Internet Services
Strengthening market leadership and unlocking new growth opportunities for a leading internet services provider.
Company Background
The “Company” assisted clients in developing online business strategies, improving internal processes and developing interactive content using Internet-based technologies. Its customers were engaged in a broad variety of industries, including retail/manufacturing, finance/banking, hospitality/travel, media/entertainment and communications/utilities industries. The Company also developed, managed and operated companies in strategic Internet-focused market segments.
Challenge
The Company’s internet development revenues were growing rapidly, reaching approximately $36 million within two years; however, the Company’s incubator investments were draining capital. Its CEO required (1) a review of the Company’s financial reporting process to senior management and the board of directors, (2) a deep dive into its incubators portfolio to determine each investment’s potential value and which investments should be divested and (3) support in maximizing shareholder value.
The engagement required a complete reassessment of the Company’s financial reporting processes and evaluation of each portfolio company.
Contributions
Financial Reporting Process
- A review of all managerial financial reports, including the Board of Directors’ package.
- Create analyses of Internet sector financial reports to estimate relative market value and determine key performance indicators.
- Development of financial reports needed to update the investment community on Company’s relevant position in industry.
Incubator Portfolio Review
- Conduct research into each industry/sector represented by the incubator investments, which included online automotive, music platforms, communications, retail and hospitality.
- Initial meeting with senior management of each investment to assess objectives relative to client’s goals and business models viability.
- Provide estimated potential ROI, probability and time frame.
- Provide recommendations as to which investments to allocate capital and which to divest.
Financial Reporting Process
- Revised existing reports and created managerial financial report that provided comparative key performance indicators to senior management and board of directors.
- Material was used in the Company’s financing deal road shows in which over $80 million was raised, and to attract additional institutional research coverage, including CS First Boston, Goldman Sachs, Morgan Stanley and others.
Incubator Portfolio Review
- Influenced the Company’s decision to divest four of its seven incubator companies. The remaining companies were further developed and eventually brought public or sold.
- At the request of the Company’s CEO, we met with the CEO and executive management team of a major satellite radio company, to initiate discussions about a potential merger.
Conclusion
The merger with the satellite radio company was completed, valuing the Company at approximately $183 million (approximately $100 million greater than its market cap at time of acquisition). The Company extended our advisory engagement to continue access to our counsel.
Joe Zappulla: jzappulla@dutchesscapital.com