Dennis Hart sold his advertising agency for 7.1X. That sounds like a great exit but it disguises the complexity of the negotiations. Hart felt like he knew precisely how much EBITDA he generated until the buyer started questioning his math.
Hart walked away from the negotiating table twice. Eventually both parties were able to agree on a set of “add backs,” but this is a good reminder that, when it comes to selling your business, your EBITDA can be subjective.
To find out if you could fetch an offer for 7.1 times EBITDA, get your Value Builder Score.
Dennis Hart founded Apex Media Sales in 1993. Generating approximately three quarters of a billion dollars in revenue shortly before the company was acquired by a fast growing media organization in 2007, Apex specialized in long-form direct response television advertising, servicing religious and infomercial advertisers. The company’s growth was fueled by leveraging substantial advertising opportunities, creating a strong sales initiative and crafting trade agreements as a unique way to capture broadcast television and national cable network airtime. A key component of the company’s growth was the development of a mousetrap in the form of proprietary software.
The acquiring media company asked Hart to stay on as Vice Chairman. Today he enjoys semi-retirement; he continues his work at the company, actively managing a multi-million-dollar media schedule for In Touch Ministries with Dr. Charles Stanley, while enjoying the benefits of having sold his company.
Some Highlights Of The Show
Business: Apex Media
4:40: “It was against the law to have long-form advertising… When I stumbled on to it, I took it to my boss and he looked at it and pooh-poohed it and said, ‘A year from now, you won’t even know this term [infomercial].’”
5:40: “Since 2008 [the industry] has been tailoring off to some degree.”
6:05: $90 million in revenue.
9:15: “I’ve gotten to appreciate timing… I said to myself I was going to grow this company and I wasn’t going to dwell on an exit strategy… I was going to make myself ready for when the timing was right.”
9:50: “I was very concerned and focused on the timing of a sale.”
10:56: “I didn’t see myself as being capable of taking Apex down the road.”
17:50: “I didn’t know how long I could keep that steam up.”
18:30: “If somebody was smart, they would go to Worldlink and then they would come to us. We had the engine, they had the better marketing plan.”
19:10: “The sale went down as far as Apex was concerned, except it didn’t come together the way I had hoped it would.”
19:50: “When most people would think, there is no way I am going to sell, that to me was the best time to sell. That’s when I had the most to sell; I had to apologize for nothing.”
21:00: The letter of intent.
28:20: EBITA explained.
28:40: 7.1X EBITA, 95% upfront, 5% held for one year.
29:20: “More than once during negotiations I told them I didn’t want to sell the company.”
31:50: Adjusting the EBITA during negotiations.
35:18: “We told [the staff] and everyone’s jaws dropped… A few of the staff were looking to do a management buyout.”
36:18: “It was like a death in the family… There was a definite change in everyone’s behavior. It wasn’t pretty. It was probably the worst [part] of the whole thing.”
39:08: “In 2008 the bottom dropped out… They could see where most companies were having lots of difficulties… It was easy to believe back then that I would have had more serious problems.”
41:45: “It really hasn’t changed my life… I’m still working.”
42:39: “The folks who bought the company ran it into the ground… A year ago they just shut the company down.”
43:35: “That’s a hard pill to swallow… It’s your baby.”
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