SilverSun Technologies (SSNT) and Jacobs Private Equity II, LLC (JPE) – which is led by Brad Jacobs – announced today that they and minority co-investors have entered into an investment agreement, under which JPE and the minority co-investors will invest $1 billion in cash into SilverSun. This proposed equity investment comprises $900 million by JPE and $100 million by co-investors, including Sequoia Heritage.
Upon the closing of the equity investment, JPE will become the majority stockholder of SilverSun, and Jacobs will become the company’s CEO and chairman of its board of directors. This investment agreement also provides for the spin-off of the company’s existing business to SilverSun stockholders as of a record date that is expected to be one day before the closing of the investment. The remaining company will become a standalone platform for significant acquisitions in an industry to be announced soon, along with the company’s new name.
Jacobs completed approximately 500 M&A transactions in his career and built five multi-billion dollar, publicly traded companies to date: XPO, one of the largest providers of less-than-truckload services in North America; GXO Logistics, the largest pure-play contract logistics provider in the world; RXO, a leading tech-enabled freight brokerage platform; United Rentals, the world’s largest equipment rental company; and United Waste Systems, the fifth largest U.S. waste management company at the time of its sale.
Each of these companies has a history of attracting world-class talent, establishing advantages through technology, and scaling up through accretive capital allocations for M&A and organic growth.
Investment Agreement
Under the terms of the investment agreement, the company will, shortly after the closing of the investment, spin off the existing SilverSun business as SilverSun Technologies Holdings and distribute all shares of the spin-off company to the stockholders of SilverSun as of a record date that is expected to be one day prior to the closing of the equity investment. And the company will also affect an 8:1 reverse stock split before the closing of the equity investment.
Upon the closing of the investment and the effectiveness of the reverse stock split, JPE, Sequoia Heritage and the other co-investors will have: (i) voting, convertible preferred stock that, in the aggregate, is convertible into about 219 million shares of the company’s common stock at a price of $4.57 per share (equivalent to $0.57 per share pre-split); and (ii) warrants to purchase an additional approximately 219 million shares of the company’s common stock at post-reverse-split exercise prices of: $4.57 per share (equivalent to $0.57 per share pre-split) concerning 50% of the warrants, $6.85 per share (equivalent to $0.86 per share pre-split) concerning 25% of the warrants, and $13.70 per share (equivalent to $1.71 per share pre-split) concerning the remaining 25% of the warrants. Following the closing of the investment, JPE and the co-investors will own approximately 99.85% of the Company’s common stock on a fully convertible/exchangeable basis.
SilverSun will also declare a $2.5 million aggregate cash dividend to its stockholders as of the same record date, to be funded from proceeds received under the investment agreement. The transactions – contemplated by the investment agreement – have been approved by SilverSun’s board of directors, and are expected to be completed in 2024. The deals are subject to SilverSun stockholder approval and the satisfaction of other customary closing conditions.
The company’s current management and board of directors, including Mark Meller, SilverSun’s chief executive officer, are expected to continue in their current roles at the spin-off company and its subsidiaries. And the spin-off company will apply for a public listing of its shares, which will be registered under documents filed with the SEC.
Goldman Sachs and Morgan Stanley are serving as financial advisors to JPE, and Wachtell, Lipton, Rosen & Katz is serving as legal advisor. And the Benchmark Company, LLC is serving as financial advisor to SilverSun, and Lucosky Brookman LLP is serving as legal advisor.
KEY QUOTES:
“I’m excited to start building another multibillion-dollar company from scratch. Soon, I’ll be providing more information about my new venture and industry, and the strategy we plan to execute.”
— Brad Jacobs
“We believe this investment agreement will provide ideal outcomes for our stockholders, customers and employees, including the opportunity for our stockholders to realize a substantial upfront cash payment in the form of a $2.5 million dividend. We expect our stakeholders will benefit from retaining the value of our existing business, while also participating in the potential upside of Brad Jacobs’ future business plans for the company.”
— Mark Meller, SilverSun’s chief executive officer
