CASE STUDIES
How We Pivoted A Computer Hardware Company And Turned Bad News Into A Valuation Boost Of 400%
We were engaged by Netbook-equivalent hardware company funded with $15 million by the top venture firm in Utah.
However, the growth opportunity for it was preempted by the commercial release of the Netbook.
When we ran it through the ValueX3 methodology, which closely looks at 55 different value drivers, we uncovered hidden intangible assets which ended up saving the day.
Focusing on these hidden assets, we then repositioned it from a hardware company to a software company to establish a high-value growth opportunity to prepare it for acquisition.
After researching the markets with the highest multiples for a potential exit, we determined that not only were mobile applications in demand, but there was also an emerging market on the horizon known as “bring your own device.”
Under our guidance, the company developed a new product and a product roadmap that exploited this fast-growth emerging market. We then identified and engaged a virtual desktop company that was seeking peripheral add-on software and management capabilities aligned with its new product offering.
As a result, the company’s valuation increased by 400 percent, and it was successfully acquired.
How We Repositioned A Trucking Company, Skyrocketing Its Value From $24 Million To $67 Million
Another case involves a trucking company headquartered in California that has been around for several decades as a family business and grew steadily becoming one of the largest trucking companies on the West Coast. The company specialized in transporting equipment related to the energy field, such as turbines.
The initial valuation was $28 million and the owners were not satisfied at a possible acquisition at that price.
So we took the company through the ValueX3 process, conducted our research and assessed the key value drivers that could reposition the company in a higher value market.
Through the process we discovered a new industry segment called “energy logistics” which had much higher valuation multiples than the trucking industry.
It turns out that the existing business had made significant investments in fuel saving technologies, computerized route management with GPS tracking and delivery scheduling using mobile apps – and everything was tied together with secure Wi-Fi networks around the country. Based on these hidden assets, we were able to re-brand and transform the company from a trucking business into an energy logistics company.
By applying the ValueX3 process, we increased the original valuation from $22 million to $67 million over a seven-month period, which is ultimately what the company sold for in the end.
How ValueX3 Turned A Claims Processor Into An IT Company — And Brought The Owners 400% More In Value
One recent client was the largest health insurance claims processor in Maryland.
They were what are called a Third Party Administrator (TPA), which is viewed by many acquirers as an unattractive and very price competitive business providing low margin administrative services to insurance companies.
Most financial and strategic buyers typically think “I don’t know if I want to be in that business.”
Yet their clients were substantial companies like Blue Cross/Blue Shield, Aetna, and Cigna, and these companies relied on the company to handle their claims processing. The reason the company existed was that they could simply process claims cheaper, better, and faster than their clients could do it internally. The company could perform these services at such an efficient and cost effective manner because they had developed a file conversion technology that could be utilized with any client’s internal files, resulting in a very valuable intangible asset that was highly prized by the marketplace and the competition – if only the market and competition knew about it.
When we discovered how the company really worked and why it was successful, we convinced the owners to present their company to the acquisition marketplace as a healthcare information technology company instead of a claims processing firm.
After repackaging the company as a technology company, their valuation skyrocketed from an initial offer of $6 million as a claims processing company to an ultimate closing acquisition price 5x higher as a healthcare IT company.
The Case Of The “Big Data” Company And How We Helped Them Skyrocket Their Valuation By 250%
We recently had the opportunity to perform a valuation engagement for a Government IT company called PSI.
At the time the company had decided that based on their existing valuation numbers it was not a good time to sell.
They believed they could not realize their acquisition price objective by selling the company in the current market.
So we suggested that we process the company through ValueX3 and, based on our guidance and recommendations, determine if the new valuation could satisfy their financial objectives.
By applying the ValueX3 process, we repackaged the company from being just another Government IT contractor into a “Big Data” technology company.
Based on this one change in market perception, we were able to help them sell the company to a South Korean investment syndicate for over 3x the original valuation.
How We Work With Clients: Internet Cabinet Retailer Achieves Massive Value Boost
For our clients the first thing we help them understand is what actually creates value in a company, something that most owners do not know. They are operating off of an assumption that says more revenue and more earning equals more value – and in some degree that’s true. But they are only pieces of a much more complex equation. There are usually many missing, hidden or unrecognized elements within a company that are actually value accelerators. For instance we have a client that’s a ready-to-assemble cabinet company that sells its products primarily on the Internet.
The original valuation on the company when we first started working with them was $3.4 million. Then we performed our ValueX3 assessment and discovered several valuation constraints within the company and also uncovered a large number of valuation “boosters” that we could immediately implement. We then developed a five-year product roadmap that closely aligned with those valuation drivers and then went back through the financial forecasts with a revised set of assumptions to match the new strategy.
With a new set of product plans and supportable forecasts, we advised the owner that the company could be sold for as much as $10 – $15 million to the right strategic acquirer that believes in the new vision for the company. The owner received an offer exceeding $10 million within 6 months after the ValueX3 engagement and decided not to sell until he could attract an offer of at least $15 million which will require another 6-12 months of forecasted growth according to the new plan.