Transportation Information, Monetization, and Access Control Solutions

2018 Revenue: $1.93M            2018 EBITDA: $223K

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Company was founded in 1999 and has extended its system to a SAAS model for easier rollout and support. The Primary Company offers a number of patent protected transportation informatics and access control solutions within the Intelligent Transportation Systems space to State DOT (75% of Company 2018 revenue), City or County Public Works (15%), and other agencies (10%).

Its Sister Company provides software products and consulting services that are used by public agency and private sector clients to manage infrastructure systems including county roads, city streets, sidewalks, curb and gutter, signs and signals, bridges, parking lots, wastewater and storm drainage systems, water pipelines, park features, and other miscellaneous assets.

§  Strong Client Relationships: The Company is proud of its strong ties to clients. Evidence of these relationships is shown in the 85% rate of repeat business. The Company verified client success stories help to easily acquire new business.

§  Outstanding Growth Opportunities: There exist several opportunities for the Company to significantly increase revenue and profit, including leveraging the Company’s proven reputation, patent protection, and increased infrastructure spending to pursue and penetrate new and existing markets.

§  Hold Patents in the First Position: On critical and pervasive transportation informatics reporting systems currently in use by other companies. 

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

Marketing & Presentation Software for Insurance Agents and Financial Advisors - Company for Sale

2018 Revenue: $1.1 M      22% Growth Rate   42.5% EBITDA Margin

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Headquartered in Kentucky, Company offers marketing and sales presentation software for insurance agents and other financial advisor professionals. The software and associated materials support tax-advantaged savings programs using the Indexed Universal Life Insurance product.

The product package was effectively established for one larger client in approximately 2012, and officially introduced to other clients in late 2015. Market feedback has been very positive, with revenues growing from $160,000 in 2014 to over $1,095,000 in 2018.

The suite of products is offered on a recurring subscription basis, and is website-accessed by its customers .The site enables financial advisors to create and manage a variety of customized, compliance-approved client reports that streamline the complex IUL product.  Client reports are accompanied by complete marketing programs that support member advisors from the prospecting phase through the close of the sale.  IUL is one of the fastest growing products in the life insurance industry, where it is used as a tax-advantaged cash value accumulation tool. A rapidly-growing number of advisors use IUL for retirement planning with their clients.

·        Growing Market for the Company’s Services: Main product is an illustration software for Indexed Universal Life. IUL’s emerging popularity with insurance agents and financial advisors, along with retirement savings wealth trends in general, support strong momentum for Company's market opportunity.

·        Proprietary Financial Product Development:  Company occupies a very unique segment in the retirement savings industry, has hundreds of agent and carrier contacts, and understands the underlying actuarial and marketing aspects of insurance-oriented savings products. All materials and product names are copyrighted.

·        Track Record/Proven Product Acceptance: Company has increased its year-over-year sales to one of the largest IMOs in the industry since inception, and now has other IMOs participating, as well as other market participants interested. Great growth potential with expanded marketing resources.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

ORGANIC SEARCH ENGINE TRAFFIC GENERATION SOFTWARE COMPANY -Company for Sale

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2019 Revenue: $900 K proj                  Gross Margins > 90%

With over 10 years of combined research and development, the software and technology have been fine-tuned and extensively tested. The software has many built-in SEO features that can be customized at will.  These features, along with other strategies incorporated in their website production process, have allowed the company to create a portfolio of websites that generate 100% organic search traffic.

Currently, the company’s websites receive approximately 6.5 million unique visitors/year, all of which is organic search engine traffic from the major search engines. As such, the company does not have the need to pay for marketing or SEO of any kind, giving it a large competitive advantage over its competition.

The owners have created a cutting-edge software program and website production technology  hat has almost unlimited potential in the right hands. We lack the management team, staff, and resources to gain broad implementation and distribution. We seek to be acquired by a company that can help our product reach its full potential.

·        Proven Methodology: The company’s websites receive approximately 6.5 million unique visitors/year, all of which is organic search engine traffic from the major search engines.

·        Proven Technology The company uses its proprietary software and website production technology to create robust websites (in a semi-automated fashion) that target large numbers of geographically-based keywords in a variety of verticals. 

