In the acquisitions I did, I only looked at the value of the customer account,
and in the cases where they were canopy I sweetened it. But all of those were
in my existing service territories.
I didn’t take any of their other company assets or employees.
But I have bought companies lock stock and barrel. Those were valued on an
income and asset approach after having audited financials for a couple of years
to examine. In one case the financials had been cooked and I got screwed.
From: Lewis Bergman
Sent: Saturday, August 22, 2020 1:15 PM
To: AnimalFarm Microwave Users Group
Subject: Re: [AFMUG] Buying and selling ISP’s
Very few want to buy a company for reasons you already laid out. I also found
from a different corporate sale that if they buy the company they seem to
discount the price about 25 to 30%. looking at it both ways it didn't seem to
make much difference.
On Sat, Aug 22, 2020 at 2:12 PM Chuck McCown <ch...@wbmfg.com> wrote:
Depends on whether you are buying the whole company or just the subs and
useful infrastructure.
Sent from my iPhone
On Aug 22, 2020, at 1:09 PM, Ken Hohhof <af...@kwisp.com> wrote:
If they thought it would be like the consolidation of the cable TV
franchises, you were paying a multiple of revenue. But cable companies
typically don’t compete with each other, you are getting essentially a local
monopoly, so it’s more realistic to think you are buying customers, and will
get that revenue for 10+ years. Also don’t typically expect the government to
pay someone to overbuild you.
Closest thing today is probably fiber. I don’t think fixed wireless is
like that, certainly not in unlicensed spectrum. Very little barrier to entry.
And if your service stinks, the competition will smell blood and start direct
mail and door-to-door marketing campaigns. I think some even have installers
following the door knockers offering to hook you up same day. Installs can go
quick if there’s already a mount and cable you can use.
Sometimes buyers will say they pay more if the subs have all signed term
contracts, but how long does that last? And if service declines after the
sale, many customers will say that contract was with the previous company not
you.
From: AF <af-boun...@af.afmug.com> On Behalf Of Bill Prince
Sent: Saturday, August 22, 2020 1:45 PM
To: AnimalFarm Microwave Users Group <af@af.afmug.com>
Subject: Re: [AFMUG] Buying and selling ISP’s
Buyers with too much funny money, or I'm missing something. I guess if
you're coming in as the 800 lb gorilla, you can cut some corners.
--
bp
part15sbs{at}gmail{dot}com
On Sat, Aug 22, 2020 at 11:41 AM Lewis Bergman <lewis.berg...@gmail.com>
wrote:
When we sold to JAB they would put the amount in whatever terms you
wanted it in. If you wanted to talk EBITDA, they would. If you wanted to talk
gross, they would. The number was always the same, they just made their method
fit your expectations. I got to know Jeff a little bit and from what I gathered
they normally thought about it internally as gross revenue multiples. They were
going to tear your business apart anyway so the expense side of things, other
than assumed obligations, didn't make much difference to them.
On Sat, Aug 22, 2020 at 1:04 PM Ken Hohhof <af...@kwisp.com> wrote:
Any WISP that has been around for 10+ years has probably expensed or
depreciated several times as much equipment as is currently active in their
network.
Do you have to identify which expensed or depreciated equipment is
still in use and which went in the dumpster years ago? And how do they
determine what the sale price is for the purpose of seeing if it exceeds the
depreciated cost? Do they assume the entire sale price of the business was to
acquire equipment?
Seems like you would be taxed twice, first for capital gains, then for
the expenses you used to offset revenue for tax purposes.
I know most buyers prefer an asset sale to a stock sale, in case there
are ghosts in the closets. But would a stock sale avoid this problem? Does it
matter C Corp, S Corp or LLC?
From: AF <af-boun...@af.afmug.com> On Behalf Of ch...@wbmfg.com
Sent: Saturday, August 22, 2020 10:51 AM
To: 'AnimalFarm Microwave Users Group' <af@af.afmug.com>
Subject: Re: [AFMUG] Buying and selling ISP’s
One concept that was new to me in my sale was depreciation recapture.
If you fully expense or 179 expense or if your equipment is old enough to have
fully depreciated, all the depreciation expense comes back to bite you in the
ass. You will be taxed on it.
From: Ken Hohhof
Sent: Saturday, August 22, 2020 9:39 AM
To: 'AnimalFarm Microwave Users Group'
Subject: Re: [AFMUG] Buying and selling ISP’s
That is very dependent on whether the business is being run as “milking
the cash cow” or “reinvesting to grow the business”. Especially since section
179 allows a lot of capital purchases to be expensed in the first year.
I suspect many WISP owners prefer to add staff and equipment and towers
and customers, rather than declare profits and pay taxes. That doesn’t mean
their businesses are worth less to a buyer. Back when I worked for corporate
America, I remember around 1990 working for a public high tech company and at
stockholder meetings the CEO would be asked why the company at every earnings
statement would just break even or a little more. He would answer they were in
business to grow, not to pay taxes.
I am sometimes puzzled by competitors who seem to have crappy service,
are hated by their customers, and have high churn. Then I realize they are
milking the cash cow, spending as little as possible, and probably making as
much or more profit as I am. In the case of big, crappy companies, they
probably don’t sweat the churn because there are millions more suckers out
there, you just need advertising to rope some of them in to replace the
cancellations. Like when asked about Frontier, I describe them as the slum
landlord of phone companies.
From: AF <af-boun...@af.afmug.com> On Behalf Of Chuck McCown
Sent: Saturday, August 22, 2020 10:02 AM
To: AnimalFarm Microwave Users Group <af@af.afmug.com>
Subject: Re: [AFMUG] Buying and selling ISP’s
Whatever 5x your earnings are. Not sales or revenue or gross profit
but bottom line earnings on your income statement/ pl. Your taxable income.
Sent from my iPhone
On Aug 22, 2020, at 8:16 AM, Mike Hammett <af...@ics-il.net> wrote:
What does the revenue multiplier end up being, though?
5x EBIDTA / revenue gets you what, in purchases that have been made?
-----
Mike Hammett
Intelligent Computing Solutions
Midwest Internet Exchange
The Brothers WISP
----------------------------------------------------------------------
From: "Chuck McCown" <ch...@wbmfg.com>
To: "AnimalFarm Microwave Users Group" <af@af.afmug.com>
Sent: Friday, August 21, 2020 8:20:47 PM
Subject: Re: [AFMUG] Buying and selling ISP’s
5 x ebidta
Revenue multiples are of no value.
Sent from my iPhone
On Aug 21, 2020, at 5:30 PM, cjwstudios <cjwstud...@gmail.com>
wrote:
1x annual revenue and hope the customers stay on
On Fri, Aug 21, 2020 at 5:43 PM Matt Hoppes
<mattli...@rivervalleyinternet.net> wrote:
This is the issue I’ve always had when I’ve looked at buying an
ISP. It always seems like a lot more money I would have to put out to buy then
I could just build and take the customers if something is wrong with the
current network.
> On Aug 21, 2020, at 12:43 PM, Seth Mattinen
<se...@rollernet.us> wrote:
>
> On 8/20/20 8:13 PM, Steve Jones wrote:
>> I think you either buy or sell, isp isnt really a flip thing
>
>
> There is/was someone in my part of the country buying up ISPs
and trying to package them all together as a flip. My ISP customers tell me
it's far easier to get the flipper's customers to cancel and switch than buy
their company.
>
> --
> AF mailing list
> AF@af.afmug.com
> http://af.afmug.com/mailman/listinfo/af_af.afmug.com
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