Situation
America First is a rapidly growing telecommunications company that provides international telecommunication services from the United Kingdom through the provision of prepaid calling cards. The company, founded in 1994, primarily markets to residential customers who have sufficient demand for long distance calling.
America First appointed ARC Associates in March 1998 to find a strategic acquirer that would provide both additional capital to enable the company to build upon its brand name and sales and marketing expertise to enable expansion into Europe.
Approach
ARC Associates worked closely with America First to produce a succinct information memorandum and to identify a list of potential partners that met America First's criteria for investment. Over a period of two months, ARC Associates contacted strategic investors, distributed information under NDA to interested parties and held meetings and discussions to qualify levels of interest and solicit offers.
The Transaction
American Telemedia Limited ("ATL"), a subsidiary of Econophone, Inc., acquired 81.25% of America First through a combination of share purchases and conversion of debt owed by America First to ATL into equity. An "earn-out" linked to the performance of America First was executed to allow key management (who retained 18.75% of the outstanding shares) to sell their shareholding to ATL at a future date on agreed terms.