In PART 1 Jim’s M&A Adviser (Rob) developed and implemented a marketing plan for Jim’s business. In PART 2 you’ll see the results of Rob’s marketing plan.

The Offers

There were 47 total prospective buyers that received the Confidential Memorandum and 19 of those buyers followed up with questions. After several days of receiving and answering questions, Rob received 7 offers, 3 of which were considered viable offers. Rob immediately began his due diligence on the 3 organizations that made viable offers to determine their business and financial capability.

Offer #1

This offer came from a computer networking company with revenues of about $32 million. It had offices in several major US and European cities and was expanding into Asia. Jim’s company was located in a section of the US that the buyer wanted to penetrate so Jim’s company would be a strategic geographic acquisition for the buyer.

The Offer was:

• $1.5 million was to be paid at closing.

• $500K to be paid after 6 months, $500K to be paid after 1 year, $500K to be paid after 18 months, and $500K to be paid after 2 years.

• An earnout that would consist of 3% of the acquired company’s revenues (Jim’s company) for the first 3 years.

• All Jim’s employees would be retained except for some redundant marketing and financial personnel.

• Key employees would receive a $10K “stay bonus”.

• Jim would receive a 3 year contract of $150K per year plus benefits that included health, life, and disability insurance plus a car allowance.

• Jim would be a Regional Vice President with the new company.

At a 5% annual growth rate for Jim’s company the earnout would contribute $600K to the $1.5 million at closing and the $2 million note for a total offer price of $4.1 million.

Offer #2

This offer came from a Private Equity Group (PEG) that had acquired a $20 million computer networking company (the “Platform” company) and was looking to Jim’s company as one of several “Add On” companies that the PEG wanted to acquire. The PEG’s goal was to build the computer networking company to $50 million in revenues over a 5 year period and then cash out.

The offer was:

• All Jim’s employees would be retained except for some redundant marketing and financial personnel.

• Jim’s company would receive part time services of a CFO.

• Jim’s company would receive marketing assistance from the company “Platform”.

• The PEG would pay Jim $2.4 million at closing for 70% of his company.

• Some stock would be given to key employees.

• Jim would retain his present salary of $175K plus his present perks consisting of health, life, and disability insurance and a car.

• Jim and key employees would receive a performance based bonus each fiscal year.

Offer #3

This offer was from a large, rapidly growing IT public company that was in the process of acquiring small IT related companies. Over the last couple of years it had made several acquisitions. The acquisition of Jim’s company would be part of its strategic growth plan. The Board of Directors had directed the CEO to keep the acquisitions “earnings neutral” at a minimum, meaning that any acquisition should have no affect or a positive affect on their price/earnings ratio.

The offer was:

• Total price of $5 million – $1 million at closing and the balance of $4 million in stock. The number of shares to be determined by the stock price at closing.

• All Jim’s employees would be retained except for some redundant marketing and financial personnel.

• Some stock would be given to key employees.

• Jim would receive a 2 year contract at a salary of $200K and benefits similar to his present benefit package.

• Jim would become a Vice President of the company.

Stay tuned for PART 3 to see what offer Jim accepted and why.

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