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Project Eagle Eye

Background

Project Eagle Eye involved a privately held firm that had done well with its wide-area motion imagery (WAMI) surveillance and other technologies for 25 years. However, for more than two years (2019-2021) before the case came to Asgaard, sales and profitability were plummeting and then the war in Afghanistan ended, effectively ending demand for the company’s products for the immediate future. WAMI is a unique technology that attaches to drones or other unmanned aerial vehicles (UAVs) and was deemed best in its class by many in the industry. 


SOURCES OF DISTRESS

  • The company’s biggest problem was that the majority of its technology was deployed in Afghanistan during the 20-year war there. The fall 2021 U.S. airlifts out of Afghanistan severely damaged the company’s top and bottom lines, as demand for its products largely evaporated in the immediate postwar future.

  • Revenues had already been decreasing during the prior 10 years, and losses had accelerated during 2019-2021. The owner decided it was time to try to sell the company or sell off the technology and close the business. 

  • The company’s projected 2021 EBITDA of -$2 million, declining sales, and dismal short-term prospects did not attract serious interest from buyers during a two-year sales process that had been run by Truist. 

  • The company was also rapidly depleting its cash reserves at the rate of $1 million to $1.5 million per month. When Asgaard was engaged in early December 2021, the company was down to about $6 million in cash.

  • The CFO and President distrusted outside help. The owner characterized employees at that time as “exhausted and frustrated with slow progress and poor prospects,” according to a referral letter the CEO wrote praising Asgaard’s accomplishments.



Retention & Interventions

Company counsel recommended Asgaard, which was engaged in early December 2021, when the company had only four months of cash remaining. The company had hired SunTrust, now Truist, two years earlier to act as the investment banker, but no serious interest or offers had been produced. When Asgaard was retained, Truist had only identified three potential buyers, but none had submitted offers. Utilizing a new sales strategy. Asgaard identified three additional potential buyers and helped to frame a new sales message and realistic projections with which to re-engage the market.


CONTRIBUTIONS

  • Potential buyers did not think that past projections reflected the real contracted backlog, pipeline or capture rates they could expect to have in the near future. A new sales deck was created by Asgaard that changed the focus from an EBITDA-based sale to one focused on the technology (patents) and the technical expertise of the employees. Asgaard urged the owner and Truist to materially speed up the bidding and sales process so a transaction could be signed in 30 days and closed soon thereafter.

  • Asgaard determined that several of the company’s PhD technical experts would be very valuable to an acquiring company, so continued employment became a condition of purchase.  

  • Asgaard assisted as the company worked to transfer several patents to the buyer to support the WAMI technology and to reassign patents unrelated to WAMI to a holding company still owned by the former owner. 

  • Even though the process had to move much more quickly than normal government transactions, the company obtained and closed on the one firm bid it received from a foreign buyer and then moved through the Committee on Foreign Investment in the United States (“CFIUS”) security review process and closed.



Results

Purchase price was a total of $12 million on a cash-free/debt-free basis, including an earnout of $2 million to be released upon highly likely follow-on product sales. Effective date of the sale was Nov. 9, 2022, after a demanding CFIUS review was finalized on Nov. 2 by several US intelligence agencies.  


KEY ACHIEVEMENTS

  • Asgaard persuaded the owner to back off plans for liquidation and strategized to create a sale worth $12 million. 

  • To create the required runway to get through the lengthy CFIUS process, Asgaard let the buyer temporarily hire some key personnel, subject to recall, so the company could deliver them to the buyer without incurring the associated carrying costs/burn rate through closing (the key attribute that attracted the buyer).

  • Speed of closing allowed technology to be delivered in operating condition, and before any competitors joined the market. 

  • Longtime key engineers and technicians agreed to remain with the new company as part of the sale contract to work on current projects and future technology. 

  • Sale success hinged on an Asgaard business plan that was materially different from the former failed business plan. 





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