ABC Longhorn Moving | Phased Purchase Option
BACKGROUND
ABC Longhorn Moving (“the company”) emerged several decades ago, when Mary Kopp merged ABC Moving with Longhorn Moving. It is a highly reputable Moving company operating in the Austin metro market and is especially well known for its high-quality commercial, office and state moves.
In May, 2021 the company was sold to Mrs. Tapasya Bhargave in the midst of the pandemic. The owning entity is called EternalEarth, Inc. The company had several high value contracts which it serviced from May 2021 into the beginning of 2022. However, in the latter half of 2022, the company also suffered from a lack of leadership from new ownership, their lack of experience specifically in the moving industry leading to several missteps and inefficiencies, unfortunate personal health issues, and the fact that the owner is absentee (she and her husband and family live in Naples, Florida).
The company is primed to regain its temporarily lost glory with new local (I.e. Austin, Texas) leadership and is being marketed to local, experienced Moving companies who can do the company and its legacy true justice and seamlessly merge it into its own operations. With the former owner Mary Kopp still available to consult on a transition, and to hand off the plethora of key corporate, office and state accounts and relationships, this is a once-in-a lifetime opportunity to parlay ABC Longhorn Moving’s innate business value (stemming from its stellar reputation and exhaustive business rolodex) into multiple returns on your investments. It is an opportunity to expand into the Commercial / Office moves sector of the Moving industry.
MAJOR VALUE PROPOSITION: Buyer will be offered an opportunity to participate with Seller’s husband to raise venture capital for EternalEarth at a $25MM valuation that entails Freight and Logistics venture scaled on top of EternalEarth’s current business line!!!
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The Seller (EternalEarth, Inc. owned by Mrs. Tapasya Bhargave) is offering a Phased Purchase Option to prospective Buyers of its business ABC Longhorn Moving. The business has been lined up seamlessly for new ownership to hit the ground running from day one. The infrastructure of the business (financial (banking, accounting), best practices, business flows, customer rolodex (plus repeatable contracts) are all in place.
The Phased Purchase Option deal terms are below, all of which will be memorialized in an “Asset Management Agreement” that is mutually executed between Seller and Buyer:
· Upon executing the Asset Management Agreement, full control is given immediately to Buyer, who will be entitled to 100% of the profits during the term of this Agreement which will be for one year. Buyer will be entitled to operate under Seller’s current USDOT#, MC# and TXXDOT#.
· Buyer commits to pay $119,700 to purchase 19% of the business within 4 months. This covers the burn for approximately 4 months while Buyer rebuilds the sales pipeline along with Seller’s cooperation. It sets a purchase price of $630,000 for ABC Longhorn Moving, which is a fair price.
· Through another set of several documents, the main one being the “Asset Purchase Agreement” (not to be confused with the Asset Management Agreement which is the subject of this writeup), the Buyer has the option to purchase the remaining 81% equity in ABC Longhorn Moving outright at any time within one year. Seller will cooperate with Buyer’s lender to accomplish Buyer’s full and complete purchase of ABC Longhorn Moving. Seller will provide all boilerplate documents for Buyer to complete the remaining 81% purchase, which will save Buyer the cost on attorney fees to draw such documents up.
· The Asset Management Agreement leaves EternalEarth, Inc. (Owner/Seller) in the majority ownership position for the next 1 year or until Buyer executes his option to purchase the company outright.
· Buyer and Seller both understand that the $119,700 injected by Buyer will be provisioned towards working capital in the business ABC Longhorn Moving.
· At the outset upon executing the Asset Management Agreement, as we expect a shortfall with ABC Longhorn Moving over the next 2 to 3 months until the sales pipeline fills up again, Buyer will have to inject outside capital, but it could come in tranches on an as-needed basis to cover expenses instead of just one check for $119,700. In fact, if Buyer has credit cards or lines of credit to cover expenses, Buyer may use those and that will be credited towards the $119,700 threshold. The minimum commitment by Buyer is to cover expenses on a timely basis.
o Seller commits to working with Buyer in good faith to trim, slash, or otherwise merge all expenses, so as to reduce expenses as much as possible.
· It is anticipated that Buyer will only need to inject a little outside capital (or use its own credit cards or lines of credit) before the sale volume of Move jobs overtakes the breakeven point. Once breakeven is reached, Buyer can pay down the $119,700 directly to Seller from the profits of ABC Longhorn Moving. All Buyer’s equity purchase will be memorialized professionally via an SPV to which the equity is allocated. Seller has on team a New York-based contract expert for the M&A space.
