The Revenue Model

Newport Beach, October $1,2022$

Several weeks had passed since Lucille Bluth had signed a term sheet with Divaaliya Capital Partners $($DCP$)$ for a $$65$ million minority investment into ADS. Since then, Lucille had hired Joffreys Investment Bank to advise her on the potential deal. Joffrey$$s Senior Managing Director, Joe Baratheon, felt that Lucille could get a much better deal by selling the business outright to a tech oriented private equity firm. Joe told Lucille that the Divaaliya deal was unattractive in two respects: valuation and treatment of deferred revenue as a debt$-$like item. $$Besides$$ he told her, $$why do you want to raise new money for a business that already generates so much cash? You$$d be much better off selling the company outright$.$

Lucille considered her options. While she would prefer to maintain control of the business, she recognized that growth in her niche of the HR software services market was beginning to slow and that the company would be unable to sustain the high growth rates of previous years. She also had to admit, much to her disappointment, that her family was not able to carry on with the business. Her husband George was a guest of the US Federal Government at FCI Dublin, where he was serving fifty$-$seven concurrent ten$-$year sentences. Her four adult children were otherwise engaged in a psychiatric hospital, a magic school, the disposed$-$of frozen banana business, and worst of all, law school. Selling the business was beginning to seem appealing.