Verifier Capital to focus on next gen

Tuesday, September 1, 2009

BOCA RATON, Fla.--Sometimes, just one deal can change the direction of a company. In the case of Verifier Capital, a lender that had traditionally focused on working with Sonitrol franchises, it was a deal with Sonitrol of Hawaii that got the firm's leadership thinking.

Last year, the Hawaii franchise founders, Ronald and Patricia Jones, wanted to cash out and retire, but they were struggling to find a way to do that without bankrupting the company or putting their son and daughter, David Jones and Lisa Hamada, in a debt-filled hole.

They looked at bank loans and thought about selling the company, but eventually worked out a solution with Verifier where the first generation could convert the majority of their equity into cash, while transferring control of the company to the second generation.

"The way we do it is that we buy the asset that has the value in it," said Verifier president Addi Aloya, "the recurring revenue. We are sophisticated enough, unlike a bank, to do cash-flow lending, and we'll put large amounts on the table without taking an ownership position."

Essentially, Verifier bought $100,000 of RMR for $4 million, and left $30,000 for the company's cash-flow base. Further, it contracted the RMR back to Sonitrol of Hawaii to service.

Sure, it sets the company back a bit, but "the kids come into the infrastructure," Aloya said. "The kids are starting at a point that took the parents 10 years to build up to."

Verifier liked the solution they were able to create in Hawaii so much, they've decided to specialize in next generation deals, where they can allow the first generation and the second generation to continue on with a successful business.

"When we did Hawaii, a light bulb went off," Aloya said. "This wasn't an issue 20 years ago. It's an issue now because there's an aging population of successful dealers. At some point they're going to need some kind of transition, and the market doesn't have a great answer for it."

Of course, noted Aaron Wray, director of business development for Verifier, "all of these details, we didn't come up with this ahead of time. This was months of effort with the owners, working with them to find a solution that was unique enough to satisfy their requirements. Each of these deals will be unique and different and need some massaging, which is what some of these other banks can't do. They can't change their system."