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Chatsworth Grows in European Sport Industry

New York February 25, 2022

Chatsworth Securities LLC has been engaged by a first division soccer European team under the supervision of Alessandro Bianchi, Managing Director at Chatsworth. “American money continues to flow into European soccer,” said Alessandro Bianchi.

Just in 2021 we saw a wide range of deals into European Soccer :

777Partners a Miami-based fund acquired fully ownership of Genoa, Italy’s oldest soccer club, the company also owns a stake in Sevilla FC, one of Spain’s most prestigious and successful soccer clubs, as well as the London Lions. The Chicago finance and technology company Peak6 has taken a stake in the Premier League’s Wolverhampton Wanderers. PEAK6 is not new to European soccer, the firm has previously owned stakes in AS Roma and AFC Bournemouth. Ares Corporation invested U$ 216.9 million in exchange for 34% of Atletico Madrid in Spain, Ares disclosed that its funds have already invested nearly U$1 billion in sports and related media. The L.A. based fund Oaktree capital has acquired a 31% equity interest in Inter Milan for U$336 million. The New York investment fund MSD Capital has bought the Italian team La Spezia early in 2021, also the Michael Dell management fund owns two other teams in Europe: Sonderjyske Fodbold, which plays in the Danish top flight and Casa Pia AC in Portugal.

The push by US investment firms in the long run is to bet on the DIGITALIZATION of the sport as consumers behavior shift, something that has been accelerated by Covid-19. With fewer fans in the stadiums, soccer teams are looking at DIGITAL content to keep that connection with consumers. Through investment firms and oversea capital, the European teams hope to improve their media production to engage the global audience.

About Chatsworth Securities LLC
Chatsworth Securities LLC is an investment banking firm that has been providing financial advisory services to corporations and entrepreneurs since 1996. Chatsworth advises on both domestic and international M&A transactions, fundraising and capital raises for large and small companies around the globe. Chatsworth has participated as an underwriter in over six hundred public offerings and has raised over $5 billion for traditional and alternative money managers and their funds.

For further information:

Alessandro Bianchi
Managing Director
Chatsworth Securities LLC
abianchi@chatsworthgroup.com

Chatsworth Securities to Establish a European Presence in Paris, France

NEW YORK and PARIS, February 9^th, 2022 /PRNewswire/ — Chatsworth Securities LLC will be establishing a representative office in Paris, France, to strengthen its global reach and to facilitate cross-border investment banking transactions between the United States and the European Union. Chatsworth, which was established in 1996, has over 20 Managing Director level investment bankers with a team specializing in technology sectors which include fintech, payments, and green energy.

“Having successfully built a cross-border M&A business between Europe and the US, the firm decided that it was more efficient to have an office in Paris. Furthermore, France and greater Europe have a lot to offer American-based companies and investors. There are great opportunities for acquisitions and US companies can benefit from many advantages offered in France, such as innovation and research tax credits, government grants through subsidized loans, a well-educated labor pool, etc. Furthermore, European companies are well structured with many of the more interesting tech start-ups showing profits on their books,” said Marcus Magarian Managing Director at Chatsworth Securities, and an alumnus of HEC Paris.

“With a presence in France, our firm will be better able to serve European companies that are seeking opportunities to access capital and acquisitions in the USA. In addition, M&A activity in France is quite robust with around 20% of deals closed being cross-border transactions. Our goal is to become a bridge that will help European companies access U.S. liquidity and opportunities,” said Ralph DiFiore, Senior Managing Director at Chatsworth Securities.

With President Emmanuel Macron’s announcement of the “France 2030” investment plan, France is committing €30 billion ($35-billion USD) to become leaders in technology and renewable energy in Europe. Chatsworth believes European technology opportunities will garner strong interest in the US and elsewhere.

About Chatsworth Securities LLC

Chatsworth Securities LLC is an investment banking firm that has been providing financial advisory services to corporations and entrepreneurs since 1996. Chatsworth advises on both domestic and international M&A transactions, digital transformation and capital raises for large and small companies. Chatsworth has participated as an underwriter in over six hundred public offerings and has raised over $5 billion for traditional and alternative money managers and their funds.

For Further Information:

Chatsworth Securities LLC
Media Contact: Marcus Magarian
Tel. +1 (203) 340-2827 | mmagarian@chatsworthgroup.com

Chatsworth Partners with QR Payments Group OPER Payment Technology

by Marcus Magarian

Chatsworth Securities LLC is pleased to announce the latest strategic partnership with OPER Pay, (OPER, LLC DBA OrderEx), a unique payment engine designed to make mobile payments easier for the customer. OrderEx, is an all-in-one digital ordering and mobile payment platform that will take a brand or merchant’s retail operations to the next level.

