Employer Solutions Group

Provo, Utah

has been acquired by

Fortune Industries, Inc.

Indianapolis, Indiana

Capital Alliance Corporation initiated
this transaction and assisted in its closing.

Employer Solutions Group

The Selling Company: Employer Solutions Group, (ESG HR) is a Professional Employer Organization (PEO) providing outsourced Human Resource Services; including health insurance, worker’s compensation insurance, payroll and related tax services, retirement plan administration and other employee benefit services to hundreds of small private employers. Under the law, a co-employer relationship exists between ESG HR and its clients, with ESG HR functioning as the employer’s human resource department thereby permitting the client companies to focus on their core competencies. At the time of the sale, the company provided services to more than 375 employers and 6,700 worksite employees.

Why the Company Was Sold: The shareholders started and successfully grew the company, only to suffer a major financial setback caused by a variety of factors, including exploding claims in their health insurance program. After correcting those problems and returning the company to significant growth and profitability levels, the shareholders were considering an acquisition strategy to boost earnings to a level that would provide their expected value from a sale in the near future. Capital Alliance introduced ESG to another PEO that we represented, but, ultimately, ESG was not successful in their price offering for the company. However, as a result of our professional handling of that client and the very high valuation we achieved, they contacted us about representing ESG in a sale transaction.

Capital Alliance’s Performance: Our industry knowledge and M&A experience enabled CA to generate interest from several strategic and financial buyers. After several offers were generated, CA strategically introduced a relatively new operator to the PEO industry who was seeking aggressive expansion and looking for talented people in addition to pure operating assets. We generated an offer worth more than 49% above our client’s expected value and, in carefully structured negotiating sessions, we were able to improve both the terms and the price of the initial offer and complete the negotiation and drafting of the purchase agreement within two weeks of introduction.

Terms of the Transaction: The purchase price was $11.2 million, of which $9.1 million, or 81%, was paid in cash at closing.

The Acquiring Company: Fortune Industries, Inc. (AMEX:FFI) is a diversified holding company formed from a reverse merger transaction and relatively new to the PEO industry. The company, through three previous PEO acquisitions, including one represented by Capital Alliance Corporation, has begun a strategic march to grow their PEO operations. ESG HR represented a significant addition to the client and worksite base of the PEO operations, while strengthening IT assets and the quantity and quality of their internal employee base. As a result of this acquisition, FFI’s PEO operations have an annual payroll base of more than $640 million, representing 16,000 worksite employees.