Barry Epstein

President
Vertex Capital
bepstein4@sbcglobal.net
972-740-2740

ASP

Summit

2013

Vertex

Capital

Advisory services specializing in the Life Safety

sector
Buy and sell side advisory services across the
country
Representation of all types of buyers and sellers:
local, regional, private equity backed, public

Acquisitions throughout the Life Safety arena,

including alarms, integrators, guards, fire/fire
sprinkler, medical alert
ASP Summit 2013

Vertex Capital

Relish contracted recurring revenue

Good opportunity for growth through
acquisition
Low market penetration vs. other recurring
revenue (TV, internet, phone)
Banks are lending aggressively
ASP Summit 2013

Vertex Capital

Recurring revenue is a safe, steady base to

grow companies on
Diversification- No one customers MRR is a
meaningful percentage of revenue (wholesale
is sometimes an exception)
Entry and exit are very fluid
The industry is very leverageable

ASP Summit 2013

Vertex Capital

Local with $50k in mrr

Regional with $600k in mrr

National account buyer with $4mm in mrr

National company buyer with $8mm in mrr

ASP Summit 2013

Vertex Capital

Dealer with $6,000 in mrr

(no contracts/mixed phone lines)

Dealer with $32,000 in mrr (good contracts,

c corp)

Dealer with $70k in mrr (valuation

expectation)

Dealer with $180k in mrr (offices, own

central, kids in business)
ASP Summit 2013

Vertex Capital

Faster growth

More markets= more of a referral base

Pick up strong sales reps and techs

Replace attrition- buying an SDM 50 to stay

even

ASP Summit 2013

Vertex Capital

Accounts Only

Accounts + Balance Sheet Items

The Above + Keeping the Office and People

ASP Summit 2013

Vertex Capital

If wholesale, let your customers know

Put ad in state association newsletter

Put the word out at the association meetings

Dont assume he wont sell to you (2 old rams who hadnt

spoken in 12 years)

Look for orphans (Large buyers/small markets too much trouble)

Build a pipeline (They may sell in 4 years)

ASK CONNECTORS

ASP Summit 2013

Vertex Capital

Signed Contracts
Own The Phone Lines
Attrition Calculation (static pool)
Financial Statements with Adjusted EBITDA
Knowledge of Tax Implications
Legal Representation
Sell Side Representation (State to State)
Multiple Offers

ASP Summit 2013

Vertex Capital

Buyers throughout the country are offered the opportunity

to buy your company

Auction Process= Multiple Buyers with Different Scenarios

Your representative takes the emotion out of the

negotiation process AND knows what the buyers can do

The best deal is the maximized combination of Price,

Terms and Structure

Every year we do at least one deal where the highest price

is not chosen

ASP Summit 2013

Vertex Capital

Whats the multiple?

Does contract term matter?
Is there a minimum MRR?
Will the buyer keep my people? Rich man,
poor men
Do I have a shot at the holdback?
Is the multiple the price or + b/s items?
Does the buyer have the money?

ASP Summit 2013

Vertex Capital

Nonbinding

Multiple

Number of accounts

Amount of recurring revenue

LOI expiration date (ideally less than 4 years!)

Freeze period

Stock purchase vs asset purchase

Accounts only or assets (a/r, inv, veh, fix, lease)

ASP Summit 2013

Vertex Capital

Local
Company

Monitoring
Service
Medical Units
Inv,Veh,A/R,
Furn/EQ
Gross Total
Holdback
Est. Deferred
AT CLOSING

Est. holdback
return
Pretax total
Taxes at 21%
Total

RMR
$100,000
$10,000
$15,000
Invent/Ve
h

Multiple
40
18
12

10%
6%
Holdback

% Back

$436,000

60%

Private
Equity

$4,000,000
$180,000
$180,000

RMR
$100,000
$10,000
$15,000

$234,000
$4,360,000
-$436,000
-$261,600
$3,662,400

$261,600
$3,924,000
-$824,040
$3,099,960

90 day
Closing Period close

Multiple
38
38
38

10%
6%
Holdback

% Back

$475,000

10%

Public Company

$3,800,000
$380,000
$570,000
$234,000
$4,750,000
-$475,000
-$285,000
$3,990,000

$0
$0
$0

40

10%
6%

$47,500
$4,037,500
-$847,875
$3,189,625

$500,000

100%

assume small holdback

5% attrition basket

returned as pers
included in 10% holdback
Buys A/R, Inv and Veh

50
45 days accounts
new cust
12 months
% switch over 90100
12 month stick up
bonus

45
45
30

5%
6%

$4,500,000
$450,000
$450,000
$250,000
$5,650,000
-$282,500
-$339,000
$5,028,500

Holdback % Back
$500,000
$4,700,000
-$987,000
$3,713,000

60 day
close

6x in pers maybe

$100,000
$10,000
$15,000

$0
$5,000,000
-$500,000
-$300,000
$4,200,000

Holdback % Back

30 day
close

A/R- collects for 90 days for seller

Attrition basket of 5%, should get
60%
of holdback with 6% and 24%
attrition

125000

Super Regional

$282,500

75%

$180,000
$5,208,500
-$1,093,785
$4,114,715

60 day
close

basket

90 day

holdback, burg and

pers

$ 100,000
$ 100,000
$ 100,000

Buying A/R, veh, inv and fixtures

Gathering Information

Culling the Field of Buyers

Getting Letters of Intent

Due Diligence

Purchase Agreement

Closing

ASP Summit 2013

Vertex Capital

Attrition has settled down and will remain stable

Number of buyers on increase as banks keep lending

No killer app in sight to destroy monitoring revenue

Utilities trying again to gain tremendous market

share

Multiples will remain strong as private equity firms

have huge amounts of money on the sideline that
must be put to use

ASP Summit 2013

Vertex Capital

Barry Epstein
President
Vertex Capital
bepstein4@sbcglobal.net
972-740-2740

ASP

Summit

2013

Vertex

Capital