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“OrderEx’s is a very advanced QR payment platform offering customers a seamless experience at the retail level. It places a lot of power and freedom in the user’s hand without the need of downloading an app” said Marcus Magarian, Managing Director at Chatsworth. “Chatsworth Securities has significant experience in digital payments and the data analytics space. The analytical first-party data alone could unlock actionable insights for brands to improve the customer’s in-store experience and help brands drive more revenue”, continued Marcus. Chatsworth will provide the company with expanded access to capital, improvement in business metrics, and potential business opportunities.

The OrderEx platform enables the seamless integration of payment processing and technology solutions across a variety of markets at brick-and-mortar locations. It gives the user a suite of tools to save time and safely serve more customers. It tackles tedious tasks so staff can spend more time with guests. With interactive menus, mobile ordering and payment, customer rewards, and on-demand server engagement and communication, restaurants can ensure high performance and high-touch service – even during the busiest rush.

OPER was founded by Dave Laiderman, CEO who began developing payments technology in college and has been addressing the challenges restaurants face for nearly 20-years. “Integrate OrderEx with your current POS system or payment provider in as little as two hours. Customers browse and order from their mobile phone; and, when they are done, they pay directly from their mobile phone,” he said.

Chatsworth is an investment banking firm that also provides consulting and advisory services. “We not only provide M&A and raise capital for clients but help clients with business challenges and opportunities” stated Ralph DiFiore, Senior Managing Director of Chatsworth. He added, “Given the challenges businesses face today we are all about helping our clients improve business metrics such as revenues, profits, and EBITDA. One way to improve these metrics is to unlock the revenue potential of their “on-premise” data which is extremely valuable to major consumer goods conglomerates and QSR groups, for example”.

OPER Payments Technology Demo Video

Sep 2021: In the News and Noted IPOs

Author: Andrew Woolston (Intern)

Reviewed by: Ralph DiFiore (CCO), Marcus Magarian, Chris Gioffre

In the News: Company Highlights

Toast:

Toast priced its NYSE IPO at $40 a share on September 22, 2021, valuing the company at $20 billion. Shares rose 56% on the first day of trading to close out at $62.51 a share but have since dropped to $49.78 a share. Toast was hit hard as the pandemic forced restaurants to close. As cities returned to pre-pandemic operations, sales rebounded rapidly, and by the third quarter, revenue was higher than a year earlier. Revenue reached $823.1 million in 2020 and tripled in the second quarter of this year to $424.7 million.[1] However, net loss reached $135.5 million in the same quarter due to rising sales and marketing costs and to R&D expenses.

Remitly:

Remitly began trading publicly on the Nasdaq on September 23^rd, 10 years since it entered the cross-border remittance market. Trading opened at $43 a share at a $7 billion valuation – 30x its 2020 revenue – but shares have since dropped to $37 a share on September 29^th.[2] Remitly remains much smaller and less profitable than its largest competitor Western Union. Revenue doubled from 2019 to $257 million in 2020 and has almost reached profitability logging a $1 million loss in the quarter ending June 30, 2021 – down from an $8 million loss in the year prior.

Sources:

[1] Ari Levy. “Toast Surges 56% in NYSE Debut after IPO Valued Restaurant-Tech Company at $20 Billion.” CNBC, CNBC, 22 Sept. 2021, www.cnbc.com/2021/09/22/toast-surges-in-nyse-debut-after-ipo-valued-company-at-20-billion.html. Accessed 30 Sept. 2021.

[2] Kauflin, Jeff. “Shares of Money-Transfer Fintech Remitly Rise 13% in IPO, Valuing It at $7.8 Billion.” Forbes, 30 Sept. 2021, www.forbes.com/sites/jeffkauflin/2021/09/23/shares-of-money-transfer-fintech-remitly-rise-13-in-ipo-valuing-it-at-78-billion/?sh=23e2ef28ecaf&utm_source=newsletter&utm_medium=email&utm_campaign=newsletter&utm_term=null. Accessed 30 Sept. 2021.

Looking for an Exit? How to Tackle an Earnout

Author: Andrew Woolston (Intern)

Reviewed by: Ralph DiFiore (CCO), Marcus Magarian, Chris Gioffre

As response to high valuation expectations, earnout transactions are M&A transactions in which the seller is granted additional compensation in the future if the business hits specified financial or other milestones.

For example, you, a seller, believe your company is worth $100 million today, but based on valuation metrics a fair valuation would be $50 million. A buyer will offer you $50 million, and you will receive the other $50 million upon attaining pre-determined milestones. The milestones are commonly determined by targets for gross sales, revenue, EBITDA margins, or gross profit targets. For example, the deal terms may establish that the seller will receive 5% of gross sales over the following three years.

