Page 46 - GS150702
P. 46
Education
StreetSmarts SM
Considering a sale of your
portfolio – think again
By Jeffrey I. Shavitz organization, and we shared a similar philosophy of where
Affinity Solutions Inc. the industry was heading and how best to accomplish our
mutual goals.
f you need access to growth capital to purchase
smaller companies, pay your sub-agents, invest in Selling a business or a portfolio is a complex transaction
marketing and staff, or develop your IT systems, – and it's the same paperwork whether your company
I where are you going to get it? This is a question that has 100 merchants, 1,000 or 10,000 merchants. Yes, there
continually rears its head in the payments industry. are more zeros, but the intent is similar in completing a
transaction.
Banks and traditional sources of capital don't understand
the business and won't lend at any price, while One major distinction between receiving capital for
nontraditional lenders charge astronomical fees, impose running your business versus my situation in selling my
inflexible terms and demand short maturities. company to a new entity is that receiving an influx of
capital is different than understanding a potential buyer's
As a result, people previously thought their only vision and mission statements and determining whether
alternative was a sale of their portfolio. Unfortunately, the philosophy of the existing and new management team
many people did not consult tax counsel. They thus found will work well together (maybe this can be the content for
themselves incurring the painful wrath of the IRS and an upcoming article). But again, to protect myself, I advise
paying steep interest rates to the IRS, and even steeper you to consider what I have to say, but check with your
penalties. financial advisers (legal, accounting, etc.) before making
any decisions. This way, I can sleep at night.
Please understand that I am neither a tax attorney nor a
CPA, but many of my friends in the industry who own This article is not about determining the current multiple
ISOs or, conversely, are merchant level salespeople (MLSs) for your portfolio; is it 20 times your monthly residual,
running one-person offices will ask me for my opinion 24 or 36? I don't know. If you don't know, you probably
regarding company or portfolio "exit" strategies. should find out; it's always better to negotiate terms when
you "don't need" the capital. Portfolios with a particular
Approximately three years ago, my partners and I sold industry concentration may achieve a higher multiple
our company Charge Card Systems Inc. to CardConnect, versus a general portfolio of many industry niches.
and I experienced both the legal and accounting issues Historical attrition numbers play another significant
during that transaction. I was very fortunate to have been variable. You get the point.
introduced to a great team of people at the CardConnect
46
StreetSmarts SM
Considering a sale of your
portfolio – think again
By Jeffrey I. Shavitz organization, and we shared a similar philosophy of where
Affinity Solutions Inc. the industry was heading and how best to accomplish our
mutual goals.
f you need access to growth capital to purchase
smaller companies, pay your sub-agents, invest in Selling a business or a portfolio is a complex transaction
marketing and staff, or develop your IT systems, – and it's the same paperwork whether your company
I where are you going to get it? This is a question that has 100 merchants, 1,000 or 10,000 merchants. Yes, there
continually rears its head in the payments industry. are more zeros, but the intent is similar in completing a
transaction.
Banks and traditional sources of capital don't understand
the business and won't lend at any price, while One major distinction between receiving capital for
nontraditional lenders charge astronomical fees, impose running your business versus my situation in selling my
inflexible terms and demand short maturities. company to a new entity is that receiving an influx of
capital is different than understanding a potential buyer's
As a result, people previously thought their only vision and mission statements and determining whether
alternative was a sale of their portfolio. Unfortunately, the philosophy of the existing and new management team
many people did not consult tax counsel. They thus found will work well together (maybe this can be the content for
themselves incurring the painful wrath of the IRS and an upcoming article). But again, to protect myself, I advise
paying steep interest rates to the IRS, and even steeper you to consider what I have to say, but check with your
penalties. financial advisers (legal, accounting, etc.) before making
any decisions. This way, I can sleep at night.
Please understand that I am neither a tax attorney nor a
CPA, but many of my friends in the industry who own This article is not about determining the current multiple
ISOs or, conversely, are merchant level salespeople (MLSs) for your portfolio; is it 20 times your monthly residual,
running one-person offices will ask me for my opinion 24 or 36? I don't know. If you don't know, you probably
regarding company or portfolio "exit" strategies. should find out; it's always better to negotiate terms when
you "don't need" the capital. Portfolios with a particular
Approximately three years ago, my partners and I sold industry concentration may achieve a higher multiple
our company Charge Card Systems Inc. to CardConnect, versus a general portfolio of many industry niches.
and I experienced both the legal and accounting issues Historical attrition numbers play another significant
during that transaction. I was very fortunate to have been variable. You get the point.
introduced to a great team of people at the CardConnect
46
