Deal Story: Essex Telecom, Inc. Acquired by T6 Broadband
Doug Smith assigned the deal to me in October 2006 and I immediately began working with the client to research and prepare a strategy to approach the telecom and ISP markets. While the client provided computer hardware and telecom services to its customers, the majority of the Company’s revenues were generated by dial-up internet subscribers. However, the industry has gradually been shifting away from higher margin dial-up service to that of lower-margin, more labor-intensive wireless technology. This shift had been impacting the client negatively year over year due to the fact that a majority of the Company’s sales came from the dial-up subscriber base. The continually declining situation was challenging and took a more protracted campaign to generate serious interest. Over the course of about nine months, we had received approximately 30 confidentiality agreements but had established only few tentative interests.
After working with a small handful of players, mostly comparably-sized ISP’s, telecom providers, and individual investors/business owners, we decided to move forward with a highly acquisitive company located in Michigan, with whom I had discussed other acquisition possibilities in the past. The group had proven they had the means and experience to get transactions done. They worked the client’s subscriber data into their model and came back with an offer, to which we made several adjustments over the following month. Although we had established a very good rapport with the prospective buyer through our negotiations, the seller (as motivated as he was to sell and pursue another venture) was lukewarm about the final deal structure, which involved a modest up-front cash component to be paid at closing, and a heavy earn-out structure going out 36 months. The prospective buyer was unwilling to budge on most of the parts of the deal, and with the continued run-off of dial-up subscribers, the client was a bit nervous about hitting the bonus thresholds moving forward. In addition, Mr. M’s computer business was not going to be part of the deal, there was redundancy in the personnel and we had real issues with the tax impact of the proposed deal on our client.
In November 2007, on the day we planned to sign the LOI and expedite the closing process with the Michigan firm, we were approached by Mr. H of T6 Wireless and quickly scheduled a site visit. The visit went extremely well—Mr. H and Mr. M got along great and seemed to be on exactly the same page regarding the future of Essex. After some discussion, Mr. H made a stronger offer of $XX for a combination of the stock and assets of the entities. Due to the overall synergy between buyer and seller, and the fact that the buyer’s plans were exactly what Mr. M wanted to see, we accepted the deal and pushed hard to a year-end close. The buyer’s financing was quickly approved, the due diligence was streamlined, and the deal was closed and funded without issue on December 31, 2007.
Sale: CETCON Inc. to Beacon Enterprise Solutions
Generational Equity, an advisor to privately held and family-owned businesses for mergers, acquisitions, and strategic growth initiatives, announced the sale of its client CETCON Incorporated, an Ohio-based engineering firm specializing in technology-related engineering projects, to Beacon Enterprise Solutions Group, Inc., a technology and telecommunications provider headquartered in Louisville, Ky.
“This transaction resulted in a strategic fit that will facilitate the growth and success of the businesses in the future,” said Doug Smith, Generational Equity managing director in the transaction.
Headquartered in Cincinnati, Ohio, CETCON, Inc. designs and implements communications systems for high-profile companies around the world. Beacon Solutions is a leading provider of technology and telecommunications services, providing support from software development and infrastructure design to interconnect voice/data and systems integration.
“The acquisition of CETCON adds a very important element in delivering complete solutions to our clients. Their engineering expertise and solid reputation in the industry were keys factors in our decision,” said Bruce Widener, chairman and CEO of Beacon Enterprise Solutions Group, Inc. “We are confident that this new relationship will prove successful for all parties.”
“We built our business from the ground up so it was important that we find the right buyer who would continue with parallel business objectives,” said Ken Kerr of CETCON. “Beacon presented us with a great opportunity and we feel CETCON will be a perfect addition to their portfolio.
Sale: A&F Networking to NetTeks Technology Consulting, Inc.
Generational Equity, an international leader in middle market mergers and acquisitions, recently advised Connecticut-based A&F Networking, on its sale to NetTeks Technology Consulting, Inc., of Boston. A&F Networking provides managed services, security and Cisco unified communications solutions to customers throughout Connecticut and New York. NetTeks Technology Consulting is a premier provider of business continuity, security, voice/data convergence and managed services solutions to mid-market clients throughout New England.
Managing Director Doug Smith, Senior M&A Advisor Mike Ryan, Assistant Vice President Matt Kneifl and Evaluation Associate Mike Meredith led Generational Equity’s deal team in negotiating the transaction on behalf of the client. In addition to its recent representation of A&F Networking, Generational Equity is currently making a market for nearly 400 middle market companies across North America and overseas, matching them to prospective buyers in North America and Western Europe.
