Selling a Tired Business Instead of Winding It Down

The situation

Herman built his machined-components company over three decades, growing it into a supplier with long-standing relationships across the automotive and industrial equipment sectors. What started as a two-person shop in a rented Milton unit had grown into a facility employing about 60 people, with equipment, inventory, and a customer list that had taken decades to assemble. By his early sixties, he was ready to step back. Neither of his children wanted the job: Wilson had built a career as an investment advisor, and Amalia as a specialist physician, and both told him plainly that taking over a factory floor was never part of their plan.

With no internal successor and no buyer in sight, Herman had started treating a wind-down as the default plan: sell the equipment and the real estate piecemeal, collect on outstanding receivables, pay off the company's debts, and close the doors. His accountant had already sketched rough numbers suggesting he would clear somewhere in the neighbourhood of $50 million after settling liabilities, severance obligations to about 60 employees, and wind-down costs. It was not a bad outcome. It was just not the best one available, and nobody had tested that assumption before Herman came to Treadstone Law to have the wind-down documents drafted. He arrived expecting a straightforward instruction to prepare dissolution paperwork; he left with a very different mandate.

What the numbers showed

Before drafting anything, our M&A team asked Herman a basic question: had anyone actually tried to sell the business as a going concern? He had not seriously pursued it. He assumed a company this dependent on his own relationships and know-how, without a management team ready to run it independently, would not attract a serious buyer at a price worth the trouble.

That assumption deserved testing before it became an irreversible decision. A wind-down destroys value that a sale can preserve: a functioning customer base, trained employees, supplier relationships, and goodwill built over decades. Once equipment is auctioned and the workforce is let go, none of that comes back — and a buyer who wants to serve the same customers has to rebuild all of it from nothing, at a cost that usually exceeds what it would have taken to simply buy the existing operation. We recommended a short, confidential process to find out what the business was actually worth to a buyer who could put those relationships to use, before committing to liquidation.

A preliminary valuation, built around the company's earnings and comparable transactions in the sector, put a going-concern sale in a range around $65 million to $75 million — well above the wind-down estimate, even after accounting for the deal costs and taxes a share sale would carry. The gap was large enough to justify the time a process would take, even though Herman was skeptical anyone would pay a premium for a business this dependent on him personally. We also walked him through the downside: a sale process takes months, requires disclosing sensitive financial information to competitors under confidentiality agreements, and can fail outright, leaving him back at the wind-down plan but with less time on the clock. He accepted that risk once he understood the size of the potential upside.

What we did

1. Ran a targeted, confidential sale process. Rather than a broad auction that risked spooking employees and customers, we worked with Herman to approach a short list of strategic buyers already operating in adjacent parts of the sector — companies that could absorb the business without needing Herman to stay forever. Confidentiality agreements went out before any financial information changed hands.
2. Flagged the key person risk early. Every serious bidder raised the same concern: how much of the business's value walked out the door with Herman. We worked through this directly instead of letting it derail negotiations later, structuring the conversation around a transition period rather than treating it as a reason not to sell.
3. Negotiated the structure, not just the price. One strategic buyer emerged with real interest but priced the key person risk and customer concentration into a lower offer than the preliminary valuation suggested, and asked for part of the price to be contingent on the business performing through a transition period. We negotiated the mechanics of that holdback so it was tied to objective, measurable performance rather than the buyer's discretion.
4. Built in a defined transition role for Herman. The buyer wanted Herman available to introduce him to key customers and suppliers and to train a replacement general manager. We negotiated a fixed transition term, a defined scope of duties, and compensation for that period, so it functioned as a bounded consulting arrangement rather than an open-ended obligation.
5. Protected the employees where we could. Herman cared about what happened to his long-serving staff. We negotiated commitments in the purchase agreement around continued employment for existing employees for a defined period following closing, understanding that a purchase agreement cannot bind a buyer forever but can meaningfully shape the first stretch after a sale.
6. Negotiated the indemnity package to a workable middle ground. The buyer wanted an extended survival period for Herman's representations about the business and a large holdback against any breach. We pushed the holdback down and shortened the survival period on most representations, while accepting a longer period on the items that mattered most to the buyer, like environmental compliance at the manufacturing facility.

The outcome

The deal that closed was not the number Herman had hoped for going in, and it was not the deal the buyer had originally proposed either. The final purchase price came in at about $58 million payable at closing, with a further amount of roughly $9 million held back and payable over an 18-month transition period, contingent on the business retaining a defined share of its existing customer accounts. If those accounts held, Herman stood to collect close to $67 million in total — below the top of the original valuation range, but meaningfully above the roughly $50 million a wind-down would likely have delivered, and without the twelve-plus months a full liquidation process would have taken to complete.

Herman was not thrilled about the holdback, and the buyer was not thrilled about the price floor we negotiated on it. That tension was the honest shape of the deal: a going-concern sale captured real value that a wind-down would have destroyed, but the buyer was not willing to pay full going-concern price for a business this dependent on one person, and no amount of negotiation was going to make that risk disappear entirely. What the negotiation achieved was a structure where that risk was shared rather than dumped entirely on either side.

Roughly 60 employees kept their jobs through the transition period and beyond, the equipment stayed in productive use instead of being auctioned off piece by piece, and Herman walked away with a meaningfully larger number than the plan he arrived with — plus a defined, paid transition role instead of an indefinite one. It was a compromise, not a triumph for either side, and it was a better outcome than the one nobody had thought to question.

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