Client Case Study: Axial Exchange, rest in peace
Axial Exchange filed articles of dissolution on July 31, 2019. Its two predecessor companies, Register Patient and Ingage Patient, were incorporated in 2009 and backed by respected venture capital investors. A merger provided new energy in 2015, but it was clear by late 2018 that Axial no longer met the profile for VC investments. Competition was tough. Staffing was thin. Cash was tight. Axial needed a new home outside the VC portfolios where it resided.
Issues and concerns:
In 2018, Axial’s board, CEO and investors knew it was time to explore exit options seriously, but they were not necessarily in a hurry to exit. If the company could finance its own existence, they could hold the investment long enough to transition the business to a higher-value owner in a thoughtful value-maximizing way. They could entertain proposals that were not necessarily a sale of the business (for example, a new customer relationship or a joint venture). They were able to say “no” to bad deals. And they could ultimately close the business if there were no other, better options.
As board members, executives and investors, they were fiduciaries for other people’s money. By law and professional integrity, they had to demonstrate good judgment in how they governed the company and made decisions, regardless of the eventual outcome. Process mattered.
As experienced business people, they understood the amount of work required to find a buyer for a company. They were not staffed to organize and run the process themselves.
Because the company was small and the results of a sell-side process were uncertain, Axial had few sources of transaction support. Traditional investment banks would not take on an assignment of this size and risk.
Oaklyn Consulting designed an incremental sell-side process to help the company understand and act on its practical strategic alternatives, while managing to a pay-as-you-go budget.
Month 1: Customize a M&A process to uncover interest in either purchase of the company or other strategic business relationships:
Due diligence of what acquirers/partners would see in the company
Developed a prospect list
Created tailored marketing collateral
Months 2-3: Initial calls and follow-up
Started with 40 names and based on feedback and board guidance, eventually expanded the list to 150.
Yielded a handful of parties with serious interest.
Month 3: Step in when Axial’s CEO departed for a new job
Supported Axial’s remaining staff
Increased communications with the board
Kept interested prospects engaged
Months 4-6: Respond creatively to nurture interest
Rearranged the customary process to get the firmest possible proposals from interested prospects, moving due diligence ahead of indications of interest
With the CEO having departed, fully managed the due diligence process
Month 7: Conclude the project
After in-depth discussions with several interested parties, there were no proposals to acquire the company outright, and the board reached the unavoidable decision to close the company.
Transitioned responsibilities to various board directors for final stakeholder communications and concluded our role
Obviously, despite best efforts, not every entrepreneurial venture yields financial success.
But every single one presents a team of people the opportunity for responsible decision-making and professional behavior. By this measure, Axial Exchange ended well, despite the unfortunate financial result.
Resolving “new home” issues is Oaklyn Consulting’s specialty.
For more than 25 years, our team has been working with business owners and investors to understand strategic options and reach the best available conclusions. Our experience with disciplined, customized processes for assessing strategic alternatives and finding business partners or acquirers includes:
- Software companies
- Health care companies
- Medical devices companies
- Insurance companies
- Business services companies
- Manufacturing companies
- Media companies
- Financial advisory firms
- Professional services firms
- Construction/engineering firms
- Venture capital and private equity investments
- Corporate subsidiaries
- Family businesses
- Owner-operated businesses
“Oaklyn Consulting did a great job for us on Axial,” said a board member. “The unfortunate outcome there had everything to do with the company’s situation and the market environment. The board and investors all agree on what a thorough, professional, top-notch job Oaklyn Consulting did for us. I wouldn’t hesitate to work with them again and in fact will look for opportunities to do so.”
Posted on September 30, 2019
by Frank Williamson