In March 2010 Fernandez and Sicilia signed an LOI with an enterprise valuation of MX $389 million (US $30 million). They valued the company with a number of measures, including comparable logistics industry multiples, next to which the implied purchase multiple of Bomi was an attractive discount. They also used company projections (See Exhibits 5 and 6 for comparable multiples analysis and company financials). Finally, they considered the 35 plus percent internal rate of return (IRR) they hoped to generate for investors over five to seven years and backed into the exit valuation they needed to achieve that return. The LOI valuation was twice the top end of the target deal range of US $5-$15 million that Fernandez and Sicilia had presented, but they were hopeful that their investors would commit more or that they could find additional capital.
 

Of particular interest were Bomi Mexico's customers, who were primarily multinational pharmaceutical and medical device companies. The customers required highly specialized and customized warehousing and transportation (e.g., for refrigerated or frozen products), and margins on such services were lucrative. Multiyear customer contracts ensured a consistent, recurring revenue stream for the company. Bomi's customer concentration was high, with the top four comprising 61 percent of the company's sales. When Sicilia and Fernandez got word that J&J, Bomi Mexico's largest customer at 26 percent of sales, would not renew its contract, conversation turned back to valuation.

Bomi Group argued that the loss of J&J to Bomi Mexico would reduce EBITDA by 20 percent, but Vestige calculated the impact at 35 percent or more and worried that the company's reputation would be damaged. Fernandez and Sicilia had spent five months in discussions with Estrada and had recently presented their investors with a deal memo, but the deal went short.
 

Of all the companies Fernandez and Sicilia reassessed in the spring of 2011, Bomi Mexico was at the top of their list. The two had stayed in touch with Estrada and knew how the company was faring. The industry was taking off, and they believed that Bomi Mexico had strong growth prospects. More to the point, they were aware that Estrada remained interested in selling. While Bomi Mexico's EBITDA had in fact fallen 45 percent after the loss of J&J, the company had also signed four new customers that Estrada said would more than compensate for the loss. Estrada provided Vestige with new projections and a new look at historical sales (See Exhibit 8 and 9), but, having seen the result of the J&J departure, Fernandez and Sicilia were skeptical of Bomi's ability to forecast accurately.

 

Question 1: Present Bomi's new projections to existing and new investors, adjust their partnership relationship and work to close a deal. 
 

