Josh Abramson has an impressive track record of building valuable companies. In 1999 Abramson started CollegeHumor.com and before he could even graduate, Abramson had received an offer of $9 million for the website.
Abramson went on to start the popular video sharing website Vimeo and apparel company BustedTees.com selling his collection of companies to Barry Diller’s IAC/InterActiveCorp for a reported $20 million in 2006.
After a short stint reporting to Diller, Abramson left IAC and started TeePublic, an innovative online marketplace that serves as a platform for artists and designers to showcase and sell their distinctive designs on a wide range of products, including t-shirts and hoodies.
With Abramson at the helm, TeePublic grew to $41 million in revenue and $4.5 million in EBITDA before he decided to sell to RedBubble in a $41 million deal, $36 million of which was in cash.
In this episode, you’ll discover how to:
Master the art of cultivating a fanatical audience.
Learn how to dodge a lengthy earn-out.
Leverage SEO to drive organic traffic.
Avoid overplaying your hand when negotiating with a potential acquirer.
Accelerate the acquisition
Letter of Intent (LOI): A letter of intent (LOI) is a document declaring the preliminary commitment of one party to do business with another. The letter outlines the chief terms of a prospective deal. Commonly used in major business transactions, LOIs are similar in content to term sheets. One major difference between the two, though, is that LOIs are presented in letter formats, while term sheets are listicle in nature. Source.
Earn-out: Earnout or earn-out refers to a pricing structure in mergers and acquisitions where the sellers must “earn” part of the purchase price based on the performance of the business following the acquisition. Source.
Due-Diligence: Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party. Source.
Waterfall: A distribution waterfall describes the method by which capital is distributed to a fund’s various investors as underlying investments are sold for gains. Essentially, the total capital gains earned are distributed according to a cascading structure made up of sequential tiers, hence the reference to a waterfall. Source.
Adjustments: When selling a business it is common for the purchase and sale contract to include one or more adjustments to the purchase price. Adjustments may occur at the time of closing or following closing or both, depending on the availability of financial information. For example, it is common for a vendor and purchaser to agree on a working capital adjustment to be completed within a 60-90 day period following closing, once closing financial statements are prepared and settled. Source.
Tag-Along Rights: Tag-along rights also referred to as “co-sale rights,” are contractual obligations used to protect a minority shareholder, usually in a venture capital deal. If a majority shareholder sells his stake, it gives the minority shareholder the right to join the transaction and sell their minority stake in the company. Source.
Pik Note: Payment-in-kind (PIK) is the use of a good or service as payment instead of cash. Payment-in-kind also refers to a financial instrument that pays interest or dividends to investors of bonds, notes, or preferred stock with additional securities or equity instead of cash. Payment-in-kind securities are attractive to companies preferring not to make cash outlays and they are often used in leveraged buyouts. Source.