·        Great Growth Potential: Owners operate this as a very profitable life-style business and have limited growth. Their sites routinely outrank billion-dollar companies for very expensive keywords in high-competition verticals like drug addiction rehab. The Company is just scratching the surface for growth and income.

·        Powerful Geo-Targeting Technology: The ability to go after geo-targeted longtail keywords on a large scale is another key feature. Company can target thousands of combinations of longtail keywords on each site it produces. This allows for flexibility, uniqueness among multiple sites, and the ability to attack a niche from several different angles.

·        Scalability: The software and semi-automated website production process allows for quick turnaround time. An organization with the proper staff in place could easily produce 100+ websites/month, and there are dozens upon dozens of niches that can be targeted, most of which the company has yet to explore in detail.

·        Superior Cost Performance to Paid Search and SEO Services: Their business model that targets Pay Per Call lead buying companies and uses highly effective organic traffic generation far outperforms the paid search models especially on the very expensive and competitive keywords.

·        Secure and Protected: The software code is fully encrypted and cannot be copied to any other site without a license. The software is highly secure and hacker-proof and their websites have ever been hacked.

·        Scales Rapidly: Company sites generate organic traffic with virtually no time delay. Websites that depend on SEO for traffic are highly dependent on budget and time allowances for web traffic to materialize. Not only do we get purely organic traffic, our traffic converts.      

·        Superior ROI: The total cost for Company to produce a website from start to finish is usually $500 or less, and full production can be accomplished in less than a day.  This allows for a fast return on investment.

·        Flexible Integration:  The software can be installed on any existing website, including Wordpress blogs. Installing the software would allow business owners and blog owners to expand their geographical search potential.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

All-in-one SIP Enabled Contact Center as a Service Provider - Company for Sale

2018 Revenue: $1.7M                 Gross Margins > 90%

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 Their offering is a robust Multichannel Contact Center and Workforce Management solution for mid-market and Enterprise customers. It is a multichannel skills based routing contact center and scales from 5 to 1250 agents per location. The base “Select” software includes skills based routing, flexible announcements, agent and supervisor software with presence, call control, queue monitoring, scrolling marquee, IM text messaging, supervisory advanced monitoring and agent control and historical call reporting.

Advanced add-on options can complement the “Select” base package. These options include: Call back number queuing, Customer post-call surveys, VoIP voice and screen recording,  Blended E-mail, Webchat and SMS queuing, CRM and customer database integration with data dip for smart routing and call coordinated screen pop, Blended automatic outdial campaigns with power/preview/progressive and predictive auto dialer.

The founders have been running the company for more than 23 years.  They are skilled software engineers and that is the strength of the company. They feel that they could greatly benefit from an acquisition by a larger company with the resources and sales and marketing expertise to capitalize on the explosive growth in this unified communications space.

·        Robust Product Set: Contact Center suite includes multichannel inbound, outbound, IVR, virtual queue, surveys, screen pops, recording and Workforce Management (WFM) and Workforce Optimization (WFO).

·        Attractive SaaS Business Model: Company has been delivering call center software solutions since 1996 and has captured that intellectual property and expertise in their proven SaaS offering - Call Center as a Service.

·        Great Growth Potential: Globally, the cloud-based contact center market is expected to grow from $6.47 billion in 2017 to $24.11 billion by 2023, at a CAGR of 25% during the forecast period according to Market Research Future. 

·        Strong Product Adjacencies: With UCaaS (Unified Communications as a Service) which is accelerating at an annual rate of 29%, according to a Synergy Research Group.

·        Relationship With a Major UCaaS Provider: Company has established a relationship with a major UCaaS provider with their Channel Partners including Company's Contact Center module where appropriate.

·        Expanding Interest in the UCCaaS Space: Several Major UCaaS providers are either developing or acquiring Contact Center Capabilities. Ring Central acquired Connect First, Nextiva released their own Cloud Contact Center solution, and  Talkdesk, the fastest growing Contact Center as a Service provider, completed a $100 million in Series B funding in 2018. Vonage acquired New Voice Media.

