Choosing to sell the business that we had worked so hard to build over the past 10 years was not easy. Like the ending to all good adventures, one is often torn between staying put with what you know, doing what you've become accustomed to do for so many years or closing out a great adventure on a high note and moving on to another new adventure even if you don't know what the new adventure is yet. Like everything we do, we had discussed when and how we would exit Summit for many years. From the founding of the company we had one primary goal, to build a business that would allow us to live a certain life style and by this I mean that we wanted to spend time with our kids while they were still kids and not have them in daycare, school or summer camps for 8 to 10 hours a day. We wanted the freedom to travel more. Above all we wanted to get out of the rat race that life had become for us.
We always said that if your company is not growing it is probably shrinking because it is very difficult to stay in a steady state when you have contracts turning over. It requires almost as much effort to stay in a steady state then to grow so we chose to grow. However, this put tremendous stress on our family since my wife and I both worked at the same place. We couldn't trade off watching the kids when working on a proposal because we both needed to put in 18 hour days. We had to cancel vacations because the government, after delaying the release of an RFP that we planned to bid on for months, finally decides to release it when we were planning to go on vacation. Even when we were not working on a proposal there was always something coming up, someone coming off a contract and onto overhead, a change to the benefits plan, difficulty with a prime contractor, the government shutting down...I could go on and on. And the big decisions always came down to us. Should we fire someone, lay someone off for lack of work, keep someone on overhead even though they have been there for several months. The point is that as we grew running the business became harder and harder and ever more time consuming.
Although we had selling Summit in mind from the day we started it, there were other options we considered over the years. The first was to hire, develop and train a management team to run the company so that we would not have to deal with the day to day operations. However, over the years we discovered that really good managers that are capable of driving the growth of a small business are very hard to find and a great CEO would have been even harder. We felt that going down this path simply presented too much risk. After all, we didn't want to discover one day that a mediocre management team or CEO ran the company we worked so hard to build into the ground.
Another option we looked into was to create an Employee Stock Ownership Program or ESOP and sell our company to the employees through the ESOP. This has certain tax benefits, but would have taken a long time for the ESOP to fully buy us out. Other disadvantages to ESOPs are the added expenses of administering the plan and we would still have to run the company or hire a CEO and management team with all the risks described above. Also, we would have not gotten as high a valuation if we had sold to the ESOP.
Although our decision to sell Summit did require a lot of introspection it was not as difficult as it might be for some. We knew many other business owners who considered selling their companies from time to time and really agonized over the decision. Most never moved beyond the thinking stage. We believed that we had reached our financial goals so why be greedy. The sooner we sell the company the faster we can transition to our new life style and the better off our kids will be for it. In addition, there were a number of other factors such as the looming cuts to government budgets that occurred in 2013 and 2014, contract expirations and peaks in the M&A market to name a few. In retrospect we couldn't have timed it better. The valuations for companies like ours were very high and there were cuts to our client's budgets, which drastically pushed bill rates down resulting in tremendous pressure on employee salaries and benefits plans and made competing for low cost technically acceptable contracts very difficult.
When we made the decision to sell we wanted to go through the process on our terms. We had known other companies who did this and clearly lost control of the process, which, to us, indicated a lack of serious interest on the part of potential buyers and an unwillingness for buyers to pay a premium. We decided that if we couldn't get what we considered to be a premium valuation we wouldn't sell. Over the years we had made contacts with investment bankers, transaction lawyers, accountants and consultants so we had no trouble finding the right team to help us sell our business. We picked a small investment banking firm named JPB Partners because we thought that we were not big enough to get a larger firm's "A team". In fact, the firm we picked only had one team, but they were one hell of a good team. JPB Partners has since sold their investment banking group to Chesapeake Corporate Advisors. We worked with them to put a Confidential Information Memorandum also known as the CIM or "The Book" together with their help. The CIM conveys several pieces of information including the company's story, the current management team, the business model also known as how we make money and various performance reports.
We, along with our investment bankers, compiled a list of all the potential buyers and proceeded to send them a teaser about our sale, which did not include anything that would identify our company, although some folks who new us well may have been able to guess. If a potential buyer is interested they sign a confidentially agreement and are then allowed to see the CIM along with other pertinent data such as the latest financial reports. After a period of time our investment bankers told all interested buyers to submit Letter's of Intent or LOIs, which are simply non-binding offers, by a certain date. We had seven total in the end. We then gave each of the seven a management briefing, which lasted half a day for each one. After that our investment bankers asked for revised LOIs by a certain date and we ended up with two serious offers. We had a follow-on meeting with each of the two buyers. One buyer offered less cash, but equity in the new company, which in total potentially offered substantially more money in the long run, but we would have to work for them for some unknown period of time. The other buyer offer more cash, but no equity. However, we would not have to stay with the company and could simply walk away. We picked the second offer because we really didn't want to be chained to another business for some unknown period of time and went into exclusive negotiations also known as due diligence.
These periods of exclusivity typically last 60 to 90 days and our buyers wanted 90 days so we agreed. It is at this time that our accountants, KatzAbosch, stepped in to help out our investment bankers by providing various financial reports. During this period the buyer examines every detail of your business and watches your performance to see if what you said would happen really does happen. For example, we said that our revenues would be $25 million by the end of the year, but as we approached the end of our 90 days of exclusivity it became clear that we were not going to meet that goal so at the last minute our buyers revised their offer down. This resulted in a very stressful weekend for all involved as each side had their teams stand down until a new agreement was reached. We did finally reach a new agreement and worked hard to complete the rest of the due diligence so that we could close on the deal. As we moved through the due diligence period our lawyers, Offit Kurman, got more and more involved trying to negotiate a deal in which our trailing liabilities were minimized.
Our team did fantastic. In fact, I don't think I've ever worked with such a great high performing team in my life. The investment bankers worked really hard throughout the whole process, the accountants were always available on short notice to slice the financial data yet another way and the lawyers were always responsive, again often on short notice. In addition to myself and my wife our Director of Operations and a 10% owner of the company put in a lot of time and effort as did two other key members of our management team, all working really hard on this deal in addition to their day jobs. The two other managers were asked to sign non-disclosure agreements so they were not allowed to tell anyone what was going on. In addition, we all signed non-disclosure agreements with the buyer and non of us were allowed to discuss the deal until we all agreed to do so. The sale finally closed in early October 2011 and Summit Solutions, LLC was now part of National Security Partners, LLC or NSP. NSP has since sold to a company called Noblis NSP. It was the end of an era, the end of a great and successful adventure.