BattlBox: an $18.95M sale, then a $6.0M buyback 18 months later

The price tag BattlBox carried in 2021 was up to US$18.95M. Revenue for the twelve months ended May 31, 2021 came to roughly $23M, with adjusted EBITDA of about $3.3M.

Stop there and the story reads as a subscription-box success. On April 28, 2023, though, the buyer, EMERGE Commerce (listed on the TSX Venture Exchange under ECOM), let the same business go for US$6,008,666 in cash, and the purchaser was Battlbrands Holdings, Inc., in which officers of BattlBox held a controlling interest. EMERGE’s own press release says so. The founders took the business back for a little under 60 percent of the $10.25M in cash they had received at closing. What this article follows is the eighteen-month gap between a $18.95M price and a $6.0M one on the same asset.

15,000 orders a month, and the media arm behind them

BattlBox was founded in February 2015 around Daniel Dabbs, Patrick Kelley, and John Roman. It ships outdoor and survival gear on monthly plans ranging from $24.99 to $149.99. According to They Got Acquired’s reporting, the pre-sale business ran about 15,000 orders a month, 500,000 email subscribers, 40 employees, and roughly 250,000 monthly pageviews. Forty staff sits at the upper edge of what this site treats as small, a different tier from the one-to-five-person operations that make up most of the archive.

What separates this from ordinary mail order is the media layer underneath it. In 2016 the company hired a content marketing lead it had found through his YouTube channel. In 2020 it produced an eight-episode Netflix series, “Southern Survival,” and it built a Facebook community out of an internal bulletin board, accumulated a blog archive, and reached a million TikTok followers. In 2019 it acquired Carnivore Club, a cured meat subscription.

What the contract actually said

The $1.5M deferred came as $500K on each of the first three anniversaries. The earn-out ran three years at $1.2M cash plus $1.2M in shares per year, up to $7.2M, with the split between cash and stock left to EMERGE’s discretion. The acquisition was funded from cash on hand.

Three different multiples on one transaction

EMERGE’s press release described the purchase as roughly 3.6 times adjusted EBITDA on guaranteed consideration. Guaranteed consideration means $10.25M cash plus $1.5M deferred, or $11.75M, which divided by $3.3M does give 3.6. Divide the full $18.95M by the same EBITDA and the answer is 5.7. In the They Got Acquired interview, the founders describe the deal as a 6x.

Three numbers stand on one transaction because the earn-out is counted differently depending on where you sit, rather than because any of them is wrong. A buyer counts what it is obliged to pay. A seller speaks from the ceiling. And the amount actually paid has still not been disclosed. The most important missing figure in this case is neither revenue nor profit, but the earn-out’s realized total.

They did not pick the buyer by price

The trigger for selling was not financial. One co-founder wanted to retire, and Roman explains that an internal buyout at the agreed valuation was too large to be workable for the partners staying in. Tim Keenan of Ocean Bridge Capital advised the deal, which took about six months from LOI to close, much of it consumed by financial audits.

The selection is the interesting part. Private equity bidders came in higher, and the team chose EMERGE, which said it did not want to change the business fundamentally. Continuity won over maximum price. This publication reads that choice as correct in hindsight. Because the business stayed intact under its parent, the option of buying it back eighteen months later still existed. Under a buyer that dismantles an organization and folds it into other brands, there would have been nothing left to take back.

Eighteen months later, back for $6.0M

On April 3, 2023, EMERGE announced an agreement to sell BattlBox for $7.2M, consisting of $6.0M in cash and the buyer’s assumption of $1.2M in deferred consideration. At the April 28 close the confirmed figures were $6,008,666 in cash and $1,161,537 in assumed liabilities, and EMERGE said it would apply most of the proceeds immediately to paying down its senior credit facility, expecting annual interest savings of about C$1M. Roman’s account points the same way: the parent company needed cash to work down debt, and the founders saw a chance to buy the business back below what they had sold it for.

What this business is worth is spoken by the $6.0M, not by the $18.95M. The first number was set when a listed company was buying a growth story. The second was set when the same listed company was raising cash to repay borrowings. The underlying operation had not changed much in eighteen months. The buyer’s balance sheet had, and the price tag tracked that instead. Speculation from here, but a parent that lets an asset go while an earn-out period is still running is a parent that does not expect the full three years of $7.2M to be paid. Note also that the $7.2M divestiture headline matching the $7.2M earn-out ceiling appears, on the documents available, to be coincidence.

Carnivore Club was not part of the buyback and was sold separately afterward. EMERGE retained seven brands across four verticals, which it described as roughly C$100M in annual gross merchandise sales.

Figures that never surfaced

The earn-out actually paid, how many of the $1.5M deferred installments were made, the mix of subscribers by plan, churn, the trajectory of that 15,000-orders-a-month figure, and how the buyback was financed. None of it is public. The $23M revenue and $3.3M adjusted EBITDA were flagged as unaudited in the press release, and they were presented as material in a sale negotiation.

Adjusted EBITDA warrants its own caution. It is a figure calculated after adding back one-time costs and founder compensation, so it differs from what actually lands in a bank account. That is why monthly profit is left blank in this site’s frontmatter for this case. There is not enough information to make it comparable.

Others have sold and bought back, but after $6.0M the disclosures stop

Selling and then buying back is not unique to this deal. Other examples include The Water Coolest, a 100,000-subscriber newsletter sold to Barstool and repurchased by its founder two years later, Extra Points, a newsletter with 679 paying readers and $4,300 a month sold for cash, employment, and equity, then bought back three years on, and DashThis, reacquired by its CEO after two collapsed deals. In each, the return came when circumstances changed on the buyer’s side.

The outside conditions behind this round trip belong on the record too. BattlBox had a Netflix series in 2020 and a million TikTok followers, and that volume of attention cannot be designed into existence. The buyback happened because external conditions lined up, with a parent under pressure to cut debt, which is not something a seller can cause. And performance after the buyback fell outside a listed company’s disclosures, so it can no longer be tracked. Nothing published so far lets anyone judge whether $6.0M was cheap.