Model Agreements:

Mergers & Acquisitions

Acquisition Letter Sample

Confidential Acquisition Funding Request for Cashflow Publishing

Strategy:  Acquire an under-performing newspaper publishing company in a growing and under-served market.  The property must have significant cash trailing cash flow, and be available at a discount on current market values.

The Market:  The prospective property is located in South Central Washington State (Yakima Valley) and serves a diverse population in excess of 400,000.  Harry Dent in his future growth book, "The Roaring 2000's", identifies this region as a pre-boom area destined to grow significantly over the next 15 years.

The Product:  The current company to be acquired publishes a variety of local and regional papers, a series of Spanish language papers (population is 30% Hispanic), travel guides, wine guides and other specialty publications.  There is no large competitor, nor is one likely because of the company's current dominant position in the region.

The Company:  The target acquisition is a 35 year old company and is for sale by the founder and current publisher.  The current owner wants to slow down due to health problems, but is willing to stay as a commissioned sales person and consultant for a minimum of two years to provide a smooth transition for the new owners.  Current staff is all long term and will stay on after the transition.

Current Financial Condition:  The Company is to be acquired is debt free, has annual sales of $750,000 per year, and is growing 10-12% per year.  Taxable income has been in the $50-80,000 range.  Seller's discretionary cash flow for 1997 and 1998 (projected) is $175,000 per year.

Acquisition Costs:  Acquisition terms and conditions have been negotiated to $800,000 with a $200,000 down payment and seller take back financing of $600,000 @ 8% on a 15 year note.

Venture Funding Required:  Expansion plans to consolidate some publications and expand to the Tri-Cities Area require a capital infusion of $500,000.  The additional $300,000 will be earmarked for expansion and consolidation expenses and working capital.

Expansion:  Consolidation and expansion of various publications will be implemented.  The Yakima valley is rapidly becoming a "Northern Napa Valley" and a wine publication is under discussion.  Special section advertising for automobiles, real estate and food and wine sections can be added.  The company also will be expanding its Legends Casino Newsletter for the local Indian Casino business.  Expansion to the Tri-Cities offers major growth potential.  The principals believe they can double the sales in five years with only a 35% increase in overhead.

Participation and Exit Strategy:  The principals are open to a variety of financing options.  A blend of common and convertible preferred stock is proposed and will assure a reasonable return prior to an anticipated exit strategy by sale to a large national business chain after five years.  Future valuation of $3 - 5 million could be achieved under the current acquisition and expansion plan.

Financial Returns:  Projected financial returns for the company are well above national averages due to the underutilized assets and low current marketing effort.  The company is expected to generate a 30% EBIT cash flow after acquisition.

The Management Team:  The strongest possible management team has been assembled to assure financial success. 

President and General Manager:  John Smith has a thirty-year career in media and advertising sales and management, event sponsorships, and retail entertainment.  He was President and General Manager of radio station KYTX in California, Vice President and General Manager of KFOX, News Radio in San Francisco, and he had a long career with WLUV in New York City where his last two positions were General and National Sales Manager.

Chief Financial Officer:  William F. McCready is currently the Principal of Venture Planning Associates, a Hawaii-based business planning and venture capital company, McCready is an equity owner in a number of venture projects including Studebaker's restaurant chain in Australia, Sanchez Communications Corp., radio broadcast company in Hawaii and Vivian Greene Enterprises, a greeting card and licensing company.  Previously, he founded and developed a Network Marketing Company, a $247-million wholesaler of diversified consumer products in Japan, Taiwan, Mexico, and the United States.