Why Include an Earnout Structure?

Buyers

Advantages

Reduces uncertainty. Instead of an upfront lump-sum payment, the buyer benefits from a longer payment period for the business by leveraging an earnout structure (from a cash flow perspective). If earnings do not hit expectations, the buyer pays less for the business than the seller’s upfront asking price. In this sense, purchase price is directly linked to actual performance and keeps the seller incentivized to perform, reducing uncertainty for the buyer. Buyers with limited liquidity may also find this deal structure attractive because the cash or stock paid at earnout is less than the cash flow generated from the investment. Additionally, buyers do not have to turn down deals based on disagreements over valuation.

Disadvantages

Lack of planning. If improperly managed, a buyer may have to pay the earnout before cash flows can sustain the investment. It is important to conduct proper analysis on the earnout structure and understand the breakeven point at each earnout milestone. From the buyer’s perspective, cash or stock from the earnout should not exceed the cashflow generated from the investment. Additionally, earnouts do not eliminate the possibility of bankruptcy or slow growth so buyers need to conduct proper due diligence in every transaction.

Sellers

Advantages

The seller achieves their valuation. Many financial and strategic buyers utilize financial metrics such as valuation multiples when determining the upfront purchase price to pay for a company. An earnout structure allows the seller to receive the amount they think their company is worth based on expected growth. With proper analysis and understanding, earnout milestones are achievable based on the sellers’ projections of future growth. In addition, the earnout structure enables the seller to spread out taxes over the length of the earnout contract – reducing the tax impact of the sale. In addition, if the deal structure is a combination of cash and stock, the stock the seller receives could increase in value and be worth more than the total valuation.

Disadvantages

Increasing uncertainty. Juxtaposing the advantage for the buyer, it is possible the seller may not hit their desired valuation if the future earnings are lower than expected and hurdles established in the deal terms are not met. Therefore, it is imperative sellers are forward-looking – planning ahead as to the structure of hurdles and thinking about what their company looks like post-acquisition. With proper analysis, the projections and hurdles should be realistic and achievable.

Earnout’s Place in Today’s Transactions

Earnouts could allow you to close a transaction in times of uncertainty. As a result of current market conditions, uncertainty surrounding the resurgence of the delta variant, and the high valuations seen in the tech industry, an earnout structure may be an attractive option for companies looking to acquire/to be acquired another/by another firm and get a transaction done. In the tech industry, earnouts may help reduce some of the purchase price risk in an industry with many M&A targets lacking a lot of operational history and a well-proven business model.

Who Leverages Earnout Structures?

Public vs. Private Transactions

Private markets favor earnout usage. A 2013 University of Chicago Law Review found only 1% of public acquisitions include earnouts while SRS Acquiom found 12% of private acquisitions involved earnouts in the same year.[1][2] Private sellers often can hide information during the due diligence process in a much greater capacity than public sellers. Due to the transparency of public sellers and regulatory requirements to disclose financial data, public transactions offer greater levels of confidence and clarity on the financial health of the seller. Additionally, public companies already have proposed valuations via share price, which lowers the variance of sale price between the buyer and seller. The financial and informational transparencies required of public companies reduces the earnout offer, in comparison to private acquisition targets.

Usage by Sector

Acquirers in the Life-Science and Tech industries favor earnouts compared to their counterparts. Life-science transactions often involve earnouts based on trials, FDA approvals, and other factors that determine a company’s financial success. Within the last 36 months, 72% of US private & public Life-Science deals included earnouts.[3] In the same timeframe, 14% of US private & public Technology deals included earnouts. 70% of the earnout transactions in tech involved revenue as an earnout metric. 36% of deals utilized an earnout length of 1 year or less, compared to 35% of life science deals exhibiting an earnout length of greater than 5 years. This discrepancy emphasizes how earnouts can be leveraged in different industries with vastly different outlooks while still providing a win-win for both buyers and sellers. Acquisition targets in the tech industry may involve earnouts due to the uncertainty around how the product will evolve and change the future market landscape – a winning technology has a short window to establish a leading presence in the market.

Highlighted Acquisition in Tech

In Lightspeed’s largest acquisition at the time (closed Jan 7^th, 2020), Gastrofix was acquired for cash consideration at closing of $60m, including small cash amount for the settlement of certain Gastrofix liabilities, and approximately $44.5m in Lightspeed shares.[4] An earnout of $4m in cash and $3m in Lightspeed shares dependent on milestones was included in the deal structure.

Noteworthy M&A Deals Leveraging Earnouts in 2020

Source: Acuris Capital Intelligence