NewtekOne (NEWT) M&A Announcement summary

Deal rationale and strategic fit

• Divestiture was required due to regulatory commitments after acquiring a bank and transitioning to a financial holding company, aligning with the seller's commitment to the Federal Reserve Board.

• The transaction enables a pure play in managed IT, cloud hosting, and cybersecurity, aligning with market demand and growth in AI-driven services.

• The acquirer expands its portfolio by acquiring an IT solutions provider with 17,000 customers.

• The entire management and staff of the divested business transition to the acquirer, ensuring continuity and expertise.

• The acquirer retains valuable patents and rebrands as Intelligent Protection Management Corp. (IPM), focusing on technology and cybersecurity.

Financial terms and conditions

• Purchase price includes $4 million in cash, 4 million shares of non-voting preferred stock, and a potential earn-out of up to $5 million based on adjusted EBITDA for 2025 and 2026.

• The seller's equity interest represents about 30.3% of the acquirer's total equity on a fully diluted basis, with a minimum one-year lock-up period; preferred stock issuance is capped to keep equity interest below one third, with excess paid in cash.

• Earn-out details are tied to performance thresholds, with specifics to be disclosed in future filings.

• The seller will appoint one representative to the acquirer's board post-closing.

Synergies and expected cost savings

• The transaction allows the divested business to operate as a focused, standalone entity, leveraging the acquirer's public company infrastructure and marketing expertise.

• No material operational changes are expected; the management team and staff remain intact, supporting seamless service for existing clients.