Success Stories

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Mergers & Acquisitions

Success Story 1 (Mergers & Acquisitions)

The Opportunity

The shareholders of a closely held Practice HIT software vendor that primarily served a high end specialty sector of medical providers had been considering the sale of their business for several years but the company continued to grow and generate attractive cash flows to the owners. Novahill Partners was asked to help the shareholders review their strategic alternatives regarding selling today, merging the business, bringing in new investors or keeping the status quo.

The Challenge

Our client was one of the leading PM/EHR vendors in its specialty, and was rated as having the highest user satisfaction rate among competitors in the specialty sector. However, the business only had two full-time sales people and no one in the firm had much marketing experience. Outside capital was needed to expand the sales staff and add software developers to keep abreast of the increased requirements from CMS and its Meaningful Use guidelines.

Our Strategy

We analyzed the company, highlighting those features of its business that would be attractive to potential limited partner investors as well as strategic buyer candidates. Novahill identified an extensive list of financial investor candidates as well as a more selected list of strategic buyer candidates. We developed an informational package for investor/buyer candidates that highlighted the key strengths of our client as well as, on a selected basis, the strategic fit of our client’s business with a potential buyer. We then approached the client-approved list of investor/buyer candidates, established bidding guideline rules and helped answer questions from interested parties. One buyer candidate in particular wanted to pre-empt the bidding process from the outset. We advised our client to allow Novahill to continue to conduct discussions with other interested buyers while at the same time attend to the request of the pre-emptive suitor.

The Result

Our client received several Indications of Interest and had tangible evidence that the pre-emptive suitor was offering the most attractive terms and conditions. The pre-emptive suitor was aware that our client had multiple bidders so the negotiations on the finalization of the sale contract went smoothly and quickly. Our client closed on the sales of its business in 30 days and at terms and conditions that yielded premium pricing.

 

Success Story 2 (Mergers & Acquisitions)

The Opportunity

A European private equity fund was approached by a U.S. strategic buyer to acquire one of its industrial portfolio companies. The strategic buyer offers an interesting price but wants exclusivity to move further.

The Challenge

The industrial portfolio company was in the beginning stages of recovering from a significant restructuring program, and its full earning potential had not yet been proven. However, the private equity fund was about to begin fund raising for a new fund and wanted to return some capital back to its institutional investors.

Our Strategy

We analyzed the industrial company and highlighted the earning power of the business when the one-time restructuring costs were extracted from a "normalized" earnings stream. We then helped develop a presentation of the industrial company that properly reflected its value as a leader in its market with attractive growth potential. While we entertained preliminary discussions with the U.S. strategic buyer to clarify several issues in its offer, Novahill discreetly talked to the top 3 other strategic and selected financial buyers to ascertain a sense for the market's interest in the industrial company.

The Result

The European private equity fund sold the business to the U.S. strategic buyer at a higher price than was initially offered and well above indications of interest from other qualified buyers.

Strategy & Restructuring

Success Story 1 (Strategy)

The Opportunity

The shareholders of a Novahill client were considering the possibility of selling their Electronic Health Record/Practice Management software business, an enterprise catering to ambulatory providers in a particular medical specialty. The shareholders of the client, however, did not understand what their business could be worth to potential strategic as well as financial buyers.


The Challenge

The client’s business had been established over 20 years ago and its customer base expanded only modestly in recent years. Our client’s underlying technology and business practices had not kept current with leading edge HIT software vendors. There was a significant possibility that buyer candidates would only value the business on its customer list, and thus the sales price would be below the aspirations of our client’s shareholders.

Our Strategy

After an in-depth financial analysis of the company as well as a comparative analysis of the client’s technology and business practices vis-a-vis its main competitors, Novahill made several recommendations regarding technology, products and pricing models to enhance the recurring revenue streams of the business. Novahill’s recommendations included expanding the company’s product lines that strengthen customer relationships and increased cash flow, modifying the company’s pricing model to encourage more recurring revenues on a contractual basis and enhancing selected product offerings with a cloud based alternative.


The Result

Our client’s business has grown its revenues and improved its cash flows significantly over the past two years. Correspondingly, the client’s business could garner values in today’s market at prices at least double what the business was worth before we were retained as a corporate finance strategic advisor. The shareholders now have several more attractive options they can consider in order to monetize their investment in the business.

 

Success Story 2 (Strategy)

The Opportunity

A European private company had an opportunity to substantially grow its revenues in the U.S. by developing its distribution channels and introducing selected new product offerings for the U.S. market.

The Challenge

The private company had reached its credit limits with its European banks and the company's shareholders were not in a position to infuse significant amounts of new equity capital into the business.

Our Strategy

We utilized the private company's base of assets in the U.S. market as a basis for sourcing new capital. We presented a proposal to the private company's European lenders which gave them comfort as to the credit quality of their existing loans, based on the company's European operations, and convinced them to allow for a release of security on the U.S. assets. We next identified financial institutions in the U.S. market that would provide loans against the U.S. assets without recourse to the parent company's assets or cash flows.

The Result

The European private company was able to establish a new source of funding for its U.S. operations at reasonable costs of capital.

 

Success Story 1 Restructuring)

The Opportunity

A micro cap public company acquired a subsidiary of large multinational corporation, thereby almost doubling the size of the acquirer and creating a need to integrate the two businesses into a new corporate structure.

