Platform Arbitrage Opportunities

Jeremy shares a deal where they purchased a declining but profitable platform business through creative deal structuring. The strategy involves buying businesses built on legacy platforms that are becoming less popular but still generate significant recurring revenue.

Key Points:

• Deal Structure:

  • Business doing $10M in recurring revenue
  • Purchased through borrowed money
  • Loan paid back in 3-4 months
  • Effectively acquired for nearly zero capital ($36 cost basis)

• Key Opportunity Factors:

  • Fortune 500 company needed quick divestment
  • Business built on declining platform
  • Limited buyer pool due to business characteristics
  • Speed of execution was more valuable than price

• Additional Value:

  • Acquired domain worth $1-2M
  • Business continues generating cash flow despite decline
  • No capital call needed from investors
  • Will generate multiple returns on investment

• Success Elements:

  • Understanding right to win the deal
  • Recognizing money wasn't most important factor
  • Ability to move quickly
  • Creative financing structure