NewtekOne (NEWT) M&A Announcement summary

Deal rationale and strategic fit

• Divestiture driven by regulatory requirements following NewtekOne's transition to a financial holding company and commitment to the Federal Reserve to exit non-banking activities by January 2025.

• Chose to partner with a public company (IPM, formerly Paltalk) to maintain exposure to the IT business and ensure continuity for clients and staff.

• IPM expands its portfolio by acquiring an IT solutions provider with 17,000 customers and is positioned as a pure play in managed cybersecurity, cloud hosting, and IT services, aligning with market demand and growth in AI.

• Retention of the entire NTS management and staff ensures operational continuity and expertise.

Financial terms and conditions

• Transaction closed January 2, 2025; consideration includes $4 million in cash, 4 million shares of non-voting preferred stock, and an earn-out of up to $5 million based on EBITDA thresholds for 2025 and 2026.

• Preferred stock issuance is capped to keep NewtekOne's equity interest below one third of IPM's total equity; excess paid in cash.

• NewtekOne holds a non-voting equity interest representing about 30.3% of IPM on a fully diluted basis, subject to a one-year lock-up.

• Earn-out details are confidential but tied to future financial performance.

• NewtekOne will appoint one representative to IPM's board post-closing.

Synergies and expected cost savings

• Main synergy is operational focus: IPM becomes a pure play IT company, freeing NewtekOne from non-core activities.

• No major cost synergies expected; emphasis is on business continuity and growth potential.