The Winning LOI [Vol. 4, Issue 2, No. 54]
Welcome to the latest issue of The Winning LOI, the Axial newsletter that anonymously reveals small business M&A valuation data…
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Welcome to the latest issue of The Winning LOI, the Axial newsletter that anonymously reveals small business M&A valuation data and certain key deal terms associated with winning LOIs.
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In today’s issue, we break down the LOI for a Technology company that specializes in providing high-performance managed Wi-Fi solutions. The business reported a revenue range of $3M-$4M and an EBITDA range of $1.5M-$2M when the deal confidentially went to market via Axial. The winning LOI was executed 20 days after pursuit and successfully closed 125 days later.
The deal was shared with 922 recipients and was pursued by 90 buyers, resulting in a 9.76% pursuit rate – 45% higher than the average for Technology deals within the same EBITDA margin. For more top-of-the-funnel deal activity insights, check out the latest issue of The SMB M&A Pipeline.
Of the 90 Axial buyside members that pursued this deal, 50% were Search Funds or Independent Sponsors. The winning LOI, however, came from the next largest buyer category—an individual investor who successfully closed the transaction. See the full breakdown below.
Pursuit By Company Type
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See below for Winning LOI #55’s anonymized data ⬇️
| The Deal | |
|---|---|
| Deal Type | Change of Control |
| Revenue Range (TTM) | $3M - $4M |
| EBITDA Range (TTM) | $1.5M - $2M |
| EBITDA Margin Range | 45-50% |
| Key Industries | Technology |
| In-Market Date | Q1 2023 |
| Axial Deal Data | |
|---|---|
| Recommendations* | 922 |
| Recipients* | 922 |
| # of Pursuits* | 90 |
| Deal Pursuit Rate* | 9.76% |
| Winning LOI Pursuit to LOI Executed | 20 Days |
| Winning LOI Executed to Deal Closed | 125 Days |
| The LOI | |
|---|---|
| Purchase Price Range | $5M - $6M |
| EBITDA Multiple Range (TTM) | 3.5x - 3.75x |
| Exclusivity | 90 Days |
| Structure | |
| ➡️ Cash | 76% of TEV |
| ➡️ Rollover Equity | ❌ |
| ➡️ Seller Note | 24% of TEV |
| ➡️ Earnout | ❌ |
| Axial Sell-Side Member Data | |
|---|---|
| Member Type | Business Broker |
| Total Deals Marketed on Axial | 20 |
| Average Annual Deals Marketed | 5 |
| Average Revenue of Deals | $4,675,379 |
| Average EBITDA of Deals | $1,427,799 |
| Axial Buyside Member Data | |
|---|---|
| Member Type | Individual Investor |
| Number of Acquisitions | 2 |
| Buyside Pursuit Rate* | 14.18% |
| Buyer Responsiveness Rate* | 94.72% |
Definitions:Â
*Recommendations: Axial sell-side members receive a matching set of buyside members for every deal they manage via Axial. A buyside recommendation refers to a specific buyside Axial member who matches a particular deal, also known as a “buyer match.”
*Recipient: A recipient is a buyside member who has been granted access by an Axial sell-side member to review a particular deal.
*Pursuit: Axial buyside members express initial interest in a deal by clicking “Pursue”, after which they can access and sign the NDA.
*Deal Pursuit Rate: The deal “Pursuit Rate” is defined as the number of times a particular deal is pursued by unique buyside members (i.e. the buyer shows explicit interest in exploring the deal) divided by the total number of buyside firms invited to evaluate the deal
*Buyside Pursuit Rate: The buyside “Pursuit Rate” is defined as the number of deals pursued by a particular buyer throughout an entire Axial membership term, divided by the total number of deals sourced during the same timeframe.
*Buyside Responsiveness Rate: The buyside “Responsiveness Rate” is defined as the rate at which a member responds to teaser shares within 5 days. The calculation initiates when a member has a minimum of 10 teasers and is calculated based on the member’s last 100 teasers received.
Disclosures: All data presented in The Winning LOI is anonymized to respect and protect the confidentiality of Axial members and their transactions. Data is provided to Axial by Axial members in accordance with the Axial Member Terms of Service. Axial has endeavored to present data accurately, but Axial does not and cannot fully verify the accuracy of the presented information. Information contained in The Winning LOI is for informational purposes only and does not represent investment advice or recommendations of any kind.
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