Success Story: A Swift Acquisition & Exit Combo
Learn how SPRCHRGR created financial reporting fluency, efficiency, and clarity for its client NTERSOL, as it acquired one company and then successfully sold - all within six months.
Core Challenge
NTERSOL, a U.S.-based firm that develops software for mortgage lenders on a consulting basis, wanted to position itself for sale on a tight timeline. Just six months before the target transaction date, NTERSOL itself acquired another solutions technology firm to sweeten the pot. This was no small feat. In their press release, the company NTERSOL purchased was “a powerhouse of digital transformation offerings for the financial services industry.”
For years, NTERSOL had perfected a very profitable business model based on a proprietary process grounded in recurring revenue. NTERSOL was achieving a fast pace of organic growth while retaining its profitability. The company also had an excellent opportunity to make a smaller “bolt-on” acquisition of a company serving a similar customer base—both proving its ability to grow through acquisition and creating a bigger return on its investment—in a very short amount of time.
Why is all this a problem? To the untrained eye of a future buyer, NTERSOL's profit margins might have appeared unusually high given industry comparable data. It could create a “too good to be true” reaction for prospective investors combined with their limited M&A track record.
NTERSOL needed a partner to ensure the buyer and seller could speak the same language and not jeopardize or derail any negotiations. They turned to SPRCHRGR’s expertise to help them bolster investor confidence through its fast, effective, and efficient transaction advisory services and deliver clarity through bespoke financial reporting solutions that would be vital to getting any deal to the finish line.
How We Supported & Supercharged
Speaking the same language
Like many startups, NTERSOL initially used cash-basis accounting upon its launch in 2018. However, as the company matured and sought to raise capital or position itself for sale, this approach became a liability. It could obscure the true measure of the company's financial performance. SPRCHRGR swiftly and efficiently completed NTERSOL’s cash-to-accrual conversion, providing meticulous supporting schedules. This created a GAAP-compliant comparison that investors could rely on to predict future performance.
Maximizing business value
In addition, SPRCHRGR helped streamline back-office processes to reduce the time senior management devoted to accounting tasks and eliminate redundancies, particularly in the accounting department, following the “bolt-on” acquisition, which resulted in greater cost efficiency. SPRCHRGR scrutinized NTERSOL’s books for add-backs to factor into the final sale price to CI&T, enabling NTERSOL to recoup nonrecurring expenses incurred during its acquisition of the smaller firm. SPRCHRGR was able to transition the smaller firm onto the same accounting and reporting structure as NTERSOL and handle the accounting for entity drop-downs during NTERSOL’s conversion from an S corporation to an LLC. In short, SPRCHRGR helped NTERSOL optimize and streamline its accounting and finance function – thus increasing investor confidence.
Clarifying the terms, verifying the numbers
Because NTERSOL's business model was based on recurring revenue, it was especially important to verify the numbers — and SPRCHRGR did just that. SPRCHRGR understood the specialized nature of NTERSOL's client contracts and was able to distinguish the appropriate profit in calculating EBITDA (earnings before interest, taxes, depreciation, and amortization). This up-front vetting process allowed for fast and simple verification of NTERSOL's quality of earnings during due diligence. The client could leverage SPRCHRGR’s expertise and deep knowledge to explain the complexity and instill buyer confidence.
Deal-making fluency
Ensuring the buyer and seller speak the same language requires fluency in the specific financial terminology dealmakers use while also breaking it down into terms familiar to business operators.
"SPRCHRGR specializes in clear financial reporting that puts numbers and words together in a way that reflects how we think about and talk about our business,” says Anthony Jenkins, CEO of NTERSOL. “They organized our financial data into an intuitive and concise at-a-glance summary. This was valuable for us in many ways, primarily in the day-to-day visualization of our performance so we could better manage our business. It then proved vital to help us communicate the value to investors and buyers during due diligence.”
Outcome
Value understood and shared
In the end, NTERSOL's quick and efficient acquisition provided a significant value-add. Because they could clearly show and prove this value, they were ready for the right buyer. Enter global digital specialist CI&T, whose insight and knowledge of the industry presented an obvious strategic alliance with NTERSOL.
SPRCHRGR's vital support enabled NTERSOL and CI&T to speak the same language and align on value. CI&T recognized that NTERSOL's team of 170 specialists operated at a high level of efficiency and domain expertise. Knowing it would have cost far more to get the same result from different sources, CI&T was willing to pay a premium.
A good deal all around
Essentially, CI&T benefited from a coveted bolt-on without having to perform a duplicate round of due diligence themselves. Better yet, the whole process took just six months. SPRCHRGR scrutinized the EBITDA add-backs in the final sale price to CI&T, helping NTERSOL to recoup nonrecurring expenses incurred on both sides during its acquisition of the smaller firm. Along the way, SPRCHRGR eliminated redundancies in NTERSOL’s accounting department, resulting in cost efficiencies still paying dividends for CI&T today.
By performing the role of translator—first in NTERSOL's acquisition of a smaller firm and later in CI&T's acquisition of NTERSOL—SPRCHRGR enabled all sides to get exactly the deal they were looking for. The ability to work with other parties to negotiate a win/win (or, in this case, win/win/win) deal is invaluable.
Helping parties reach an agreement, and accelerate
NTERSOL's ability to execute complicated deals quickly and efficiently — with SPRCHRGR's support — is a big part of why CI&T wanted to do this deal. As CI&T Founder and CEO Cesar Gon said when the sale was complete, "With the North American side of our business experiencing record growth, this acquisition enhances our ability to rapidly expand our team to meet the growing demands of existing and new clients as we continue to offer world-class digital transformation and digital efficiency capabilities at speed and scale."
“Our team’s ability to decipher the financial jargon and streamline the M&A process is an underrated yet vital service,” says Tim McCann at SPRCHRGR. “When approaching a life-changing decision like selling your business, it's impossible to comfortably navigate the process if you don't know what the other parties are talking about. There is a saying in M&A that ‘Time kills all deals’. Knowing what to expect lets you anticipate diligence requests and keep your deal on track through closing.”
Transaction advisory guidance to help buyers and sellers close deals faster
Optimizing the sale of your business is a stressful process. To get the best multiple, it's vital to have expert financial support in preparing for the transaction.
Contact us to have the transaction advisory guidance and insightful financial reporting you need for your next deal, or to prepare for your first one.