Frank Spence

12 Pages Posted: 21 Oct 2008

See all articles by Robert S. Harris

Robert S. Harris

University of Virginia - Darden School of Business

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This case features an entrepreneur who must decide whether to sell his small distribution company. The case explores several issues for class discussion: (1) valuation of a private company, (2) assessing the entrepreneur's perspective and alternatives, (3) deal structuring (including earnouts), (4) risks and their effect on value, and (5) advice from a banker's perspective.




In mid-1995, Frank Spence looked out of his living room window, and his mind wandered to the future. Should he sell his medical-products distribution business? What would a reasonable sales price be? Recently, he had talked with Chris Saunders, his contact at First United. Another meeting was scheduled for later in the week, and Spence hoped Saunders could give him some useful advice.

Frank Spence

Having just celebrated his 56th birthday, Frank Spence had a very successful entrepreneurial career. He had started several businesses in the healthcare area, amassed a considerable net worth, and enjoyed substantial cash flow from the enterprises. His most recent venture was in the medical-products distribution area. Through the years, Spence had developed excellent personal contacts with hospitals and doctors. More recently, he had learned the ins and outs of dealing with HMO's. In addition, he was on excellent terms with suppliers as a result of his prior ventures in related areas.

In the late 1980s, Spence had sold off another venture and started a distribution company. He purchased products directly from suppliers and sold to hospitals and other large health organizations. Spence focused on niche products in which producers had little or no sales effort. In essence, he was picking up business that to date seemed too small to interest large suppliers. As a result, the products he sold tended to be handled by small outfits like his that covered only a limited geographic area. From a national perspective, the business was extremely fragmented. Spence had no exclusive contracts; rather he used his excellent personal contacts to good advantage.

. . .

Keywords: acquisitions, entrepreneurship, mergers, small business, valuation

Suggested Citation

Harris, Robert S., Frank Spence. Darden Case No. UVA-F-1206, Available at SSRN:

Robert S. Harris (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4823 (Phone)
434-924-4859 (Fax)


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