We reach out to 166 HR SaaS companies with over $25 million in annual revenue. Many operated in the same space as Hapital but had a different service offering. We engaged in dialogue with 68 (41%) of these companies. Of these 68, several expressed some degree of interest, but only one provided a specific offer. This offer was unfortunately inadequate.
We provided the owners with an always-available and always-updated report on our activity with all prospective acquirers, their feedback, and their status.
In August 2020, Hapital decided it would like for us to begin considering financial acquirers. Applying an asking price of $3 million, we began dialogues with financial acquirers on August 20, 2020. A total of 88 financial acquirers expressed interest. Although several indicated interest in making an offer below the asking price, only two submitted a letter of intent to acquire Hapital at the asking price of $3 million. This purchase price was 11% higher than the valuation we presented on April 11.
Of the two letters of intent, one received on September 15, 2020 entailed payment of 90% of the $3 million purchase price at closing and 10% through a seller note to be paid over three years. The other, received on September 21, conditioned 17% of the purchase price on sustaining revenue for one year. We negotiated the first letter of intent and reached close to the point of both parties’ signing it. The most challenging part of the negotiation was allocating Hapital’s several hundred thousand dollars of prepaid revenue between the buyer and seller. We achieved this by applying FASB (Financial Accounting Standards Board) standards.