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When Steve Katz and Mark Pankhurst, founders of Automated Catalogue Services, Inc., first retained us, the company was at an early stage of development with less than $1 million in revenues and a burn rate of over $1 million per year. ACS's business model was predicated on bringing together b2b vendors and buyers in well-defined vertical markets, through the use of CD-ROM based catalog databases. Subscribers use these to search, select and configure orders from graphically pleasing and data rich electronic industry catalogs. Our first step was to invite a leading publisher to invest in the company, not only to provide much needed working capital, but also to gain access to its market leading trade magazines. Bill Communications, a subsidiary of VNU, acquired 50% of ACS for several million dollars, provided the necessary working capital and entered into operating agreements to give ACS access to its circulation lists, advertising sales force, and print media. As a result, ACS was successful in proving its business model in one vertical market, which opened to way to establishing similar catalogs in more than 15 other business-to-business markets. We advised the founders to migrate at least one of their off-line 'marketplaces' to the Internet as a way to show the potential in an online environment short of a full rollout. Sterling Commerce, a leading e-commerce software and systems provider, entered into negotiations with ACS to make it a platform for the Sterling Internet division and proceeded to buy the entire company for $45 million. We represented the founders in the transaction while working closely with Broadview Associates who represented ACS and VNU. The founders generated a return of over 2000% on its original investment, and VNU booked an extraordinary gain of about $20 million (five times its original investment) less than two years after it became a shareholder.
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Mergers & Acquisitions | Strategy
Consulting | External
Corporate Development | © 2003 Atlantic Accord |
Often clients turn to us for
financing, when it is evident that the venture capital route is costly, unnecessarily
dilutes the founders, and does not yield much strategic benefit. In such cases we may
advise a two-step transaction. First, we will secure a strategic partner who brings
significant operational, marketing or technology benefits to our client, in addition to
obtaining some financing. After one or more years of operation and definitive proof of
success, at a second stage the client business is sold to the strategic partner or to a
third party. In this way, occasionally, stellar return on investment may be realized over
a relatively short period of time. 