A billion here, a billion there, and soon you’re talking real money. That’s what Lessen, which has a property services platform, said effectively happened when it acquired SMS Assist, which has cloud-based software for facilities maintenance, for $2 billion.
“The two companies will serve a national footprint of approximately 250,000 residential and commercial properties and facilitate approximately 2.5 million repair and maintenance orders per year – in tandem with bolstering a broader range of property services,” a press release stated. “By merging the complementary strengths of both companies, Lessen will continue to tackle real estate’s pain points, providing its customers with a scalable, tech-enabled, enterprise solution for commercial and residential services.”
The companies said that the acquisition involved $500 million in new debt and equity as well as a stock swap “resulting in an increased combined company valuation of over $2 billion in enterprise value.”
A price of a transaction would normally be cash plus market value of stock and any other measurable considerations, and for it the acquiring company would get the target, its assets, both tangible and intangible, which would include intellectual property and goodwill.
However, both Lessen and SMS Assist are privately held companies. Unlike public companies that have market caps based on share prices and numbers of shares, private company valuations are difficult to calculate without extensive insight into the corporation’s books.
And market cap is only one aspect of enterprise value, which also includes long- and short-term debt, minority interest in other companies, cash and cash equivalents, and unfunded pension liabilities.
Lessen has promoted itself as allowing property managers to “overcome labor shortages, reduce overhead, scale their businesses, and benefit from our supply chain and buying power to secure project materials for faster deliver.”
SMS Assist addresses facility managers who need such things as reactive and preventative maintenance, landscaping, snow and ice management, floor care, turns and rehabs, in-house technician management, and asset management.
The two companies say that their operations are complementary.
“Debt and equity investors who backed this transaction include Monroe Capital, Värde Partners and Koch Real Estate Investments,” Lessen said. “Additionally, clients who invested in the deal with Lessen include American Homes 4 Rent, among others. Notable clients of the new combined entity include Invitation Homes and American Homes 4 Rent, among others.”