Essex Telecom provides computer hardware and telecom services to its customers, the majority of the company’s revenues are generated by dial-up internet subscribers. The industry has gradually been shifting away from higher margin dial-up service to that of lower-margin, more labor-intensive wireless technology.

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.

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