·        Software integrates with SIP Enabled hardware and software systems

·        Very Competitive on Price and Features 

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

SaaS Mergers and Acquisitions Deal Announcement

#M&A #MergersandAcquisitions #SaaS #InvestmentBanker #softwareM&A #sellsoftwarecompany

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

When an EBITDA Multiple Doesn’t Work for a Valuation

Takeaway: In our technology focused mergers and acquisitions practice we are often approached by an entrepreneur saying, “I want to sell my company for strategic value.” This article explores what strategic value means and why a buyer would pay more than an EBITDA multiple for a seller’s company.

Rule of Thumb Valuations

In the world of mergers and acquisitions, sophisticated buyers, private equity firms, and business valuation firms establish some “rules of thumb” valuation multiples. The International Glossary of Business Valuation Terms defines “rule of thumb” as “a mathematical formula developed from the relationship between price and certain variables based on experience, observation, hearsay, or a combination of these; usually industry specific.” For one industry it might be a multiple of revenue, for another it is based on assets and capacity like the hotel industry at $25,000 per available room, or Revenue Per Available Seat Mile (RASM) for airlines or for other industries, monthly active users or subscribers, an EBITDA multiple, or a value based on discounted cash flow.

The Pros and Cons of Rules of Thumb Multiples

Rules of thumb multiples are very convenient and a great starting point for a valuation discussion or analysis, but we view them as just that, a starting point. Valuing a business is far more complex than valuing a piece of commercial real estate (discounted cash flow) or a single family home. For a home there are very accurate comparables based on the number of bedrooms, the number of bathrooms, school district, distance to public transportation, square footage, and a few others. The value of a business, however, is subject to the interpretation of the buyers that evaluate it. A strategic buyer will evaluate a potential acquisition based on the value that can be created after the assets of the target are combined with buyer’s assets. This points to two critical elements of your business sale; 1. Capture and articulate your company’s strategic value drivers in your business sale marketing documents and, 2. Get as many opinions from the market as possible.

Capture and Articulate Your Company’s Strategic Value

Below are some of the most powerful drivers of strategic value:

1. Contractually recurring revenue – This is exactly why most major software companies are moving away from a one-time licensing fee to a software as a service (SaaS) offering. Microsoft and Adobe recently changed their business model to this approach and their market values are soaring. Salesforce.com launched their business using the subscription model, and they have been a huge success. The time and materials IT service model is disappearing and being replaced with a managed services offering. Contractually recurring revenue tremendously reduces the risk for a business buyer and they will pay up for it both in purchase price and the percentage of cash at closing versus earnouts and deferred contingent payments.