· As required, Buyer will provide Colony Bank (Buyer’s Note holder) with notice of the new investment and shareholders in. But because Buyer’s ownership position will be below 20% before Buyer actually buys ABC Longhorn Moving completely outright, Colony Bank will not trigger Buyer to be added to the personal guarantee.
· Buyer must assure that the SBA debt will continue to be serviced, as it is one of the expenses of ABC Longhorn Moving. Mrs. Tapasya Bhargave (Owner) will earn a $4,500 monthly fee as a balance sheet rental fee, i.e. for continuing to take on the liability of the debt in her name as a personal guarantor, as long the SBA Note she is taking on is not taken out by Buyer purchasing the company outright.
· Other than the SBA Note, all other contracts (mainly Verizon, Insightly (CRM), Website host, Phone system RingCentral, Quoting system PowerMove) will be taken on by Buyer within three months of the Asset Management Agreement being executed, however, Seller will work with Buyer to attempt to cancel those out assuming Buyer seeks to merge operations with his own current operations.
· Payroll and Accounting : Seller will continue to take this on as long as Buyer has not exercised its option to purchase the company outright. (Note: this may be advantageous from a tax perspective for both Buyer and Seller).
· During the one year asset management agreement, Buyer will have full autonomy to run the business at their discretion, do what they want with the ABC Longhorn Moving Brand and Seller only has veto rights on mergers, acquisitions, bankruptcy, or taking on additional debt - likewise, Seller will not take any actions on these aspects without first informing Buyer.
o Seller notes that Seller currently has, due to preapproval by Seller’s lenders, the opportunity to purchase a warehouse or other suitable real estate; purchase more trucks; purchase another company; and procure an Economic Injury Disaster Loan (EIDL) from the SBA. Seller will continue those pursuits but if they come through, Buyer will not be obligated to take the resulting assets on his own books when executing the full purchase of ABC Longhorn Moving.
· Seller notes that its current expenses are around between $30K to $35K per month and 2022 YTD Revenue is $75K/month. A spreadsheet outlining our expenses will be made available to Buyer. Seller notes that about $40K of credit card and Line of Credit debt is on the books that must be paid off over the first several months of 2023.
o Expenses can potentially be reduced by $10K if Buyer has own moving industry Insurance as Seller can then cancel its $5K/month insurance.
o Seller has two trucks on lease from Ryder which Buyer will not be obligated to take on, eliminating another $4K in expenses. Moreover, Seller can negotiate with Ryder to buy those two trucks, if Buyer wants to, and can line up 100% no money down financing for Buyer to do so.
o Seller’s husband can stay on for $500/month to consult on Sales call center best practices, introducing Buyer to moving industry call centers, Moving industry software and CRM best practices, other Moving industry opportunities, expansion into Florida where Sellers live.
o Seller has lined up strong personnel that will stay on, at Buyer’s discretion, in the areas of Operations, Service-Dispatch, and Moving Crews. Seller also has interviewed a couple of strong candidates who are interested in being in a high leadership position and Seller will share those candidates with Buyer.
o Mary Kopp will stay on for a certain consulting fee to be determined with her directly, to hand over key relationships and work on selling moves in cooperation with Buyer.
· The ABC Longhorn Moving business must maintain separate financial books, and if any customers are transferred to a different entity, ABC Longhorn Moving should be compensated for that on the financials.
· If Buyer is unable to complete the full purchase within one year, his 19% Equity position will begin earning 19% of ABC Longhorn Moving's quarterly profits. At that point, Seller may consider an extension of the Asset Management Agreement if Buyer so requests it.
· Seller will provide to Buyer all current P&L, financials and access to all sales leads, admin access to all company email, website leads, RingCentral, etc, and most substantially, the substantial rolodex of commercial relationships built up over the past few decades.
· Seller will convey all equipment (dollies, moving carts) etc. As part of the eventual sale. Buyer may elect to purchase a Trailer that Seller owns for an additional $11,500.
· Buyer will be empowered to set up its reputation with lenders (including the SBA) in order to scale and acquire more businesses to merge into this one. Seller can assist in guidance on this process. Seller will set up Buyer with lenders in its network who are already familiar with ABC Longhorn Moving and will lend on it; of note, Buyer will very likely get a large working capital cash lump sum in its loan with its borrower.
· This is a great opportunity to gain (or expand an existing) foothold in the booming Austin – San Antonio market.
· This is an easy, low-cost and risk-reduced way to buy the business without taking the liability of the loan.
Mrs. Tapasya Bhargave
Owner and Chairwoman of the Board of Directors
Mr. Tapan Bhargave
Member of the Board of Directors
Director of Strategy
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ABC Longhorn Moving
Commercial, Residential & Senior Transition
e: bhargave@abclonghornmoving.com
m: 312.608.3686
w: www.abclonghornmoving.com