In far more than a handful of recent deals involving all kinds of commercial properties and Cape Cod businesses, the buyer has been someone the seller knows or is affiliated.

Most often this association is rooted in an existing business, landlord-tenant or employment relationship. In many other instances the buyer just happened to be an adjacent property or business owner.  In business sales, an amicable deal with a competitor or supplier has brought some others to the closing table.

It appears these deals are being struck as private “off-market” transactions suggesting the phrase, “When you’re ready to sell, let me know.  I may be interested,”  is paying off for many motivated buyers.

Naturally, the primary reason why these buyers are particularly motivated is the synergistic benefit the opportunity typically offers. Since the property or business is familiar to the buyer, the lower degree of pre-purchase due diligence can be an added incentive. Bankers seem to be willing to warm up to these types of transactions as well. For some, dealing direct and the potential to save on transaction costs are often perceived as another mutual benefit.

Despite what appears to be a favorable outcome, there is some downside to selling to someone you know under a private transaction.  

First, whether a business or property sale, choosing not to expose the opportunity to the open market will limit the chances of obtaining a maximum price and optimum terms which would otherwise be achieved through competitive bidding among multiple buyers. 

Second, experience has shown that private sales tend to begin with some general conversation on the topic and then quickly ramp up from there. Absent proper planning and pricing this can put both parties in an awkward and sometimes untenable situation where they eventually ask, “How did we get here and this fast?” 

Sound financial planning, legal and valuation assistance is the best hedge against these risks. 

For motivated commercial property and business sellers looking to privately transact with someone they know, the take away here is this:

The prospective buyer is likely to have a unique benefit to leverage and a solid familiarity of your business or property. And to be confident you are striking the right deal, be sure to first obtain proper financial, legal and valuation assistance.

Joseph P. Egan is a MA Certified General Real Estate Appraiser with over 25 years of professional valuation experience. Through a specialization in commercial real estate and closely-held businesses, since 1991 he has completed over 600 appraisal, brokerage and consulting assignments concerning all types of commercial real estate assets and going concerns located on Cape Cod, Nantucket, and Plymouth County, MA. Clients served generally include attorneys, banks, corporations, developers, investors, and owners of closely-held and family businesses. Prior to relocating to Cape Cod, Joe worked in the New York Metro Area and throughout CT with leading regional and national appraisal firms such as Cushman & Wakefield. Please contact Joe here.

Mashpee, MA

The well known Tinder Box store located in Mashpee Commons next to Starbuck’s Coffee, sold for $175,000.  The acquisition also included a satelite location at a local golf course. The transaction was facilitated by Greg & Cindy Holmes of Kinlin Grover GMAC Commercial who represented both the buyer and seller.

The Tinder Box is a national franchise operating as Tinder Box International and currently includes a network of 148 stores located throughout the United States. In 1928, company founder Edward Kolpin opened the first Tinder Box store in Santa Monica CA.

The 1,200 square foot retail store (known as Tinder Box #399) specializes in the sale of cigars, pipes, lighters, humidors, gifts and an interesting assortment of smoking-related accessories.  In addition to offering traditional and exclusive cigar lines, the Mashpee store features a 30 foot humidified cigar wall and an 8′ x 12′ walk-in humidor, along with its popular smoking room with a large screen television, wet bar (BYOB) and convenient humidified lockers for its customers.

The Sullivan’s intend to continue The Tinder Box tradition of providing their growing number of loyal customers the finest in smoking products, gifts, accessories and expertise available on Cape Cod.

Webb Research, located in E. Falmouth, Mass., is the world’s leading manufacturer of autonomous underwater gliding vehicles, as well as autonomous profiling drifters and floats. Terms of the transaction were not disclosed.

Webb Research adds autonomous underwater vehicle systems to Teledyne Marine’s portfolio of marine electronic subsystems, including acoustic modems, acoustic and inertial navigation systems, acoustic Doppler current profilers and subsea electrical and optical interconnect solutions. Webb Research’s gliders are autonomous underwater vehicles (AUVs) that use changes in buoyancy in conjunction with wings and tail steering to convert vertical motion to horizontal, and thereby propel the system on a programmed route with very low power consumption. Applications of gliders range from oceanographic research programs to military persistent surveillance systems and mobile nodes for subsea communication networks.

In fiscal year ended December 31, 2007 Webb Research had sales of $12.2 million. After the closing, the acquired business will operate under the name Teledyne Webb Research.

Teledyne Technologies is a Thousand Oaks, California based provider of sophisticated electronic subsystems, instrumentation and communication products, engineered systems, aerospace engines, and energy and power generation systems. Teledyne Technologies’ operations are primarily located in the United States, the United Kingdom and Mexico.

Kongsberg Gruppen is headquartered in Kongsberg, Norway and is a technology group with over 4,400 employees in 25 countries. The company has two divisions, Kongsberg Defense and Aerospace, and Kongsberg Maritime of which Hydroid will join. Kongsberg Gruppen reported revenues of approximately $1.6 billion in 2007 and is listed on the Oslo Stock Exchange and traded under the ticker
KOG.

“The acquisition of Hydroid is within Kongsberg Maritime strategy to expand in the rapidly growing market for AUV-based operations through a broader portfolio of products, wider presence in the market and focused R&D efforts,” stated Rolf Arne Klepaker, Kongsberg Maritime Subsea Executive Vice President.

Hydroid was established in 2001 to manufacture, support and further develop the REMUS Autonomous Underwater Vehicle (AUV) technology, originally developed, and licensed from, the Woods Hole Oceanographic Institution. Located in Pocasset, Massachusetts, Hydroid offers a range of REMUS vehicles, including systems rated for 6,000 meter operations, and has delivered over 150 systems in the past seven years.

All the HUGIN vehicles and the REMUS vehicles can be customized for many applications which include: hydrographic surveys, mine counter measure operations, harbor security operations, environmental monitoring, debris field mapping, marine geological survey, inspection of underwater engineering structures and pipelines, search and salvage operations, fishery operations, and scientific sampling and
mapping.

In a separate press release issued by Axia Advisors, the Burlington MA based firm announced its advisory role in connection with the $80 million sale to Kongsberg Maritime.

Chris von Alt, President and CEO of Hydroid, LLC, stated, “As a Kongsberg company, Hydroid will continue to improve the products and services we offer, so they will be of greater value to our customers. This strategic fit is very important to our shareholders, and we are grateful to Axia Advisors for their contributions to this remarkably successful outcome.”

• Established Food Market – Upper Cape
• Waterfront Restaurant – Upper Cape
• Five Small Motels – (3) Upper Cape & (2) Mid Cape
• Upscale Inn – Nantucket
• Country Store – Mid Cape
• Ethnic Restaurant – Mid Cape
• Small Guesthouse – Outer Cape
• Three Upscale Inns – Outer Cape
• Gas Station – Mid Cape
• Two Convenience Stores – Upper Cape & Lower Cape
• Pet Kennel – Lower Cape
• Marina – Mid Cape
• Sign Shop – Upper Cape
• Upscale Cafe – Upper Cape
• Breakfast & Lunch Eatery – (2) Mid Cape
• Bakery – Mid Cape

 Stay tuned…I am aware of more transactions in the works!