How Does a Business with Negative Equity Sell Four Years Later for about $10mil?

Over the course of sixteen years, I took my original business, Maxwell Training Centers, Inc, on a long path, starting in computer training, transitioning to a distance learning company, and ultimately becoming a provider of web conferencing services to the pharma industry as MedConference LLC. The computer training business had run its course, and new technologies were creating an emerging market for eLearning solutions, webcasts, and webinars. It sounds crazy on the surface, but all of these changes directly led to me selling my business for just under 10 million dollars. There were 3 changes crucial to this outcome you may want to know.

1.   Addressing the Challenge - Cashflow

As always, the #1 challenge was managing cash flow during the transition phase of about eighteen months. Since traditional bank financing was not an option and we declined an investment from Merck Capital Ventures, we opted for a Convertible Notes Offering, and I spent months making presentations to numerous private investors which resulted in raising $250,000. To avoid layoffs, we implemented an Employee Stock Option Plan (ESOP) as a way of offering a long-term incentive since in the short term we were all taking pay cuts.

 2. Re-Building the Team

As we all know you are only as good as your team and our dramatic shift in a short period meant we needed to re-assess our talent. Like many small businesses, we had a strong core of dedicated employees, but we also need to bring in new talent. I’m a big fan of internal promotions however I also believe you need new blood with different backgrounds and experience to challenge the norm and positively change things.

3. Pivoting and Execution

In my experience, the business you sell will look much different than the business you started. Knowing when to “pivot” requires a strong dose of personal conviction and perseverance. In my case, the tactics that allowed us to take advantage of a new market opportunity required that we share the equity with both employees (ESOP) and investors (Convertible Notes Offering). Your proof of concept is landing some high profile accounts in your new market which helps both your cash flow and visibility in the M&A world. 

The Final Result

In late 2006, I negotiated the sale of our company to a public company (inVentiv Health Inc.) for a multiple of roughly 7x EBITDA (approximately $10mil). At closing, the founders owned approximately 80% of the stock and the remaining 20% was split among employees and new investors. By sharing a 20% stake in the company, it allowed a struggling company to become a niche market leader and increase total shareholder value exponentially.

That’s where Stony Hill Advisors comes in; we’ve been involved in selling businesses in a multitude of industries with a concentration is B2B services, technology, healthcare, and manufacturing. We are entrepreneurs and former business owners who conduct engagements with the highest form of professionalism and confidentiality. Interested in learning more? Feel free to contact me at [email protected] or 610-600-1060. I’d be happy to see how much-hidden value we can find in your company, together.