Case Study #84: Selling a Small Consultancy Firm to One of the World’s Largest Airport Operators

It’s often said that entrepreneurs and founders start companies to prove somebody else wrong, and Kiran Merchant is no exception. He spent decades as a consultant to the aviation industry, and when his boss refused to give him a $8,000 raise, he decided to leave and start his own firm.

18 months later — yes, less than two years — Kiran sold Merchant Aviation (MAV) to Aéroports de Paris (Groupe ADP), one of the world’s largest aviation companies, for a high single-digit multiple of EBITA.

Begin with the End in Mind

As author of The 7 Habits of Highly Effective People Stephen Covey once said, “Begin with the end in mind.”

When Kiran started MAV, he did just that. He had no idea what kind of company he wanted to start, but what he did know was that he wanted to sell it eventually. He always had a dream of becoming a filmmaker, and so wanted to be able to pursue that after selling MAV.

He built the company from the ground up, first working on his own as a consultant on airport infrastructure development. He soon realized that he needed help and recruited some old coworkers to join him. They made up a team of 12 employees at the time of the sale.

For Kiran, the idea of selling wasn’t to become rich or make a ton of money. It was to pursue a higher purpose in life that would make him happy and give him the freedom to do whatever he wanted to do. The thought of this type of future is what propelled him to approach the deal with Groupe ADP so fiercely — he couldn’t stop thinking of that “end” he had been dreaming of.

Keep Things Personal — or Not

When Kiran created the company, he initially didn’t give much thought to including his surname in its name – he simply thought it had a nice ring to it.

Groupe ADP expressed their concerns — the company was so intrinsically tied to his goodwill and reputation, and they were worried about how it was going to survive without him.

What’s more, Kiran did not want an earnout. He was very clear in that he wanted to agree on a price, and the buyers were to pay it 100% upfront. There was a fear on ADP’s side that if Kiran wasn’t in the picture — as well as his personal relationships, his personal way of doing things, and his personal knowledge — then the business would fall apart.

So they struck a deal: if Kiran could get them $30 million in revenue for the next 30 months, he would get a hefty bonus. It gave him an incentive to stick around and gave the buyers a sense of confidence. He says the deal worked like magic. They started looking at the growth potential instead of the potential of losing business.

After weeks of deliberations, Kiran was finally close to getting the “yes” he was hoping for.

Sticking to His Guns

When Kiran decided he wanted to sell MAV for 10 times EBITA, everyone looked at him like he had two heads. An engineering architectural consultancy firm had never gone for that much. A friend stepped in to help. He urged him to stop talking about what the company was currently doing. Rather, he had to start talking about what it could become.

As such Kiran shifted the conversation away from what MAV does year after year and toward how it could open doors for a potential buyer to get into a very lucrative market. And that’s exactly how he finally sold Groupe ADP on MAV. They’re one of the world’s largest airport operators, yet somehow didn’t have an “in” to the US yet.

After some more discussions, they decided to partner with MAV to see what Kiran was all about. Within three months of working together, they approached him with a Letter of Intent. The initial offer was the industry standard: two times the EBITA, with 50% up front and the other 50% as an earnout. Kiran was clear, again. He didn’t want an earnout. So he had a private conversation with the owners and explained his point of view. Somewhat miraculously, over dinner, they said yes.

Key Lessons

• Start with a clear vision: From day one, Kiran knew he wanted to sell his company to pursue his passion for filmmaking. By keeping this goal at the forefront of his mind, he was able to shape his company’s growth strategy and navigate the path to a successful exit.
• Stand your ground: Despite facing skepticism from others in the industry, Kiran remained firm in his belief in MAV’s potential value and refused to settle for less than what he deemed fair. This determination ultimately paid off in securing a favorable deal with Groupe ADP.
• Focus on future potential: Kiran’s ability to shift the conversation from current performance to future potential played a pivotal role in convincing Groupe ADP of his company’s value. This serves as an important lesson in emphasizing future growth prospects when positioning your company for acquisition.

MAV sold for what Kiran hoped (a high single-digit multiple of EBITA), and he still works for the company as the Vice Chairman of the Board. He only had a two-year contract after the acquisition, but he decided to stay because he still cares about his team and his clients.

He isn’t sure when he’ll step down, and for now, is busy working toward that dream of becoming a filmmaker.

If you have an end (and an exit) in mind that you need help pursuing, we can help. Give us a call today to talk about your options.