In 2012, Ismael Wrixen, seeking fresh opportunities to engage his entrepreneurial spirit and empower his own financial and career success, joined forces with Thomas Smale, his old friend from the University of Bath, in an upstart business providing brokerage services for mid-market online businesses.
Now rebranded as FE International, the company has emerged as the pre-eminent advisor within the industry, bringing due diligence, integrity and creativity to the process of matching sellers and buyers/investors. Like many companies that ultimately changed the world, it was started out of Smale’s home with a very small upfront investment. It launched with a range of products and services in the buying and selling websites space, but has since evolved to focus almost exclusively on sell-side brokerage. FE International’s success is partly rooted in the principles Smale expounded upon in “Killer Flipping Secrets,” a book about how to run and optimize one’s business for eventual sale that Smale wrote while still a student.
Having now completed over 300 transactions, ranging from several thousand dollars to major seven figure deals, Wrixen and Smale – who had long had sales reps in the U.S. – officially opened an office in San Diego in 2013 to offer 24 hour worldwide service to their clients. Hiring Ryan Sorensen to run that office was a move made in deference to the fact that while the principals are based in London, Wrixen estimates that 90 percent of their buyers and 50 percent of their sellers are in the U.S. Incredibly, to this point, FE International has been predominantly a referral only business, building its stellar industry standards setting reputation one transaction at a time.
The web based enterprises that FE International has negotiated transactions for are in many different industries; the most prominent are ecommerce (particularly drop ship ecommerce businesses), advertising and lead generation in the areas of employment, healthcare and insurance.
The company now has a team of seven, including Wrixen and Smale, based in Europe, comprised of ex-investment bankers, brokers and tech staff. The team’s diverse experience ensure that that FE International can manage a sale from start to finish across all aspects and skill sets required. Rather than an ongoing operation, they now run a management service to help buyers take on businesses as an investment.
Wrixen was one of those rare and lucky college grads who snagged a potential career making opportunity right out of the University. While studying finance and business at Bath, he got his feet wet in the financial world with a brief stint in portfolio risk management with Morgan Stanley. He graduated with 1st class Bsc (Hons) in Business, gaining the Accenture prize for excellence in the process. Immediately after graduating, he landed a plum job with Citigroup, working as part of a brokerage team that brought IPOs to market. During his 2.5 years there, he managed relationships with senior ranking individuals in FTSE100 listed firms – including Vodafone, a part owner of Verizon.
Wrixen rose to the position of analyst but made the bold decision to leave just before his next promotion. While he was in school, he listed his main career goals were money, opportunities and empowerment. The banking world offered the financial part of that but not the other two. “I did very well in that industry and was grateful to be part of it,” he says, “but ultimately, when you’re promoted, you know where you’ll be for the next three years, what income level you will be at. There’s no room for growth. You can work twice as hard as the other guys in your department and still make the same amount. I thought, if I’m going to work 16 hours a day, I’m going to do it for myself.”
In the months prior to leaving his job, Wrixen was following Smale’s progress and discussing strategies on various transactions that Smale was working on. Certain larger hedge fund groups were among those interested in buying websites. Wrixen realized that the business process of FE – then called Flipping Enterprises – was not too much different from what he was already doing on the institutional level. In August 2012, Smale discussed with Wrixen bringing him on to help grow the company more formally. Wrixen bought out Smale’s original founding partner and became a full partner in the company.
Wrixen’s years at Citigroup gave him a wealth of experience, expertise and business acumen that have played an integral part in his role as a partner in FE International’s exponential growth. He worked with financial tools to help him analyze companies from a formal perspective – something that is part of FE’s thorough vetting process with each prospective seller now. He believes that a lot of people who call themselves brokers are simply masquerading as such, because they lack that basic background. Smale also worked for a time at Morgan Stanley.
“Thomas and I have been able to draw a lot from our previous work creating financial models and applying legal systems to structure our transactions,” says Wrixen. “Our background in the array of offerings we did in public markets has been useful to us here. There are also other important essentials you learn in the corporate financial environment, including general professionalism. It’s interesting to see how some of the big corporate things we’ve done can be applied to transactions around smaller businesses. There is definitely an overlap.”
