HRC Advises Compliance & Cyber Focused Cloud Service Provider

Background

BlackMesh (“BM”) was seeking to explore its strategic options, as both owner-operators had been working day-to-day for 15 years and were looking to diversify their holdings with a liquidity event. They also recognized the challenges faced with continuing to grow a business to the next level of scale, and we’re open to exploring the market for the right strategic acquirer, who would value the business properly, while being able to monetize further what they’ve built to such a point.

BM engaged HRC, leveraging our deep network and expertise within the cloud and technology services verticals, as well as feeling comfortable due to a relationship established years prior, during which BM and HRC would regularly discuss the market, value drivers, and other opportunities within the space.

Objective

BM sought to sell majority control to a strategic acquirer who would be open to taking over day-to-day management of the operations, allowing the two owners to transition out of the business ultimately. BM wanted an acquirer who understood the near and long-term value of the business, factoring in current year growth, and the increase in profitability. Also, one who has clear, tangible synergies that would translate to incremental value beyond the standard financial drivers.

Transaction Process

HRC ran a targeted yet thorough process, presenting the opportunity to the right audience while effectively telling the story, supported by comprehensive materials. After receiving significant preliminary interest, it came down to two final bidders, which presented a challenging decision for the sellers. Both bidders had reached the sellers’ valuation expectations and were larger, private equity-backed strategics with a strong ability to close. Ultimately, we chose the party that had a higher portion of the consideration in cash, as well as didn’t mind the owners transitioning out of the company after a brief integration period. Therefore, within six weeks of the process starting, a term sheet was signed, and the due diligence period began.

Outcome

During the due diligence period, the process was quite ordinary and smooth, as BM continued to perform as projected, and there was no re-trading by the buyer. HRC was mindful in the planning phase of the process to be realistic and conservative with the company's projections, ensuring that expectations were managed on the buyer's side regarding what they would receive at closing. In the end, the deal closed 75 days after the term sheet was signed, which is quite common, with all parties being very pleased with the results. HRC is grateful for the opportunity to work with such a great company, run by two exceptional founders, as well as with the buyer, who displayed the utmost professionalism and straightforward behavior from start to finish.