HRC Architects ~10x EBITDA Expansion

Background

RookMedia (“Rook”), a Swiss-based company, sought to acquire its largest competitor, DomainSponsor (“DS”), to create a leader in the domain name monetization space, a sector of ad-tech/internet marketing. Despite being 15% of the size of DS, Rook had an unfair advantage and grand aspirations to absorb its much larger competitor.

Objective

Rook was seeking support and guidance on how to best acquire DS from a valuation and structural perspective, as well as how and where to raise the capital from. Rook engaged Harbor Ridge Capital (“HRC”) to advise on the transaction and fundraising. Also important to note, HRC’s founder had previously completed a transaction in the same space, thus fully understanding the business and value drivers.

Transaction Process

After conducting a financial analysis to determine the type of capital available from the debt markets, HRC refined the valuation and deal structure, which proved highly accretive to the acquirer. A term sheet was signed, and HRC began its fundraising process, which was expected to be challenging, given that a Swiss company would be acquiring a US company, and we were seeking a US-based investor. Also, Rook was quite a bit smaller than DS, and in an internet marketing industry, which is relatively volatile and not conducive to institutional investors. However, the combined businesses were expected to generate tremendous revenue and profit synergies, creating a highly compelling acquisition story and an ideal financing opportunity, which HRC illustrated the combination’s expected cash flow, along with the pro forma synergies.

Outcome

After a thorough outreach to a vast pool of target alternative lenders (unitranche and mezzanine), HRC identified a handful of highly interested parties. A term sheet was signed with two different lenders, one senior and one junior. The acquisition closed where the acquirer expanded their business by ~10x, and only took on minimal dilution, creating significant shareholder value.