Client had legacy document management software division that generated high recurring revenues and free cash flow, but showed very little growth. Client was building next generation of workflow management software, which was the future of the company. Client management was distracted by serving two “masters”: The legacy business and the new startup business.
Sold legacy division to PEG interested in milking the stable income and earnings, allowing management to focus on the startup by using proceeds from sale to accelerate development of new product. Auction was run to find the highest and best terms to sell the division:
Client was able to divest of legacy business for 2.6x revenue plus lucrative transition consulting and real estate lease, freeing the management team to focus on the next stage of their business interests.