Monetizing Mission
Critical ERP/IT Systems

Investment Strategy

By working within one of the two U.S. Virgin Islands economic development programs, Leeward unlocks significant value for its transaction partners through the purchase of mission critical ERP/IT systems. Instead of underwriting the book value of these assets, Leeward underwrites the strategic value of the ERP/IT systems to the Company allowing companies across all industry sectors to monetize assets that are typically not financed via traditional capital markets.

Transaction partners get use of the ERP/IT systems through an exclusive Application Service Provider (“ASP”) agreement. The acquired ERP/IT systems must reside within a U.S. Virgin Islands data center, facilities that comprise the second largest concentration of bandwidth in the western hemisphere. Transaction partners can terminate the ASP contract through a termination fee and have the option to repurchase the assets upon termination.

Investment Criteria

Deal Size

Leeward targets transactions between $10 million and $100 million but can consider smaller deals under certain circumstances.

Industry

Leeward will consider all industry types so long as the purchased assets are mission critical for the Company's product or service offering.

Candidates

Later stage middle market companies with mission critical ERP/IT systems and EBITDA in excess of $5 million.

Transaction Types

  • Financial Sponsor Transactions – Capital for Financial Sponsor led acquisitions
  • Strategic Acquisitions – Capital for strategic acquisitions by Owner/Operators or Sponsor owned businesses
  • Liquidity Events – Management-led buyouts, family ownership changes and Owners seeking a significant liquidity event without the sale of equity

Typical Terms

Purchase Price

Cash to seller between 3X to 7X trailing twelve months EBITDA.

ASP Fee

Typically Application Service Provider ("ASP") fees do not exceed 70% of pre-transaction operating income and ASP fees usually increase each year by a predetermined percentage.

ASP Term

Initial term of 5 years with automatic renewals until a Termination Event.

Other ASP Costs

With the exception of U.S. Virgin Islands data center and specific LCM Technology Services' costs, transaction partners are generally responsible for all other costs including software license fees, telecommunications costs and redundancy or disaster recovery costs.

Termination Event

Transaction partners have the ability to terminate the Application Service Provider agreement for a fee after an agreed upon term

Asset Buy-Back

Transaction partners retain the option to buy back the assets following a Termination Event.

Execution & Management

LCM Technology Services, with the support of both U.S. Virgin Islands and State-side service providers, has successfully executed on the relocation of State-side ERP/IT systems to U.S. Virgin Islands data centers. The Chief Information Officer or other IT Executives of Leeward's transaction partners are actively involved in the transition. Leeward understands each Company has unique business requirements and Leeward has the experience and resources to implement solutions that maintain or enhance service levels for its ASP customers.

Background

Leeward's Principal, Matthew Hagen, conceived of Leeward's investment structure within the U.S. Virgin Island economic development program after having executed a similar transaction for his family business, American Forest Products, LLC. Through its U.S. Virgin Islands affiliate, Lexington Management, LLC, AFP relocated the Company's SAP enterprise platform to a U.S. Virgin Islands data center. Lexington, a beneficiary of the Territory's economic development program, became AFP's primary Application Service Provider.