experienced uneven historical profitability. Additionally, the Company operated two lines of business with very different metrics. Other hurdles included excess industry capacity and an unforeseen competitive threat from a potential new entrant.
The Process: To help the Company maximize its value, FourBridges first worked with management to develop a three-year forecast, as well as a detailed analysis of the Company’s primary business and the historical impact of volatile commodity prices. FourBridges also drafted a Confidential Information Memorandum, highlighting Southern Water’s strengths, including a diverse customer base, an experienced workforce and the strategic value of the Company’s process technology.
More than 50 potential strategic buyers in North America were contacted, and five made visits to Southern Water. FourBridges helped Southern Water compare and evaluate proposals that were received. Ultimately, it was determined that General Chemical offered both the best value and most consistent vision of the evolving market for water treatment chemicals. FourBridges took the lead in negotiating the transaction and completing the sale.
The Result: The deal terms included a three-year consulting contract for Peters, and his sons will maintain their roles with the Company. In addition to the cash price, selling shareholders will have an opportunity to receive additional payments based on specific performance metrics. FourBridges also negotiated a long-term lease of personally owned real estate that was attractive to Peters from a tax- and financial-planning perspective.
The strategic acquisition will immediately strengthen General Chemical’s market position in the Southeast and ultimately expand the company’s footprint, enabling it to better serve customers across the nation.