Hacker Bits, April 2016

David,
I’m still interested in moving
forward and appreciate
the offer.
The offer was enough to
begin a serious conversation,
but I think it was on
the low side. Here’s why:
– We’re the #1 downloaded
Spanish-language Bible in
the App Store. In fact, we
get more downloads than
the vast majority of English
bible apps.
– We’re a Top 10 Free app
in the Books category. Better
than Disney, Google’s
Play app, Barnes & Noble,
Marvel Comics, DC Comics,
and others.
– The business is very consistent,
and has been for
some time (> 2.5 years).
This isn’t a trend or a seasonal
app.
– We rank #1 for “la biblia”,
#2 for “biblia”, #2 for
“spanish bible” and top 10
for many other phrases.
Since the app performs
so consistently and takes
so little of my time (~1
hour per month) it needs
to make financial sense to
give it up…
Given the strategic value of
the app, Salem Media’s unrivaled
ability to monetize
media properties, and the
other factors mentioned
above, I could accept an
offer of 6x revenue. That
would give Salem Media
the most popular Spanish-language
Bible app at a
reasonable price and provide
me enough incentive
to give it up.
Frankly it also helps that
you guys have experience
with app properties and
that I can trust you as a
buyer.
Let me know what you
think. I can move quickly if
the deal makes sense.
Trevor
They came back with an
updated offer of 4.5x revenue, a
bump of 1x.
But I knew they could do
more.
I countered again, basically
reiterating the previous email,
lowering my ask to roughly 5x
revenue.
Finally, he emails me:
Trevor,
Let me know if you have
a few minutes this afternoon.
I think I have a way
to get to 5x revenue but
I want to be sure you are
good with it before I send
along the offer.
Hope you all are having a
great trip.
David
The timing for this entire
process was less than ideal as
my wife and I were in Europe for
all of March and April.
But I still remember where I
was when I “accepted” their offer:
having dinner with my wife
in Germany.
I’m not gonna lie, saying yes
on the phone from a restaurant
in Germany to a big company
offering to buy my company felt
pretty cool.
Once we’d agreed on the
price it was time to begin due
diligence.
2. Due diligence
After we’d agreed on price,
the joy of due diligence began.
I already had all my ducks
in a row so it was pretty easy to
get them everything they asked
for (see Aquisition Questions List
on next page).
What wasn’t fun was how
long it took. We agreed on the
price and started due diligence
around March 10th, and I didn’t
get the first draft of the initial
asset purchase agreement until
April 21st. Just awful.
In the first half of April
they’d asked (and I’d complied
with) multiple due diligence
asks, phone calls, etc. Eventually
I had to put my foot down
and say no more. I wasn’t giving
them a single more minute or
document until I got the draft
agreement.
It worked.
I worked up more and more
moxy as the process continued.
3. Asset Purchase
Agreement (APA)
term negotiations
I finally got the draft APA on
April 21st. It was a 63-page document,
so I finally hired an M&A
firm to help.
I ended up only having to
spend ~$5k on lawyers for the
whole deal, which sounds like a
lot until you work with lawyers.
I was happy to pay it for the
hacker bits
33