When a newly formed SaaS company engaged us 16 months ago, they set a clear goal: to prepare for a successful exit in 3-4 years. With $5 million in annual revenue, $1 million in EBT, and $3.7 million in current assets, the company had a solid foundation. Their overseas operations, established for two years, had built a strong recurring customer base, which quickly attracted buyer interest.
However, just one year into the engagement, the company received an unexpected $33 million acquisition offer, requiring them to fast-track their exit strategy. With proactive financial planning, clean accounting records, and compliance-ready systems already in place, the company was fully prepared to meet the rigorous demands of due diligence and execute a seamless transaction.
Challenges
- Accelerated Timeline: The original 3-4 year exit plan was reduced to just one year due to the acquisition offer.
- Buyer-Specific Requirements: The buyer required:
- Detailed subscription revenue reports.
- Working capital calculations.
- Written accounting policies and processes.
- Compliance with ASC 606 revenue recognition standards.
- Data Accuracy and Compliance: Ensuring compliance with sales and use tax reporting, meticulously tracked by state.
Our Approach
To address these challenges and ensure the company was ready for the accelerated transaction, we implemented a focused strategy:
- Leveraging SaaS-Based Compliance Platforms
- Implemented SaaS tools tailored for ASC 606-compliant revenue recognition to ensure accurate and transparent recurring revenue reporting.
- Maintained clean, up-to-date accounting records, enabling quick access to detailed and well-documented financial information.
- Due Diligence Preparation
- Proactively prepared subscription revenue reports, working capital calculations, and profitability analyses to align with buyer expectations.
- Ensured all critical financial data was accurate, organized, and readily available for due diligence.
- Streamlined Compliance
- Verified sales and use tax compliance, ensuring all reporting was accurate and met buyer requirements.
- Organized financial documentation to streamline the due diligence process.
Results
The company successfully completed the $33 million acquisition, far surpassing the original 3-4 year goal:
- Accelerated Exit: The transaction closed just 16 months after engagement, significantly ahead of the planned timeline.
- Efficient Due Diligence: All required documentation—including revenue reports, working capital analyses, and compliance data—was delivered within 4-5 days, ensuring a smooth and efficient process.
- Stakeholder Confidence: Buyer confidence was reinforced through ASC 606-compliant revenue recognition, precise working capital calculations, and accurate sales tax reporting.
- Valuation Justification: The company’s strong recurring revenue base, financial readiness, and proactive preparation directly supported the $33 million valuation.
Conclusion
This engagement demonstrates how proactive financial planning, rigorous compliance, and a focus on due diligence readiness can position businesses for success—even when timelines accelerate unexpectedly. By leveraging SaaS-based tools and maintaining clean, organized financial systems, we enabled this SaaS company to achieve a seamless and successful $33 million exit.
Whether adhering to a long-term strategy or responding to sudden opportunities, our tailored processes empower businesses to thrive and capitalize on their full potential.
