barry epstein president vertex capital [email protected] 972-740-2740 sedonaoffice 2013 ...
TRANSCRIPT
Advisory services specializing in the Life Safety sector
Buy and sell side advisory services across the country
Representation of all types of buyers: local, regional, private equity backed, public
Acquisitions throughout the Life Safety arena, including alarms, integrators, guards, fire/fire sprinkler, medical alert
SedonaOffice 2013 Vertex Capital
Why do acquisitions?
Types of buyers and sellers in today’s market
What the seller needs to have and wants to know
Ingredients of the letter of intent
Financing the deal
Looking at a seller’s actual bids
SedonaOffice 2013 Vertex Capital
Faster growth
More markets= more of a referral base
Pick up strong sales reps and techs
Smoother revenue stream
Replace attrition- buying an SDM 50 to stay even
SedonaOffice 2013 Vertex Capital
Local with $50k in mrr
Regional with $600k in mrr
National account buyer with $4mm in mrr
National company buyer with $8mm in mrr
SedonaOffice 2013 Vertex Capital
Relish contracted recurring revenue
Good opportunity for growth through acquisition
Low market penetration vs. other recurring revenue (TV, internet, phone)
Very liquid market = easy exit
Lenders throwing money at large borrowers
SedonaOffice 2013 Vertex Capital
Dealer with $6,000 in mrr (contracts/mixed phone line)
Dealer with $32,000 in mrr (good contracts, c corp)
Dealer with $70k in mrr (valuation expectation)
Dealer with $180k in mrr (offices, own central, kids in business)
SedonaOffice 2013 Vertex Capital
Signed Contracts Own The Phone Lines Attrition Calculation (static pool) Financial Statements with Adjusted EBITDA Knowledge of Tax Implications Legal Representation Sell Side Representation (State to State) Multiple Offers
SedonaOffice 2013 Vertex Capital
What’s the multiple? Does contract term matter? Is there a minimum MRR? Will the buyer keep my people? Rich man,
poor men Do I have a shot at the holdback? Is the multiple the price or + b/s items? Does the buyer have the money?
SedonaOffice 2013 Vertex Capital
If wholesale, let your customers know
Put ad in state association newsletter
Put the word out at the association meetings
Don’t assume he won’t sell to you (2 old rams who hadn’t spoken in 12 years)
Look for orphans (Large buyers/small markets too much trouble)
Build a pipeline (They may sell in 4 years)
ASK CONNECTORS
SedonaOffice 2013 Vertex Capital
Nonbinding
Multiple
Number of accounts
Amount of recurring revenue
LOI expiration date (ideally less than 4 years!)
Freeze period
Stock purchase vs asset purchase
Accounts only or assets (a/r, inv, veh, fix, lease)
SedonaOffice 2013 Vertex Capital
Buying 1,000 accounts at $25 per month= $25,000 in mrr.
Purchase price is 33x, 10% held back for one year.
$25,000 * 33x = $825,000 * .9 = $742,500.
Bank lends 22x or $550,000. Buyer comes up with balance of $192,500 or puts up more mrr to the bank ($33,700 total= no cash upfront)
SedonaOffice 2013 Vertex Capital
Attrition has settled down and will remain stable
Number of buyers on increase as banks keep lending
No killer app in sight to destroy monitoring revenue
Utilities trying again to gain tremendous market share
Multiples will remain strong as private equity firms have huge amounts of money on the sideline that must be put to use
SedonaOffice 2013 Vertex Capital