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Selling a Successful Company: How Interweave Engineered Its Acquisition

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About a year and a half ago,
Linda Ligon knew the time had come for her and her publishing company,
Interweave Press, to start a new chapter.

 

Ligon founded Interweave—now
a publisher of more than 150 books on crafts, as well as craft magazines that
include Spin Off
and Handwoven—in
1975 in Loveland, CO. After 30 years of operating what was originally going to
be a short-term, part-time business, she wanted to put the wheels in motion for
her eventual exit, and she made a promise to herself to ensure her company’s
viability even after she was gone. Of course, she had concerns about selling.
“I had a whole midlife crisis about it,” Ligon says with a laugh. “I think
anyone who had built a business out of love for it and its market would have
the same kind of feelings.”

 

Taking Advantage of a Boom
Time

 

Although there are numerous ways
for a founder to exit a business—by selling to an individual employee or
outsider, for instance, or transferring ownership to a child, or engineering an
employee stock ownership program and making employees the owners—the best
option for Interweave and Ligon turned out to be a straight sale. “The last
number of years I was thinking about how to create continuity for the
business,” Ligon recalls. “None of my children was interested. Interweave had a
strong management team, but they weren’t necessarily in a position to buy me
out.”

 

If Interweave Press hadn’t been
doing well, Ligon might have simply closed the company. But since the press was
on a roll, she was determined to find the right buyer for it; 2004 seemed like
a particularly good time to sell because the crafts market was booming.

 

For obvious reasons, selling while
the market is high generally helps business owners get top dollar for their
companies. And of course a seller has more control over negotiations when a
company is strong than when it’s so troubled that the founder must sell quickly
to avoid a financial crisis.

 

So Ligon decided to sell
Interweave Press while it was “on top.” Recognizing that she wanted and needed
help, she hired a business broker to handle the sale, and because the bulk of
Interweave’s revenue comes from magazines, she chose a broker that specializes
in deals for magazine publishers. Specifically, she selected AdMedia Partners
of New York City, a firm she saw as compatible.

 

The biggest challenge facing Ligon
as she went through the process of selling her company was pulling together the
financial statements and other business records that would prove Interweave’s
worth. “We had to convert 30 years of running the business in a very organic,
seat-of-the-pants way into [the kind of] very precise package that any serious
buyer would require,” she recalls. This is a common hurdle for business
sellers, says business broker Howard Fisher of the Fisher Company in Arizona.

 

As Ligon stresses, it wasn’t that
Interweave’s records were in disarray. But the company’s systems for financial
reporting and overall record-keeping (book and magazine sales, circulation
records, advertising and author contracts, and the like) had been designed to
facilitate its management rather than to facilitate evaluation by potential
buyers.

 

Because Ligon was selling from a
position of strength, she had time to groom her company and its financials,
which in turn helped her get a good purchase price from a suitable buyer. “We
spent a great deal of time getting our books as much in order as we could in
anticipation of a sale,” she says.

 

One big decision Ligon had to make
was when to let her staff know that Interweave was on the selling block. She
told company managers almost immediately, in part so they could help put
Interweave’s books in order. And she briefed the entire staff a good six months
before the deal was finalized. “I did it with a written memo sent out
company-wide, and followed up with small-group and individual meetings,” Ligon
says. After that, she updated her employees regularly. The result: “They were
wonderful—there were no leaks and no resignations.”

 

Ligon credits letting her
employees know as quickly as possible about the proposed sale with helping
Interweave steer clear of the turbulence and turnover that afflict many
privately held companies when they are about to be sold. “We avoided that
pitfall,” Ligon says.

 

A Limited List of
Prospects

 

Unlike many sellers, Ligon decided
to put out a request for bids only to a selected list of buyers. “We didn’t
broadcast the company’s availability,” she says. The idea was to sell to people
with a known interest and ability to take over the business rather than to open
bidding up to the publishing world in general. That would save time as well as
ensure that Interweave would go to the best buyer—a company or individual
able to take it to the next level of business success.

 

The sale took about nine months,
which is fairly average, according to business brokers. Ligon and her broker
“kept the process at a pretty stately pace,” Ligon says. “We just didn’t want
to be rushed.”

 

The eventual buyer, Aspire Media
LLC, is a company formed to acquire consumer “enthusiast” media businesses. It
has financial backing from private equity firms (Frontenac Company and Catalyst
Investors) and business know-how from Clay Hall, a publisher Ligon has known
for 10 years. Hall has owned, operated, and advised magazine-publishing
companies for 25 years and has overseen more than 70 magazines. “I knew that
Interweave would prosper under Clay’s leadership,” Ligon says.

 

When the agreement between Aspire and
Interweave was announced in June 2005, Hall’s statement said, “Our first
priority will be to invest in and build on the success of Interweave Press by
continuing to grow and expand the business organically, as well as through the
acquisition and development of additional media properties.” That growth
strategy meshes well with Ligon’s own vision for the company’s future, and she
has agreed to stay on as creative director for a period to be determined.

 

Back to “What I Do Best”

 

Ligon’s best advice about
developing an exit strategy—take the time to do it right. Don’t develop
your strategy on the fly. “The more you think ahead and think things through,
the more successful you will be,” she says.

 

On the day the acquisition was
announced, Ligon went on the record to say she was “thrilled to be able to hand
off the business side of the company to Clay and Aspire so that I can focus on
doing what I love and do best—creating and developing top-quality craft
magazines and books that are highly valued by crafters and craft marketers
alike.”

 

 

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