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Company Name Ticker Expeditors International of Washington EXPD CH Robinson JB Hunt Transport Services Echo Global Logistics CHRW JBHT ECHO WERN CNW ODFL UPS LSTR KNIN Werner Enterprises, Inc. Con-Way Inc. Old Dominion Freight Line United Parcel Service Inc. Landstar System Inc. Kuehne & Nagel International AG Industry Average CAGR is 17.9%, Histoically for Company Income Statement (MXPs) Average Price per Unit Sales Volume (Shipping Notes) Total Sales Total Operational Expenses (w/o Overhead) Profit before Overhead Total SG&A (Overhead) Total Expenses EBITDA Depreciation and Amortization EBIT Taxes Net Income EBITDA Margin Income Statement (MXPs) Average Price per Unit Sales Volume (Shipping Notes) Sales EBITDA $ 5,634 $ $ 7,577 $ 513 615 447 $ 3,203 $ $ 203 $ $ 1,666 $ 8 252 306 $ 4,269 $ $ 1,245 $ 165 $ 45,297 $ 5,548 $ 2,009 $ 138 $ 17,992 $ 1,005 900 $ 8,910 $ Total Sales Total Operational Expenses (w/o Overhead) Profit before Overhead Total SG&A (Overhead) Total Expenses EBITDA Depreciation and Amortization Actual & Projected Financials, March 2010 EBIT Taxes Net Income EBITDA Margin 2009 1,477 112,493 EBITDA Margin EV/EBITDA 12.7 9.1% 8.1% 14.1 14.0% 10.2 28.4 4.0% 15.1% 5.5 5.8 7.2% 13.3% 7.7 12.2% 11.6 6.9% 13.3 5.6% 11.7 10.1% 12.1 2010 2010 1,634 82,216 1,557 114,196 2011 Financials as of April 2011 1,469 106,056 2011 1,603 119,678 166,199,727 177,856,982 191,856,953 250,865,508 320,569,069 407,869,784 527,258,708 113,269,269 112,224,678 126,394,204 169,486,645 216,116,183 281,515,743 371,783,542 52,930,459 65,632,304 65,462,749 81,378,863 104,452,886 126,354,041 155,475,166 31,124,545 34,130,876 39,432,935 43,433,419 74,249,925 80,773,200 89,369,479 144,393,814 146,355,554 165,827,139 212,920,064 290,366,108 362,288,943 461,153,021 21,805,913 31,501,428 26,029,814 37,945,444 30,202,961 45,580,841 66,105,687 2,650,960 3,067,627 3,567,627 6,167,627 6,887,627 23,378,853 34,877,817 26,635,334 39,413,213 59,218,060 7,013,656 10,463,345 7,990,600 11,823,964 17,765,418 16,365, 197 24,414,472 18,644,734 27,589,249 41,452,642 13.6% 15.1% 9.4% 11.2% 12.5% 2,960,563 18,845,351 5,653,605 2,887,044 28,614,384 8,584,315 20,030,069 17.7% 13,191,745 13.1% Note: EBITDA margins variation reflect capacity increases that remain idle for a period of time 2012 1,475 128,783 2012 Note: EBITDA margins variation reflect capacity increases that remain idle for a period of time 1,599 156,859 2013 2013 1,495 154,300 1,618 198,152 2014 2014 1,523 191,950 1,629 250,419 2015 2015 1,543 246,298 1,645 320,449 2016 1,560 320,349 134,329,175 155,774,153 189,922,144 230,683,499 292,275,313 380,016,625 499,705,371 103,048,425 119,919,002 145,386,645 197,290,237 238,707,987 302,050,584 384,280,993 31,280,751 35,855,151 44,535,499 33,393,263 53,567,326 77,966,041 115,424,378 13,819,442 14,530,250 16,274,134 17,918,677 20,281,290 23,221,445 27,184,098 116,867,866 134,449,251 161,660,779 215,208,913 258,989,277 325,272,029 411,465,091 17,461,309 21,324,901 28,261,365 15,474,586 33,286,036 54,744,597 88,240,280 3,528,708 3,524,590 3,406, 120 4,406, 120 7,939,453 9,379,453 11,107,453 13,932,601 17,800,311 24,855,245 11,068,466 25,346,583 45,365,143 4,179,780 5,340,093 7,456,573 3,320,540 7,603,975 13,609,543 9,752,821 12,460,218 17,398,671 7,747,926 17,742,608 31,755,600 13.0% 13.7% 14.9% 6.7% 11.4% 14.4% 77,132,827 23,139,848 53,992,979 17.7% Company Name Ticker Expeditors International of Washington EXPD CH Robinson JB Hunt Transport Services Echo Global Logistics CHRW JBHT ECHO WERN CNW ODFL UPS LSTR KNIN Werner Enterprises, Inc. Con-Way Inc. Old Dominion Freight Line United Parcel Service Inc. Landstar System Inc. Kuehne & Nagel International AG Industry Average CAGR is 17.9%, Histoically for Company Income Statement (MXPs) Average Price per Unit Sales Volume (Shipping Notes) Total Sales Total Operational Expenses (w/o Overhead) Profit before Overhead Total SG&A (Overhead) Total Expenses EBITDA Depreciation and Amortization EBIT Taxes Net Income EBITDA Margin Income Statement (MXPs) Average Price per Unit Sales Volume (Shipping Notes) Sales EBITDA $ 5,634 $ $ 7,577 $ 513 615 447 $ 3,203 $ $ 203 $ $ 1,666 $ 8 252 306 $ 4,269 $ $ 1,245 $ 165 $ 45,297 $ 5,548 $ 2,009 $ 138 $ 17,992 $ 1,005 900 $ 8,910 $ Total Sales Total Operational Expenses (w/o Overhead) Profit before Overhead Total SG&A (Overhead) Total Expenses EBITDA Depreciation and Amortization Actual & Projected Financials, March 2010 EBIT Taxes Net Income EBITDA Margin 2009 1,477 112,493 EBITDA Margin EV/EBITDA 12.7 9.1% 8.1% 14.1 14.0% 10.2 28.4 4.0% 15.1% 5.5 5.8 7.2% 13.3% 7.7 12.2% 11.6 6.9% 13.3 5.6% 11.7 10.1% 12.1 2010 2010 1,634 82,216 1,557 114,196 2011 Financials as of April 2011 1,469 106,056 2011 1,603 119,678 166,199,727 177,856,982 191,856,953 250,865,508 320,569,069 407,869,784 527,258,708 113,269,269 112,224,678 126,394,204 169,486,645 216,116,183 281,515,743 371,783,542 52,930,459 65,632,304 65,462,749 81,378,863 104,452,886 126,354,041 155,475,166 31,124,545 34,130,876 39,432,935 43,433,419 74,249,925 80,773,200 89,369,479 144,393,814 146,355,554 165,827,139 212,920,064 290,366,108 362,288,943 461,153,021 21,805,913 31,501,428 26,029,814 37,945,444 30,202,961 45,580,841 66,105,687 2,650,960 3,067,627 3,567,627 6,167,627 6,887,627 23,378,853 34,877,817 26,635,334 39,413,213 59,218,060 7,013,656 10,463,345 7,990,600 11,823,964 17,765,418 16,365, 197 24,414,472 18,644,734 27,589,249 41,452,642 13.6% 15.1% 9.4% 11.2% 12.5% 2,960,563 18,845,351 5,653,605 2,887,044 28,614,384 8,584,315 20,030,069 17.7% 13,191,745 13.1% Note: EBITDA margins variation reflect capacity increases that remain idle for a period of time 2012 1,475 128,783 2012 Note: EBITDA margins variation reflect capacity increases that remain idle for a period of time 1,599 156,859 2013 2013 1,495 154,300 1,618 198,152 2014 2014 1,523 191,950 1,629 250,419 2015 2015 1,543 246,298 1,645 320,449 2016 1,560 320,349 134,329,175 155,774,153 189,922,144 230,683,499 292,275,313 380,016,625 499,705,371 103,048,425 119,919,002 145,386,645 197,290,237 238,707,987 302,050,584 384,280,993 31,280,751 35,855,151 44,535,499 33,393,263 53,567,326 77,966,041 115,424,378 13,819,442 14,530,250 16,274,134 17,918,677 20,281,290 23,221,445 27,184,098 116,867,866 134,449,251 161,660,779 215,208,913 258,989,277 325,272,029 411,465,091 17,461,309 21,324,901 28,261,365 15,474,586 33,286,036 54,744,597 88,240,280 3,528,708 3,524,590 3,406, 120 4,406, 120 7,939,453 9,379,453 11,107,453 13,932,601 17,800,311 24,855,245 11,068,466 25,346,583 45,365,143 4,179,780 5,340,093 7,456,573 3,320,540 7,603,975 13,609,543 9,752,821 12,460,218 17,398,671 7,747,926 17,742,608 31,755,600 13.0% 13.7% 14.9% 6.7% 11.4% 14.4% 77,132,827 23,139,848 53,992,979 17.7%