3. Time to Market and First Mover Advantage – Most business buyers could develop the sought-after technology themselves, but we suggest they analyze the cost of their time to market delay. Believe me, with first mover advantage from a competitor or, worse, customer defections, there is a very real cost of not having your new strategic product today. We were able to convince one buyer that they would be able to justify our seller’s entire purchase price based on the number of client defections their acquisition would prevent. Think of the difference today between first mover Gatorade and the distant number 2, PowerAde.
4. Companion Products and Similar Customer Base – There is an old salesman saying, “It is ten times easier to sell an additional product to an installed account than it is to open a new account.” If you product or service is viewed as a logical add-on to the buying company’s product suite it can produce some stunning post acquisition sales growth. Similarly, if the buyer’s and seller’s customer base is similar, great value can be achieved by cross-selling to one another’s customer base. The market may provide you with value expansion because you have an installed base of difficult to penetrate blue-chip accounts.
5. Removing Barriers to Entry – If your company has already broken the code to federal government business or even more importantly security clearance, this can be quite valuable to a buying company that is anxious to penetrate that client.
6. A Superior Business Model – For the selling company, of course, their main product, service, and intellectual property are valuable. Often what is overlooked, however, is the value of a better sales system, or social media approach, or the use of outside contractors. The buying company might be thinking that if we implemented the seller’s sales system across our entire sales force, could improve our productivity by 10% across the board. If you have developed a particular strength, make sure your potential buyers know about it and value it.
7. Improve the Core Product Offering of the Buyer – We represented a seller who had developed a database and algorithm to help hospitals establish the proper level of nurse staffing for the various hospital units. The two final bidders were both major providers of human resources and staffing software for hospitals. Often these software systems would sell for a half million dollars and up. Our client’s product was viewed as an important module that would improve the competitiveness of the buyers’ main system. The selling price ended up being way higher than even an aggressive multiple of EBITDA.
8. Restate Financials to Reflect the Buyer’s Pricing Power – For small technology companies selling into the enterprise, there is often a substantial required pricing discount when competing with the big legacy provider. In one M&A deal we restated our seller’s historical financials using the pricing power of the brand name acquirer. This client was a small IT company that had developed a fine piece of software that compared favorably with a large, publicly traded company’s solution. Our product had the same functionality, ease of use, and open systems platform, but there was one very important difference. The end-user customer’s perception of risk was far greater with the little IT company that could be “out of business tomorrow.”
By applying the pricing model of the buying company to our client’s income statement, we were able to double the financial performance of our client on paper and present a compelling argument to the big company buyer that those economics would be immediately available to him post acquisition. It certainly was not GAP Accounting, but it was effective as a tool to drive transaction value.
9. Defensive Response to M&A Activity in the Market – This dynamic can drive company selling price beyond traditional valuation models. We have a number of potential sellers in our pipeline that have contacted us well in advance of taking their company to market. They just wanted to make a connection and to get advice on how to prepare their company for their eventual optimal exit. When we hear about a completed acquisition of one of our prospective client’s competitors, we pick up the phone. This deal announcement will normally elicit a competitive response from the marketplace in the form of several other acquisitions from the buyer’s competitors. You see it all the time. If Merck buys a biotech company with a promising cancer drug pipeline, you can be pretty sure that Novartis, Pfizer and others will soon follow suit. The same goes for the tech industry if Google buys an Artificial Intelligence company. Microsoft and Adobe will be close behind. This produces an arbitrage opportunity and company selling prices shoot up until the competitive demand is satisfied.
Sell to Your Strengths
This list is by no means exhaustive. You are in the best position to recognize your company’s strategic value components. As you engage with the various potential buyers, try to envision how your two companies would combine and how they could leverage your assets to produce performance well beyond 1 + 1 = 2. You can even take this one step further. Try to quantify this synergy and use that in your selling approach. Your value proposition is unique to each individual buying company so it is important that you maximize your exposure to the market and invite as many opinions as possible.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

Acquisition Opportunity - Managed IT Services & IP Telephony Provider SMB

2018 Revenue: $4.77MM                          2018 EBITDA: $1.12MM

§ Recurring Revenue Business Model Focus: Steadily increasing company's revenues generated from managed services contracts (48% of annual sales) with enhanced sales resource and focus.

§ Diversified Customer Base: With over 275 clients, no single customer represents more than 3.5% of annual revenue, and the top 5 customers represented 15% of sales in 2018. Their customer base is also well diversified across several industries.

§ Growth in Revenues and in Profitability: The Company has achieved a 69% sales growth from 2015 - 2018 while steadily increasing EBITDA margins from 19% to over 23% over the same period.

The Company offers data, voice, and interconnect services as well as managed services, premise and cloud phone systems, and cloud services. The Company provides IT Support such as technical helpdesk support, computer support, and consulting to small and medium-sized businesses. Company's Managed Service Plan ensures proactive care, round-the-clock maintenance, and live (24x7x365) help desk support. In 2018, revenue was derived from hardware and software sales (33.8%), recurring revenue (service agreements and circuit commissions) (48%), and break/fix and ad hoc services (18.6%). 

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Company differentiates itself from the competition on many fronts including: a proprietary process for evaluating and solving technology needs; a comprehensive approach based on years of experience with and a market-leading position in both data and voice technologies; and a full suite of services ranging from infrastructure to cloud services, which is unparalleled in the Company’s market segment.

Company differentiates itself from the competition on many fronts including: a proprietary process for evaluating and solving technology needs; a comprehensive approach based on years of experience with and a market-leading position in both data and voice technologies; and a full suite of services ranging from infrastructure to cloud services, which is unparalleled in the Company’s market segment.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value