As parents of two boys, maintaining a home in south Charlotte, attending school activities and participating in community events, Dale and Sue Clark appeared to be a typical couple. However, they were, and remain, anything but typical.

            They were heavily into bonds – surety bonds. They had grown an immensely successful business by providing a unique service in the surety industry. And when the opportunity arose to sell their family business, The Bond Exchange, they had some specific ideas about what they wanted, but it took accounting and legal professionals to end up with an acceptable and profitable deal.

            Dale's father, Leon Clark, had started The Bond Exchange in 1975 as a specialty insurance agency serving the performance and bond needs of small and emerging contractors in the Carolina's. Dale and Sue Clark eventually bought the business from Dale’s father. The small and emerging contractor tier of the surety market, which had been the primary customer base of The Bond Exchange since its inception, had historically been ignored by the major agencies and insurance companies. There were three prerequisites that prevented most smaller contractors from being able to be bonded by the larger surety companies: (1) three years in business, (2) CPA-reviewed financial statements, and (3) specific capitalization requirements.

            Where the big companies saw an unprofitable market, The Bond Exchange saw an opportunity. The federal government, through the Small Business Administration (SBA), sponsored a program entitled The Small Business Surety Guarantee Program that guaranteed the bonds of small and emerging contractors. This reduces the risk to the surety companies writing bonds for the lower tier of the contractor market. Because The Bond Exchange focused exclusively on this segment of the market, they began to receive contractor referrals from across the nation. Dale and Sue were thus able to capitalize on an area of the market most large surety companies did not want to serve.

            As they were growing the business, Sue used her extensive accounting and computer background to work with a programmer to develop unique software enabling the company to serve the bond needs of over 10,000 insurance agents across the country and handle their nearly 1,000 contractor clients. (The significance of this is highlighted by that fact that most agencies handle fewer than 50 contractors.)

            Consequently, The Bond Exchange grew to become one of the largest producers of SBA-backed bonds in the country. As their expertise and client base grew, The Bond Exchange began representing other insurance companies to serve their growing standard contractor business along with commercial surety business. Over the next 25 years, The Bond Exchange became one of the largest "bonds only" agencies in the country. The company also grew along with its customers. When the company was first started, 90 percent of the company’s revenues were from SBA backed bonds to small and emerging contractors. Now, less than 10 percent of its business is from this market tier

In 1998 the Clark’s received purchase offers from two surety companies. Dale and Sue did not think the offers met their expectations or provided acceptable benefits for their employees and decided not to pursue them. However, it prompted them to consider that it may be a good time to capitalize on the value of the company and the favorable business environment to sell the company. 

            Dale did considerable research regarding valuing agencies and studied various methods used in the industry to establish the value of a company like theirs; he was fairly certain that they should expect a better offer.

            Dale’s higher opinion of the valuation of the company turned out to be justified when he received a call from the CFO of CNA Surety, a major bond company, interested in talking.  During the next week the three top executives from CNA Surety came to Charlotte to meet Dale and Sue.  "From the first time Sue and I met with CNA Surety, we knew this was the perfect match for The Bond Exchange."

            CNA Surety is the largest publicly traded surety in the country and had the programs in place and the business attitude Dale and Sue were looking for. "CNA Surety could provide surety service for 99% of our existing client base, which other surety companies could not. CNA Surety is a great company committed to serving the needs of any size contractor or insurance agent," says Dale. "That is what we were looking for.”

            Initially it was necessary to establish their company’s value by having certain financial statements prepared for prior years. The Clark’s turned to their CPA, John Blair of Blair, Bohlé & Whitsitt, PLLC, for his expertise. In addition, Dale discussed with Blair the appropriate valuation method and together they prepared various financial projections to substantiate the company’s value.

             Soon an outline of the initial purchase proposal came from CNA Surety. The Clark’s turned to Paul Hattenhauer, the company’s attorney with Culp, Elliott & Carpenter, P.L.L.C., for his guidance. Together Blair and Hattenhauer came up with an alternative proposal involving a different purchase method, providing tax benefits to CNA Surety, resulting in fewer taxable consequences to the Clark’s and meeting Dale and Sue’s sales price. The proposal was a deal-clincher. Dale and Sue knew that negotiations to sell a business were not their expertise, so Blair and Hattenhauer handled the remaining negotiations of the sale.

            "It was a win-win situation for both companies," says Dale. "Both John and Paul protected our interests with respect to price, terms, employee benefits, tax consequences and estate planning," adds Sue. "There were so many issues which Sue and I would never have thought about. John and Paul were vital to the success of the sale of our business," said Dale.

            Business owners many times engage brokers to exclusively negotiate the sale of their company. However, by allowing their accountant and lawyer direct access to the negotiations, while taking responsibility themselves for understanding the process, the Clark’s were able to realize their sales price. Their CPA and attorney also advised them of significant income tax issues resulting from the sale. "In my business, I work with sophisticated financial statements every day and have always been aware of tax consequences, but I still found it necessary to call on John and Paul just about every day".

            In addition, Dale and Sue had an existing estate plan, including estate tax and asset protection trusts for their children and grandchildren, which had been put in place several years earlier. It was very important that the structure and terms of the sale of the business compliment the existing arrangements.

            Since Hattenhauer had implemented the estate plan for the Clarks, he guided them accordingly. When the sale occurred, the deal was structured to dovetail with the couple’s estate planning objectives. "Paul showed us how to add to the funding of the trusts for our children and grandchildren that provide tax savings and creditor protection," adds Sue.

            "We are approaching our second year as part of the CNA Surety family and it has been a great experience," says Dale. "I wanted a five year contract, and at this point would like to re-up if they will have me.” Sue also plans to stay on with her husband and their son Brian plans to make The Bond Exchange his career as well. "Sue and I cannot express the value that our professionals, John Blair and Paul Hattenhauer provided us," reiterates Dale. Blair and Hattenhauer continue to advise Sue and Dale about tax matters and estate issues.

            As a result of the sale, The Bond Exchange is now a subsidiary of Troy-Fain Insurance, a wholly owned company of CNA Surety, although Dale and Sue are still in charge of the day-to-day operations of the business. A large part of the negotiations in the sale concerned employee benefit issues. Dale and Sue had a committed group of employees that they wanted to protect through the ownership change and were largely able to do so.