Generational Equity is an international leader assisting privately held, middle market clients in mergers, acquisitions and divestitures. The firm’s mission is to release the Generational Equity (hence, the name “Generational Equity”) that is in every business. After 20 years of growth, the Generational Equity group of companies has more than 300 professional advisors located in offices worldwide. Aside from its headquarters in Dallas, Texas, Generational Equity has U.S. affiliate offices in New York, Chicago and Irvine, Calif., and international affiliate offices in London, United Kingdom and Zurich, Switzerland. For more information, contact Generational Equity’s Dallas headquarters by calling (877) 213-1792 or via e-mail to info-us@genequityco.com.
Sale: RCI Painting to an Individual Investor
RCI Painting, Inc. is a commercial painting contractor serving primarily Maryland and Washington D.C. The company had long standing relationships developed by the owners with owners and landlords of large apartment buildings in the area which resulted in substantial repeat business. The company also held a license in Maryland to do renovation work.
The buyer, an individual investor, had hired a local real estate broker to help him find a business doing renovation work in the area. The broker saw our listing on BizBuySell and brought him to our attention. His vision was to expand the business in Virginia where he resided.
RCI signed an engagement agreement in May of 2006 and we started working on the marketing campaign immediately. We got very little response to our mailer as the market was flooded with contractors. Our client agreed to allow us to run local print advertising which also had marginal results. In late 2006 we proposed to the client to go off the market until 2006 numbers were complete and re-look at the market at that time. We put the deal on hold.
We did an update in March of 2007 and the client wanted to remain in the market. We identified a handful of strategic buyers in the surrounding area for our campaign. We got one interested party that came to the table with a reasonable first offer. Negotiations continued and an LOI was signed 10/2/07 contingent on the buyer obtaining financing. The financing fell through late October and we were back to square one. Again we went on hold until now 2007 numbers were complete.
We updated the profile in March 2008 and again posted the business on several internet sites. A local realtor brought us the potential buyer who produced a strong first offer on 4/2/08. The LOI was negotiated and signed April 18, 2008 and closing was projected for early June. Due diligence went smoothly, but the buyers bank was moving very slowly. The purchase docs were ready for signature in early June but we waited on the bank. The bank finally approved financing, but asked that the seller try to obtain a Virginia license. We modified the agreement to make a best efforts attempt but the buyer objected and the deal apparently would die. We had an all hands meeting on 7/8 to resolve the final issue. All parties agreed to modify language and the deal closed and funded July 11, 2008.”
Sale: Exclusive Rights to Manufacturer Spinel Transparent Products
Generational Equity, an advisor to privately held and family-owned businesses for mergers, acquisitions, and strategic growth initiatives, announced the sale of the exclusive world-wide right to manufacture Spinel Transparent Products by its client, Technology Assessment & Transfer, Inc. (TA&T) based in Annapolis, Maryland to ArmorLine Corporation of Charlotte, North Carolina.
Technology Assessment &Transfer (TA&T) develops and commercializes advanced materials for defense, aerospace, bio-medical, and industrial applications, primarily through government funded research and development (R&D). TA&T is the industry leader in the research and development of magnesium aluminate (Spinel) transparent armor and optical system components for a wide variety of end use applications. Exceptional wide-band transparency (UV through the mid IR), high hardness, dielectric, and ballistic properties make Spinel an attractive choice for electro-optical sensors, laser-RF communications, and vehicular and aircraft ballistic protection.
ArmorLine Corporation is a global provider of armor, personal protection, and specialized security products. ArmorLine products are currently protecting critical assets in some of the world’s most hostile threat environments.
The sale of the exclusive world-wide right to manufacture Spinel Transparent Products by TA&T to ArmorLine Corporation will diversify ArmorLine’s product portfolio given Spinel’s improved ballistic and rock-strike performance and resistance to sand abrasion. Spinel transparent armor also offers 50-60% weight savings and reduced thickness over traditional ballistic glass. Armor weight and thickness reductions are critical for performance of armored vehicles, fixed and rotary wing aircraft. Commercial markets for transparent Spinel include aircraft, train, bar code scanners, watch crystals, cell phone and PDA devices due to its excellent abrasion resistance and light transmission properties.
About Generational Equity
Generational Equity is one of the nation’s leading middle-market mergers and acquisitions companies, providing private business owners with the information and expertise they require to exit their business successfully. A unique, four-phase approach that includes education, financial analysis and reporting, sales documentation and deal-making ability combine to offer business owners an unparalleled level of commitment and experience, all focused on helping to release the generational equity and wealth in every business.