The Challenge

Both businesses of the acquirer were using different and older versions of the operating and accounting software. These antiquated systems slowed and complicated the monthly and quarterly closing process.

Our Strategy

We studied the two software packages and assessed updated versions of both systems. We worked with the acquirer's internal staff to understand their needs and evaluated their responses. We negotiated with both vendors to obtain the lowest possible price and the shortest implementation time. Based on our review of the staff responses, the cost, system functionality and the timeline to implementation, we recommended to the senior management which package to select.

Based on our review of the company's reporting requirements and nature of the businesses, we concluded that certain operational realignment would improve the company's cash flow. Working with senior management, we recommended a restructuring of the company into two distinct new business units, each unit with a President reporting to the company's CEO and a Controller reporting to the CFO. This allowed our client to improve its focus on the two distinctively different market places while also enhancing its internal controls.

The Result

The implementation of the new software package was successful, and the aggressive time frame that the corporation desired was met. The cost of acquisition and implementation of the new system was lower than budget due to careful management of the time that vendor consultants were utilized. The cost savings were then used to purchase additional modules of the software that were not included in the original scope. The establishment of a single, companywide general ledger improved the monthly and quarterly reporting cycle.

The company set up two new business units. This allowed for more directed marketing, operating efficiencies and improved internal and external reporting. Within each new operating division, the pre-existing business units continue to operate, but the reporting systems and internal & external communications became more simplified and efficient.


Success Story 2 (Restructuring)

The Opportunity

A private company had been incurring substantial operating losses in light of a significant down turn in the capital intensive segment of the market it served. The company's products were high end, leading edge technology instruments.

The Challenge

The company's technology, with proper repositioning and broadening of its distribution channels, could access new industry sector segments in the international markets.

Our Strategy

We studied the market potential and competitive landscape of the certain new end markets and made recommendations on which niches of the market under consideration could result in the higher value creation for the client.

The Result

The private company was able to develop new end market customers and diversify its revenue base to combat a cyclical down turn. Within two years, the client's end markets served rebounded from the cyclical down turn, and the client's business valuation was enhanced with a stronger and more diversified revenue stream.

Corporate Divestitures

The Opportunity

A public corporation acted as the holding company for four distinct and different industrial businesses. A large shareholder of the public holding company was applying pressure to liquidate its shares in the company.

The Challenge

The public company was selling at a conglomerate's discount to the market of other industrial peers. The stock of the public company was too illiquid for the large shareholder to sell a meaningful block of its stock.

Our Strategy

We reviewed the option of selling the public company as a whole to strategic or financial buyers. A sum-of-the-parts analysis was also conducted, showing a significant advantage in selling the company in four separate pieces.

The Result

After orchestrating two relatively quick and attractive auction processes for divesting the larger divisions, it took another several months to effectuate the divestiture of the remaining two businesses in a more deliberate sale process with a limited number of buyers seriously in pursuit. The net cash generated in the sum-of-the-parts divestiture strategy yielded a return that was 40% higher than the straight sale of the entire company.

Fairness Opinions

The Opportunity

A privately owned U.S. company with public debt had an opportunity to restructure its operations and turn around one of its primary subsidiary's operations. A U.S. hedge fund was prepared to provide the capital for the restructuring program, with expensive cost of capital terms and conditions. The Board of Directors of the private company needed an arm's length fairness opinion to ensure the transaction was deemed fair from a financial point of view for all stakeholders in the company.

The Challenge

Certain dissident bondholders of the company's public debt were applying pressure on the controlling shareholder to forgo any further restructuring efforts and instead file for Chapter 11 in the bankruptcy courts.

Our Strategy

We analyzed the structure of the proposed new capital financing, reviewed the business plan of the restructured subsidiary to assess its feasibility, and weighed the alternatives for the company without the restructuring program. Due consideration was given to the public bond investors as well as the private shareholders.

The Result

We provided a fairness opinion on the funding for the restructuring program. The hedge fund provided the new capital and the company implemented its restructuring program. One year later, the company's cash flows improved significantly to the point where all public debt had been retired at par and the hedge fund investor had been paid off.

Capital Raising

The Opportunity

A closely held medical device company had obtained several patents for a unique device to transfer patients between a hospital bed and gurney. Production had begun and sales were being made to major regional hospital organizations. We assisted in obtaining financing for the first production run from a prominent private equity group, but after further analysis, we determined that the company needed $5 million in additional equity capital to meet new sales demand.

The Challenge

Most institutional investors are unwilling to participate in a transaction where the company does not have an established track record and sales orders are not confirmed. Hospital groups were unwilling to issue purchase orders without documented evidence that the new device would save money and the company did not have the people and financial resources to conduct such a study.

Our Strategy

Through the network we had cultivated in the private equity/venture capital community, we arranged several meetings with interested investors. The assignment included developing a detailed three year financial plan including a bank letter of credit program to allow for the production and shipment of product from Asia plus a capital allocation to conduct a cost savings study for hospitals. Once the financial plan was agreed on with management, we helped prepare marketing documents, including a one page teaser, a three page opportunity description with more detail, and a 50 page business plan.

The Result

We obtained a detailed term sheet from a venture capital firm that specialized in the healthcare sector, providing the $5 million capital, plus a $1 million bonus for management if certain sales targets were met. Of particular note, the VC firm was willing to take a minority position, a highly unusual situation given the relatively early stage of the company. Another plus was that the firm had extensive ties to the hospital community that could open doors for additional sales.