When first learning of this acquisition opportunity, the first thought was, this will take a miracle to get done. The Client (“RM”), the second largest player in the domain name monetization space, a form of internet marketing, with roughly $3mm of EBITDA, was interested in acquiring its main competitor and the largest player in the space, Target (“DS”), which had around $20mm of EBITDA at the time. Beyond the obvious size differential in seller vs. buyer, there were other material challenges

RM was based in Zurich, Switzerland, while DS was based Los Angeles

The industry had declined since the recession, yet flattened out in recent years

Google, their largest supplier, represented 80% of revenue

Very niche, nuanced business; hard for investors to understand 

Adtech had soured most investors due to the volatile nature of the business, and overarching control of Google 

RM was not private equity backed, and hadn’t made an acquisition before 


All the more reason for RM to engage a specialist like HRC, to advise on the transaction, raise the financing, help with the integration plans, and other areas which were uncharted territory for RM. While the challenges were plentiful, and this certainly classified as a “hairy” deal, there were several key fundamentals making the opportunity very compelling and likely to get done, with a properly run process. This included:

• An attractive acquisition multiple of DS

Large amount of pro-forma EBITDA to raise capital against – $25mm

Low pro-forma leverage multiple 

RM management knowing the business inside and out, with significant synergies

RM having strong management team to lead the combined business


With this in mind, HRC was up for the challenge, and we engaged in a formal contract, (monthly retainer plus success fee), and got to work. The sellers were interested yet required some coaxing given RM’s size, lack of private equity backing, etc.., yet were cognizant of the strong fit and synergies. After much back and forth, the term sheet for the acquisition was signed, with a 60-day window to raise financing, diligence the transaction, and close the deal.  

With any deal, the way the company is positioned and how the story is told is immensely important. HRC having extensive private equity experience in addition to advisory, proved highly valuable in how to best tell the story, the positioning, and how to highlight key aspects of the business. Further, our comprehensive fundraising materials spoke the same language to the target audience of investors, answering the expected questions with tangible operational and financial information. Additionally, we needed to combat the stated challenges, yet be open about certain negative elements, and address them head on, vs. any kind of omission of the truth. This all ensured the highest likelihood of closing and at the strongest valuation. Ultimately this deal was not for everyone, and with HRC’s depth of network, and thorough process, the right investors were identified, which were comfortable with the level of risk/reward of the deal.

After all was said and done, the transaction closed, and $50mm was raised with two different types of debt financing. With the acquisition, RM grew their business from $3mm to $25mm in EBITDA, and a top line north of $100mm, all with minimal equity dilution. Post-acquisition the combined company was undeniably the industry leader, paid down all of its debt after a few years, and significantly arbitraged the value of the equity. 

HRC proved instrumental through every step of the transaction, and had developed a strong working with relationship with the management of Rook. So much so that after the transaction, Cyrus Maghami of HRC was offered an interim-CFO role with the company that he held for nearly a year after the closing.  

About: Harbor Ridge Capital is a leading M&A boutique, with a focus on technology verticals, including software, IT/Cloud services, marketing technology, and healthcare IT. Learn more at www.harborridgecap.com. 

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