The Selling Company: Sequent, Inc., based in Columbus, Ohio is a 23-year-old professional employer organization (PEO) serving 225 small and mid-sized businesses (3,300 employees), with comprehensive, tech-enabled employment related services and HR consulting. The company’s service offering includes: payroll processing and administration, payroll tax administration, workers’ compensation insurance, health and other benefit administration and exceptional risk management for all employment related compliance matters. The company was well run, had a very good industry reputation and no debt
Why the company was sold: The company was formed by six friends, only one of whom was active in the business and served as Sequent’s CEO since its formation. The shareholder group wanted to monetize their long-term investment and desired a complete sale of the organization.
Capital Alliance’s Performance: As a result of Capital Alliance Corporation’s (CAC) strong industry recognition, CAC was invited to compete to represent the company in a sales process and ultimately awarded the engagement. We prepared a high quality Confidential Information Memorandum (CIM) and ran a targeted and formal process that produced eight written indications of interest that included a significant detail of transaction terms. CAC recommended the top three candidates and then approached each candidate with requests to improve terms and valuation. Additionally, CAC requested two of the three buyers to convert their offers into an all-stock transaction to facilitate a smoother acquisition and less complicated post-closing integration, as well as a 20% increase in after-tax proceeds to the shareholders. Near the end of the process, we delivered three formal Letters of Intent (LOIs) from highly qualified buyers, each with similar valuations and terms. CAC’s industry and transaction knowledge led them to recommend the best fit buyer, and the transaction was closed within 60 days of the acceptance of the LOI.
Terms of the Transaction: The selling shareholders received an industry leading 85% cash payment at closing, with a total transaction value exceeding industry average earnings multiples by approximately 35%. The deferred portion of the price was set up with an escrow account and subject to meeting very reasonable gross margin requirements.
The Acquiring Company: Resourcing Edge (REI) is a 15-year-old certified PEO (CPEO) based in Dallas, TX, serving over 15,000 employees. REI has a strong desire to expand to the Midwest sector of the U.S. and found the quality of Sequent’s employees and their earnings quality desirable enough to warrant a significant valuation. CAC has known the principals of REI for more than 12 years, which helped facilitate a smooth and successful closing.
