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How Aaron Leibtag Got $15 Million for a 15-Employee Company


Aaron Leibtag

Aaron Leibtag cofounded Pentavere Research Group, a digital health company that identifies patients not receiving the medications or interventions they should be receiving because critical data is buried in a patient’s electronic health record.


Despite having just 15 employees, they attracted an acquisition offer that valued Pentavere at $15 million.


In this episode, you’ll discover how to:

  • Find a strategic acquirer.

  • Get an acquirer to focus on future potential rather than historical EBITDA.

  • Avoid re-trading by leveraging radical candor.

  • Avoid having your proceeds locked in a risky earn-out.

  • Evaluate the difference between debt and equity in a term sheet.


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More About Aaron Leibtag

Aaron has successfully established partnerships and gained financial backing from major global pharmaceutical companies and top-tier hospitals for the development of DARWEN™ AI.


This innovation has been recognized for its leading accuracy in prestigious scientific journals and showcased at key international conferences. With a demonstrated expertise in leading organizational change, Aaron has steered multiple private equity-backed consumer businesses toward successful liquidity events.


His leadership extends beyond the corporate realm, having served as the vice chair of Sinai Health System’s Volunteer Advisory Committee and as a board member for the Museum of Modern Contemporary Art.


Definitions

Letter of Intent (LOI):

This document outlines the basic terms and conditions of a deal before a formal agreement is drawn up. It serves as a mutual commitment between the buyer and the seller to move forward with the transaction on the agreed-upon terms.


Due Diligence: 

This is a comprehensive appraisal of a business or investment undertaken before a merger, acquisition, or investment. It seeks to validate the information provided and uncover any potential risks or liabilities.


Earn-out: 

This is a financing arrangement for the purchase of a business, where the seller must meet certain performance goals before receiving the full purchase price. It reduces the buyer’s risk and aligns the interests of both parties post-acquisition.


Put Option:

A put option is a bit like an insurance policy for your stock investment.

Imagine you own a stock that you think might go down in price, and you want to protect yourself from losing too much money. A put option can be your safety net.


Here’s how it works:

  • You pay a fee, known as a “premium,” to buy a put option or negotiate put options when you sell your company.

  • This option gives you the “right” to sell your stock at a predetermined price, called the “strike price,” by a certain date.

  • You don’t have to use this option if you don’t want to. It’s like paying for car insurance but hoping you never have to use it.


So, let’s say you own a stock that’s currently worth $50. You buy a put option with a strike price of $40 that expires in one month. You pay a premium, maybe a few dollars per share, for this right.


Two things can happen:

  1. The stock price drops to $30. Yikes! But because you have the put option, you can still sell your stock for $40, the strike price. So, the option saves you from a bigger loss.

  2. The stock price stays the same or goes up. You decide not to use your option. It expires, and you lose the premium you paid. But your stock is worth more or the same, so you’re probably okay with that.


Remember, unlike owning a stock, which you can keep for as long as the company is in business, an option has an expiration date. Once that date passes, the option is either used (exercised) or it becomes worthless.


If you agree to roll a portion of your proceeds into stock of the company acquiring yours, you may be able to negotiate a put option that gives you the rights to “put” (i.e. sell) your shares to your acquirer at a predetermined price.


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