Case Study: Sentinel Security Solutions Rockets to Sell-Side Readiness with Strategic Acquisition, Financing
As part of its innovation strategy, Sentinel Security Solutions dreamt of 5x growth for the company. Partnering with Katalyst Point Advisors, they secured a strategic acquisition and financing, propelling them towards a lucrative exit. Discover how this collaboration ignited their growth journey.
Background
Sentinel Security Solutions, a leading cybersecurity firm based in San Francisco, set an ambitious goal to grow its revenue by 5 times within the next 5 years, aiming to reach $200 million from its current $40 million while maintaining double-digit profitability margins in tandem with that growth. Focused on inorganic growth, the CEO and COO sought Katalyst Point Advisors to guide them through this strategic journey.
Challenges
The audacious growth plan required a targeted approach to identify and acquire the right businesses to complement Sentinel Security's strengths. Katalyst Point Advisors initiated a comprehensive review of the Company’s strategic goals, processes, and market positioning to chart a course for success.
The KP Approach
To ensure a seamless execution, Katalyst Point assembled a dedicated advisory team, including a 3rd-party accounting firm, a fractional executive with IT integration expertise, a fractional executive with HR expertise, and an M&A attorney to support legal review and documentation. With a well-established team of advisors, Katalyst Point leveraged its M&A expertise to:
Targeted Acquisition Search: Within 6 months, Katalyst Point identified a perfect fit: a division being divested by a publicly traded company, codenamed "Project Firewall." This acquisition would be a pivotal step towards achieving Sentinel's 5x growth trajectory significantly.
Acquisition Financing: Securing the right financing proved to be a challenging hurdle. Katalyst Point Advisors conducted pre-vetting discussions with lenders to streamline the due diligence process for Sentinel Security’s acquisition of Project Firewall. Prior to issuing the Letter of Intent (LOI) for Project Firewall, a private credit lender with a strong track record in financing acquisitions within the information technology sector had already been identified.
Streamlined Execution: Within an impressive two months, from issuing the LOI, Sentinel Security closed a $20 million credit facility with the lender, showcasing lightning-speed deal execution. The alignment of motivations between Security Sentinel, the lender, Project Firewall, the advisors, and Katalyst Point played a crucial role in this process.
Results
Accelerated Growth: The acquisition of Project Firewall positioned Sentinel to achieve its ambitious growth goals, setting the stage for a lucrative exit.
Increased Efficiency: Katalyst Point’s expertise allowed Sentinel's leadership to focus on running their core business while navigating the acquisition process.
Wider Reach: KP's extensive network provided access to hundreds of brokers and bankers, significantly expanding Sentinel's deal sourcing capabilities.
Client Testimonial
"Partnering with Katalyst Point was a game-changer. They handled the entire acquisition search and financing process, allowing us to focus on our core business. Their access to a wide network of professionals helped us source the perfect acquisition opportunity and secure the necessary financing from a motivated, credit-worthy lender than we ever could on our own. Without Katalyst Point, achieving our ambitious growth goals and preparing for a successful exit would have been much more challenging. We are tracking to our 5x goal, operationally stronger, and will reengage them to run an efficient process that supports our future growth and exit strategies."
- CEO, Sentinel Security Solutions
Key Learnings
Early engagement with M&A specialists like Katalyst Point can significantly increase the probability of achieving ambitious growth goals.
Strategic acquisitions, coupled with expert financing support, can be powerful tools for accelerating company value.
Leveraging a specialized M&A firm's network and expertise can save valuable time and resources, allowing business leaders to focus on core operations without the need to build out a full corporate development team from scratch.
Company: Sentinel Security Solutions
Location: San Francisco, CA
Sector: Information Technology
Transaction Type: Buy-Side, Acquisition Financing
Industry: Software & Systems, Technology Hardware & Equipment
FAQs
Q: How did Katalyst Point Advisors contribute to Sentinel Security's growth strategy?
A: Katalyst Point Advisors played a pivotal role by conducting a thorough strategic review, conducting meticulous target evaluations, assembling a specialized advisory team, pre-vetting lenders, and facilitating the acquisition of a key division. By streamlining the acquisition process, this ensured a smooth execution from target identification to closing, saving valuable time, and setting the stage for Sentinel Security's 5x revenue goal.
Q: How did Katalyst Point Advisors streamline the acquisition process?
A: Katalyst Point's curated advisory team and extensive network streamlined the acquisition search, ensuring a comprehensive and efficient process from target identification to deal financing.
Q: What challenges did Sentinel Security face in securing financing for the acquisition?
A: The primary challenge was finding the right financing for the transaction because Project Firewall was a subsidiary being divested from a publicly traded company. Katalyst Point Advisors, through pre-vetted lender feedback, identified a private credit lender that specialized in financing these types of acquisitions, enabling Sentinel Security to secure a multi-million-dollar credit facility in just two months.
Q: What cost savings did Sentinel Security experience by outsourcing corporate development?
A: For a small business such as Sentinel Security, establishing an in-house corporate development team was financially challenging. Outsourcing corporate development with Katalyst Point provided substantial cost savings compared to establishing an in-house team of employees, allowing Sentinel Security to focus resources on growth while benefiting from expert support. Importantly, access to an extensive network of brokers, bankers, and a curated advisory team, enhanced the acquisition search process.
Q: Why did Sentinel Security choose a buy and build strategy?
A: Sentinel Security aimed for rapid growth, and a buy and build (or roll-up strategy) offered a quicker path to scale. This approach, frequently utilized by Fortune 500 companies and private equity firms, allowed them to leverage existing strengths and strategically acquire complementary businesses to achieve their ambitious 5x revenue goal on the path to exit within 5 years.
Q: What lessons can other business owners learn from this case study?
A: The case highlights the importance of expert guidance in executing roll-up or buy and build strategies. Leveraging external corporate development support, like Katalyst Point Advisors, can provide access to a broader network, accelerate deal processes, and make ambitious growth goals achievable.
Q: What are the key takeaways for business owners of privately held companies?
A: Partner with M&A specialists early for increased success:
Strategic acquisitions and expert financing accelerate company value.
Leverage the network and expertise of M&A firms for efficiency and guidance.
Q: How can I learn more about Katalyst Point's services?
A: Contact us today for a confidential assessment; we’ll explore if we’re the right fit for each other and discuss how we can help you achieve your strategic growth goals on the path to exit.
Disclaimer: This case study is illustrative and anonymized for confidentiality. It does not constitute financial advice. We do not accept deposits, transmit, or hold for customers any funds or securities in connection with such transactions. We do not engage in trading securities of publicly traded companies. We neither market nor offer financial advice to non-institutional customers. There is no guarantee that active client engagements will be successful.