Dear Insider,
We’ve been receiving questions about what life is like after rolling equity into an M&A transaction with a Private Equity buyer. Today, we bring you a case study that explores not just the transaction itself, but what followed afterwards, and how a few key decisions made a massive impact. How did this individual’s decision to sell and roll equity affect him and his team? What lessons can be drawn from the outcomes?

To protect the confidentiality of the individuals and the transactions involved, we’ve changed their names and their identifying details.
________________________________________

Peter and the Plan

At 59, Peter W. was the CEO and majority shareholder of a 150-person midwestern civil engineering firm. With ownership concentrated in Peter’s hands, the firm had also embraced a generational spread of 19 shareholders, fostering leadership buy-in across the organization.

Peter had built a firm poised for long-term success. A solid governance structure, exceptional project managers, and a loyal client base had contributed to a robust backlog and a reputation for excellence.

This potential hadn’t gone unnoticed. Peter’s firm attracted consistent interest from buyers. When offers came in, Peter would present them to the board for consideration. These offers—significantly higher than the firm’s internally calculated share value—sparked serious discussions. 

The highest initial offer came from Jupiter Basalt Capital at $28 million, representing a 4x multiple on the firm’s estimated $7 million EBITDA. While this exceeded the internal valuation of $15 million, it raised questions: Was the offer truly reflective of the firm’s market value? What was that value if not? Would this number be worth transitioning control of the firm?

Most importantly, what would happen to the firm after the transaction? What were the risks and what were the potential outcomes?
________________________________________
 
Key Decision 1: Seeking Expertise

Out of fiduciary duty to shareholders, the board directed Peter to explore external valuations and seek a second opinion. They engaged PSMJ’s M&A Advisory team to assess the firm’s market value.

Key Findings from PSMJ’s Analysis:
•    Their standing internal valuation approach significantly undervalued the firm, even by common internal standards.
•    While the offers on the table were worth considering, they fell short of what PSMJ believed to be the firm’s fair market value.
•    The board needed to clarify its goals—whether to consider other offers, or re-align their internal valuation approach to preserve a fair internal transition process.
After thorough analysis and discussions, the board decided to move forward with engaging PSMJ’s M&A Advisory practice to navigate a potential transaction on their behalf.
________________________________________

Key Decision 2: Pursuing the Right Transaction

PSMJ’s M&A advisory team worked to understand Peter’s firm, its culture, and its drivers of success. This insight helped identify a shortlist of potential buyers, with Jupiter Basalt Capital remaining a strong contender.

Peter and his team valued Jupiter Basalt’s leadership team, which included a few seasoned professionals from the engineering industry—some of whom Peter had known for years. The team’s transparency and alignment with his firm’s long-term goals made them an appealing partner.

Through PSMJ’s involvement in the process of finding a potential buyer, Jupiter Basalt’s final offer reflected this partnership approach. They valued Peter’s firm at 8.5x on $7 million, at just under $60 million—more than double their initial proposal. 
________________ ________________________
Key Decision 3: Rolling Equity for the “Second Bite”

As the majority shareholder, Peter received just over $30 million in consideration and retained an 8% equity stake in the new entity. The other shareholders received an average of $1.5 million, with proportional equity stakes. Several even wrote checks to increase their investment during the closing.

Over the next three years, Jupiter Basalt Capital acquired several other engineering firms, significantly scaling the platform and increasing its valuation multiple. Peter’s 8% equity stake soared in value from just under $5 million to nearly $25 million.

When Jupiter Basalt sold the platform to Bluewell Capital, Peter’s payout was almost as high as his initial windfall. Confident in the ongoing potential, he rolled a significant portion into the next venture.

Three years later, Bluewell Capital sold the platform to Brick Partners. By this time, Peter had earned more than the total value of his original firm. His team thrived in the growing organization, delivering record-breaking results year after year.

For the other shareholders, the decision to sell externally proved transformative. Rather than drawing on firm profits or incurring personal debt to fund internal buyouts over 5–10 years, they achieved payouts far exceeding previous expectations, despite their smaller stakes.
________________________________________

Peter’s Next Chapter
Now 65, Peter is ready to retire but remains deeply engaged in the industry. He’s being tapped to lead a new private equity fund, where he’ll help others navigate the same life-changing opportunities he experienced.
________________________________________

Key Takeaways
Peter’s success underscores the importance of preparation, expertise, and strategic alignment:
1.    Know Your Value: Engage professionals to assess your firm’s true market worth before considering offers.
2.    Clarify Your Goals: Ensure alignment between internal shareholders and external market opportunities. Pick a plan that matches your goals.
3.    Leverage Expertise: Expert M&A advisors can guide you to the right buyer, and help you make sure you’re getting a fair shake.
4.    Plan Beyond the Transaction: Retaining equity can multiply your rewards, carrying your returns well beyond the initial transaction. Many buyers view this as a win-win, where your interests are aligned with theirs.
________________________________________

What’s Next?
In our next edition of PSMJ’s M&A Insider, we’ll share the story of Paul H., whose approach to an M&A transaction led to significantly different outcomes.

Are you making the right decisions in your approach? Do you want to learn more about the world of M&A? Feel free to ask a question, leave a comment or connect with us via the link provided below.
_______________________________________________________________________________________

Are you making the right decisions in your approach? Do you want to learn more about the world of M&A? Feel free to ask a question, leave a comment or connect with us HERE.