The FE International Indicative Transaction Timetable delineates for each transaction the Process Overview and Client Responsibilities at each stage. The first week is the Assessment, which involves broker review of the business, traffic verification, financial overview, initial valuation and the reviewing and signing of a representation agreement. The next 1-2 weeks is the Sales Preparation phase, which includes verification of financials, the seller’s completion of a business questionnaire and income statement, a final valuation and prospectus drafting. FE is one of only a few brokers that does proprietary Due Diligence in this early stage. This process covers a detailed analysis of financial, operational, traffic and legal issues and details. During this time, the broker prepares an asset purchase agreement (APA) for review by the seller’s legal counsel.
The subsequent 2-4 week Marketing and Negotiation Period involves the marketing of the transaction to target buyers through multiple distribution channels, including the FE buyer community which includes funds and strategic investors, as well as wealthy private individuals; other channels include specialist niche buyers, site listing, major business sale networks). Subsequent parts of the process include soliciting offers, discussing bids, vetting buyer suitability, negotiating offers and formally accepting the winning bid.
The final week is the Closing, in which the APA is reviewed and signed; the seller transfers assets into escrow while the buyer’s funds are secured; the seller and buyer facilitate the asset transfer; and the outstanding deal terms are fulfilled.
“What Thomas sought from me when we partnered was the fact that I could bring to the table formality and structure, so that FE International could evolve from being a profitable concept to more of a scalable business. The timetable is one of the internal systems and processes we now have in place, all of which inspire confidence in our business by sellers, investors and new employees. The unique model we have acts as a barrier to other brokers who are trying to do the same thing as we are but don’t quite get the unique method behind our proven process. While these areas are my forte, Thomas has an exceptionally creative mind about how he sees the company developing. He is also incredible at networking and has a reputation in the industry which precedes him. Everyone knows him and considers him one of the smartest business minds out there.”
Because the company has thus far built its business and rep mostly based on word of mouth, Wrixen and Smale are as attentive to and concerned with the success of a $10,000 deal as they are with a multi-million dollar one. Wrixen adds that a lot of their business comes from buyers who ultimately want to score bigger assets. They will use the results of a small transaction as a test run to establish what could evolve into a longstanding relationship with FE International.
Explaining a typical interactive scenario, he says, “Someone comes in after reading about us, listening to a podcast or being referred by one of our clients. A member of our team strikes up a direct conversation, starting with a basic information form we have online. People have various reasons for wanting to sell a site, sometimes just because they’ve taken it as far as they want to and are eager to launch something new, other times to buy out their home mortgage, secure funds for their children’s education, even out of boredom!
“The one interesting thing to know about many entrepreneurs,” Wrixen adds, “is that while most are very creative in their ability to come up with and implement exciting new ideas, they’re not always equipped to or interested in running the business day to day. In the assessment stage, we have our team do a review of the business, the traffic and financials. From the knowledge we have gained working in the same space, we know what will or won’t sell, and if we think a site is not ready or needs upgrading to get it in shape to be sold, we tell them.
“One of the things that really sets us apart from less reputable selling platforms websites is the extra level of service that includes due diligence, our expertise and experience from past deals. Any site we work with has to meet certain criteria. This is all commission based, so if we get involved in a project that we see up front has no or limited potential, we won’t waste our time or the seller’s time. We put great effort into our marketing materials and when we agree to work with a business, we create a 20 page, highly detailed prospectus that we send out to the strategic buyers and investors in our little black book we think would be appropriate. We have from one to two thousand potential buyers we can bring these to.”
Just as the sellers all have different motivations in contacting FE International to serve as their broker, strategic buyers can emerge from a variety of circumstances, goals and needs. Some, Wrixen says, might already have a business in that particular niche and they want to bolt on new acquisitions. Others are pure financial investors or private wealthy individuals, and still others run large funds and manage assets for smaller investors interested in exciting new opportunities with great growth potential.
“There are many reasons for people to buy into these alternative investments,” he adds. “We’ve found over the last few years that the potential Return on Investment is huge. While average real estate investments generate a 10-15 percent return, these sites often have up to a 50 percent ROI. It gives us great satisfaction to help people achieve their financial objectives with complete transparency in the process. FE International is one of the bigger companies in a new and growing niche and has the opportunity to help shape how the niche and industry will evolve over the next five to ten years. On a personal level, it’s a joy to get up in the morning and work every day with some of the smartest people and most successful fellow entrepreneurs out there.”