Case Study

Entrepreneur Owner-Manager: Founder

Right Networks Recapitalized by BV Investment Partners

Right Networks is the leading hosting and solutions provider for QuickBooks Desktop accounting software and more than 400 other business-critical applications. Growing 40% a year, Right Networks is taking thousands of accountants and small and medium-sized businesses (“SMBs”) to the cloud.

The company’s proprietary HyperRight® Virtualization Technology enables Right Networks to deliver efficient, reliable, and scalable cloud solutions to over 25,000 customers, more than the combined total of SMBs served by all the other QuickBooks commercial hosting partners.

Bigelow Assignment

Co-founded in 2002 by John Farrer and Phil Romine, the two founders had very different objectives for a transaction. After 14 years in business together, Phil had decided it was time to move on to other things whereas John was keen to continue on with the business and take it to the next level.

Having previously hired a banker to find a new investor some three years earlier, without success, failure was not an option. Could Bigelow find an investor that would satisfy both the personal and professional objectives of the two founders?

Unique Challenges

Would investors be able to handle significant concentration with the “anchor tenant” Intuit?

In an increasingly SaaS (software-as-a-service) world, would investors view a business focused on hosting a desktop product as sustainable?

Would investors appreciate and value the HyperRight® technology and the competitive advantage it provided?

Would investors be willing, and able, to support an accelerated growth plan to triple the size of the company in the next 5 years?

Outcome

The Bigelow engagement architecture was customized to address these unique challenges and shareholder objectives, including:

  • Pulling-forward critical work streams to address company and industry-specific questions: a third-party market study to quantify the opportunity for continued adoption of hosting for QuickBooks Desktop providing a solid foundation for a future growth plan; and a quality of earnings study to supplement audited financial statements, verify add-backs, and validate channel profitability.
  • Use of complex transaction structuring to ensure equitable treatment of the founders (given their different objectives), and the use of representation and warranty insurance to minimize indemnification exposure post-closing.

After evaluating multiple attractive partnership opportunities, Right Networks chose to recapitalize the business through a majority investment from BV Investment Partners. BV is one of the oldest and most experienced sector-focused private equity firms in North America, actively targeting investments in the business services and IT services sector. BV brings a wealth of experience and an impressive track record of helping fast-growing companies like Right Networks achieve their full potential.

Through the recapitalization, Phil Romine was able to exit the business completely, while John Farrer continues to lead the company as its CEO and remains a significant owner.

“Beyond the strategic direction and guidance that Bigelow provided throughout this process, they became an extended part of our team and as enthusiastic and passionate about our business as we are. Their thoughtful, proactive approach to learning about the business and building our story to engage with potential investors was paramount for our ultimate success.”

John Farrer, Founder & Chief Executive Officer
Right Networks, Inc.

“Bigelow is unique – you took me from where I was in my business to where I needed to be in my life.”

Phil Romine
Right Networks, Inc.