Gaston Sealey
Gaston Sealey Co. has been distributing and servicing farm equipment out of Fairmont, North Carolina since 1951. Three generations of family ownership. Grain systems, grain handling and storage, rotavators, and parts. Farmers and dealers across the Southeast as customers. Seventy years of revenue, equipment, inventory, customer relationships, and property.
That kind of history doesn't come cheap to an acquirer. Most buyers cover a price tag like that with outside investors, a large check at closing, a bank loan, or some mix of the three. Fourscore client Matt Matros took a different path: he recently acquired Gaston Sealey Co. using an asset that came with the company itself.
Using the Company's Real Estate to Fund the Purchase
The company owned its real estate and Matt purchased Gaston Sealey Co. through a stock sale, acquiring the entire company as it stood, real estate included. Simultaneously, he sold that real estate to an investor and negotiated a long-term leaseback so the operating company could stay in the same facility under the same operations. The proceeds from the real estate sale covered the cash consideration due at closing. A multi-million-dollar acquisition closed with essentially no upfront cash out of the buyer's pocket.
The logic behind it is worth understanding for any owner-operated business in the Southeast sitting on property it owns. An operating company and the building it occupies are two different assets, and they appeal to two very different buyers. An investor who wants stable income from a long-term commercial tenant is not competing with an operator who wants to run a farm equipment business. Sold separately and coordinated correctly, the property can finance the purchase of the company.
There is a cost to it. The company pays rent now where it used to own, which is a permanent addition to operating expenses. The structure only works if the rent and the lease term are set where the business can carry them for decades and not just through the first few years.
"It shows that savvy deal making can go a long way as an alternative to other capital sources. Separating the assets and bringing in another party to buy the land means coordinating a second transaction alongside the first, with its own complexities to work through. That said, having the right team around you makes things like that possible." — J.R., Fourscore
Why the Timing Had to Be Exact
The legal work came down to coordination. All three components had to close on the same day, because if the real estate sale funds are late, the money is not there when the acquisition needs it. The lease had to be built for permanence, with rent, term, renewal rights, and control of the space locked in, since a business that can be pushed out of its own facility in five years is not a business worth buying. And diligence had to satisfy two sets of counsel at once, because the real estate investor would not close without confidence in the company that was going to be its tenant.
Fourscore represented Matt on the acquisition, the real estate sale, and the leaseback, and ran all three as a single transaction rather than three deals.
"Everything had to close the same day, and there were a lot of moving parts. I needed lawyers who could keep track of all of it, and that's what I had," said Matt Matros.
Gaston Sealey Co. continues to operate out of Fairmont, serving the same customers it has served since 1951. Same building, same team, same day-to-day operations. What changed is who owns what, and that distinction is the whole point. Matt didn't need a bigger check or a bigger loan to buy a seventy-year-old company. He needed to see the deal differently than most buyers do, and a team that could execute on that view without anything falling through the cracks.
For any potential acquirers, that's the question worth asking before assuming a large capital raise is the only way in: what is actually available inside the deal already and how can your team access it.
To learn more about Gaston Sealey, visit GastonSealey.com
To learn more about Fourscore's legal services for business owners and founders, visit fourscorelaw.com
Picture on the top is by Roger Starnes Sr and is in the public domain.