Data Acquisition & Control Company

Background

  • The founders developed innovative measurement and control hardware and software products for use in a variety of applications related to energy exploration and development.
  • They had gained traction in generating revenue and interest with early customers.
  • To realize on its growth potential and stay ahead of the technology curve, the operational and financial support of a larger strategic player was required. As such, the Board decided to explore its strategic alternatives including M&A.

Activity

An operational perspective to the deal

  • Completed a rework of corporate presentation material and conducted an extensive analysis of prospective acquirers.
  • Early in the marketing process, an existing customer emerged as a leading candidate. However, while reasonable based on financial metrics, the initial offer did not meet the expectations of the Board.
  • In addition to expanding the scope of prospects, with management, we explored the potential for incremental uses of the technology within the operations of the lead prospect. This exercise uncovered several realistic opportunities including preventative maintenance applications and specific new product lines to enhance revenue.
  • Met with the leading prospect to present and discuss the new applications with the objective of capturing their interest and hearing their impressions. The showed great interest and shared a lot of information with us in this operational discussion.
  • We followed up with an updated cash flow model including forecasts for the base business and incremental revenue and cost savings to result from the combination.

Result

  • We received an increased offer from the lead prospect that was over 2x its original.
  • The transaction with this billion dollar public energy services company was closed over a few months from launching the M&A process.
  • Negotiations following the LOI preserved and resulted in a moderate increase in the value with careful attention to structuring, definitions and other details such formulas related to the closing balance sheet and earn-out and escrow provisions.
  • All key employees joined the acquirer on attractive employment terms.
  • Along with the support of a parent, the company has retained their existing location and retained much of the operational autonomy it had before the transaction.