Deal: This week Boston based NaviSite, Inc. (NASDAQ: NAVI), acquired two privately-held providers of hosting services – Alabanza (Maryland) and Jupiter Hosting (California) for total cash consideration of approximately $15.5 million.Read between the lines – ”Alabanza and Jupiter fit neatly into our managed hosting offerings and were acquired at less than four times expected synergistic EBITDA,” said Arthur Becker, Chief Executive Officer of NaviSite.Definition 1 – “Less than” usually means “very close to”. For arguments sake lets call it 3.9X EBITDA. Definition 2 – “Expected” Denotes in the future. This can be interpreted in many ways. As short as 12 months following the acquisition or the period starting after integration. This could be a wide range. You know where my thoughts are. Definition 3 – "synergistic EBITDA” – What buyer’s expect after all changes are in place after the acquisition. This often includes: savings due to certain senior management restructuring, accounting consolidation, network optimization, marketing efficiencies, perk reduction (For example purposes only: Mercedes, aviation fuel, executive retreats, seminars etc.), and many other corners of the P&L that need trimming.
Growth – Not stated but I believe NaviSite is including anticipated Alabanza and Jupiter growth during the synergistic future.So is the value “less than four times expected synergistic EBITDA”? Only the future will tell. But the current EBITDA (what is being sold today) value - we know is higher than 4X. My guess is closer to the 5 or 6X EBITDA range. Mentally I am at the higher end.
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About Tom Millitzer
I am an M&A guy. I sell Hosting Companies. I want you to fulfill your dreams. If you are building your company or exiting for success...I want help you grow rich.
I started NCC International in 1994, we represented our first hosting company in 1997. NCC has completed over 400 assignments. If you are considering buying or selling you need to know me. I do not bite.
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