With the FOR SALE sign above Reflect having such an unrealistic number painted on it is anyone surprised they haven’t yet been acquired?
Let’s start with, what we believe, are the facts:-
- Despite strenuous denials, the owners of Reflect are actively shopping the company
- Matt Schmitt might be listed as President (& Founder) but we doubt that he has had this business as his sole focus for many years now
- They will be losing one of their two big clients and there is no guarantee that they will keep the others
- They aren’t burning money and are likely cashflow positive but we don’t believe they have the funding to really grow the business significantly going forward
- Rumour from the retail sector is that they have won a small amount of business with Macy’s
- We don’t know which bank but it’s Canadian and they took that business away from Harris (what did we tell you about Harris)
So let’s get back to the subject of suitors. The owners don’t seem to realise that any price needs to be based on a multiple of EBITDA but it also has to adjusted for risk on older accounts (it could of course also be a deal based on earnout metrics related to ongoing cash flow but we are not sure that any of the owners want to hang around what with all their other business interests).
Their three big accounts are also ALL at an age when it’s time for a refresh of hardware and software – which obviously doesn’t help when you are trying to shop the business.
Bottom line we think it truly is time for them to reflect and take a lower offer – did we say that USD 3 Million is too much?