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Valuing ATM portfolios
An ATM consultant says that sellers of ATM portfolios can expect to make money -- but not megabucks.by Bob Rudinsky, president of Lexus Enterprises.
March 21, 2002
As an ATM consultant, I have received many calls by ATM owners asking the following questions: How do I value my ATM network? Is there a standard formula for selling an ATM portfolio? How do I find a buyer? Can you help me?
The following examples should provide a good basic understanding of how to value your ATM portfolio and how much others may be willing to pay:
If you own 100 ATMs that cost you $7,000 each or $700,000 total two years ago, you would assume that using a five-year straight line depreciation schedule, the value of the ATMs would be ($700,000/60)*(60 months minus 24 months) or $419,999.97 after two years of depreciation.
While $419,999.97 is true for depreciation, it's not a true value of your portfolio. Buyers of ATM portfolios use the absolute lowest wholesale price when putting a value on machines. If the ATMs were Triton 9500s, they would likely be valued at $500 per ATM or $50,000 total. In most offers, the equipment value of the ATMs is not even considered as an additional value over the offer price of the locations.
You own 100 ATMs and have five-year contracts that are two years old. You might assume that because there is still three years left on the contracts, you can sell for the present value of the three remaining years of gross revenue minus operating expenses, a percent of the renewal revenue and the value of the equipment.
In a perfect world you could, but not in the ATM world. If your machines are in good locations and allow for assignment without a merchant's consent, you may be able to receive 20 to 26 months gross revenue minus operating expenses as an offer. This offer will include the assignment of contracts, the ATMs, signage, paper and all other assets that go along with each location.
If the ATMs are in high-risk locations like gentleman's clubs, you may have a difficult time receiving more than 10 to 15 months gross revenue minus operating expenses.
You own 100 ATMs and all or some of the contracts require a merchant's permission or consent to be assigned. Your merchants may say no, or they may ask the new owner to double the rent payment.
One project I worked on resulted in several merchants unplugging the ATMs and requesting immediate removal. Their actions constituted a breach of contract. The big "but" is what are you going to do -- take them to court? This could slow down or eliminate the possibility of selling your ATM portfolio.
Be careful. You are selling for a reason. You don't need more headaches. Look at selling your company instead of the ATM portfolio. This may make it possible for you to sell with your merchants not sharing in the decision.
You manage a network of 100 ATMs that you sold to merchants. You provide processing, service and management of these ATMs but do not own them. The contracts have three years remaining.
In this example, you are selling or buying a revenue stream only. The only asset is the contract securing each site. Calculate the gross monthly revenue. You can expect to sell or buy for approximately 15 to 20 months gross revenue minus operating expenses. Once again, the strength of the contracts along with the renewal potential will determine if a premium or discount is warranted.
Now that you have put a value on your company or portfolio, how do you sell it? As quietly as possible! You need to protect yourself if you decide not to sell.
Many companies are more interested in obtaining your information than they are in buying your portfolio. Never show potential buyers specific information without a confidentiality agreement signed and returned to you.
You will need to provide some information in order to spark initial interest. The following are guidelines that I use in the initial stages of evaluating a portfolio for sale or purchase:
• Number of ATMs in portfolio
• Average monthly withdrawals per ATM
• Average number of months left on contracts
• ATM makes and models
• States where machines are located
• Ability to assign contracts
• Seller's asking price, if known
Once you have provided some information, it's time for the potential buyer to sign a confidentiality agreement that is at least one year longer than the remainder of your longest-running contract. This will prevent the potential buyer from trying to steal your renewals.
Due diligence will follow from the buyer, hopefully followed by an offer and close date. As the seller, you need to do as much due diligence on the buyer as the buyer does on you.
Make sure there is real money at the closing. If you hear the words "we have investors," be careful. This means they have no money! Make the buyer prove that they have the money to buy your portfolio.
Your attorney should get deposit money in escrow as soon as an offer is accepted. Ask for at least 10 percent, with a penalty if the buyer cannot close the purchase. As the seller, try to obtain full payment at closing. Many buyers offer 50 percent down, with additional payments starting in three to six months.
Your portfolio may be worth much more to you than someone is willing to pay for it. In rare instances, you may get lucky and get overpaid. Remember that your portfolio is only worth what someone else is willing to pay!
Bob Rudinsky is president of Lexus Enterprises, Inc., an ATM management and consulting company. He can be reached at 561-218-8641 or by email at atmgi@aol.com.
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