Private equity investor David Kennedy was clear when he invested in Jon Coss’s business: the goal wasn’t to sell but to be sought after by acquirers. Kennedy felt that sellers who approach potential buyers are at a disadvantage. Instead, he urged his CEOs to build irresistible businesses that attract acquirers.
Hear Jon explain the difference between selling versus being acquired in this clip.
Jon established Pondera Solutions in 2011, aiming to tackle fraud in U.S. government programs like Medicaid. In 2017, Kennedy’s Serent Capital invested eight figures to buy 50% of Pondera. By 2020, with Serent’s help, Pondera’s annual revenue surpassed $9 million. It was then that Thompson Reuters came forward with a reported $125 million offer.
Why such a premium for Pondera? Jon had nurtured a relationship with Thompson Reuters for nearly ten years. Pondera relied on data providers like Thompson Reuters to run its fraud detection algorithms. In 2020, Thompson Reuters made an offer that amounted to an incredible 13 times Pondera’s annual revenue.
☕ Can We Buy You a Coffee?
We’re conducting a “Built to Sell” Reader & Listener survey. It takes about 3 minutes to complete. We’ll send you a Starbucks gift card as a thank you for taking a few minutes. We’ll share the results here in the coming weeks. Please take 3 minutes and answer our reader survey.
📣 Quote of the Week
“We’re not selling, so if you want to buy us, we’re not really interested in messing around and you’re going to have to pay us what we think we’re worth.”
– Jon describing his response when Thompson Reuters first approached him about acquiring Pondera.
🏆 A Parting Keepsake
To celebrate the acquisition, Jon hung the Pondera lobby sign in his family game room as a memento.
- Bluware-Headwave Ventures Inc. (“Bluware”), a prominent company that provides advanced technology for understanding what’s beneath the Earth’s surface, particularly in the context of oil and gas exploration, is pleased to announce its acquisition by Computer Modelling Group Ltd. In the last fiscal year, Bluware recorded impressive total revenue of US$23.5 million, comprising US$17.7 million from services and US$5.8 million from software. Notably, Bluware achieved an estimated Adjusted EBITDA margin of 5%, equating to a valuation at 20 times EBITDA. CMG’s strategic investment in this acquisition totals US$22 million, with the possibility of an earn-out provision of up to US$8 million contingent upon the attainment of specific revenue thresholds associated with Bluware’s key contracts within 18 months of closing.
- Private equity firm Sun Capital Partners Inc. is selling Smokey Bones to FAT Brands Inc., the owner of Johnny Rockets, in a deal that values the Florida-based barbecue chain at approximately $30 million. With this acquisition, FAT Brands will incorporate 61 Smokey Bones locations spanning 16 states into its existing portfolio of 17 brands. The transaction values Smokey Bones at around three times its adjusted EBITDA, which stands at approximately $10 million.
If you know someone who has successfully exited their business and has valuable insights to share, we encourage you to nominate them.
(Was this newsletter forwarded to you? Sign up here.)