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Premier Alliance (PIMO) Acquires Ecological; Adds New Chairman, Significant Pipeline Growth Opportunity, Synergies

Recently, Premier Alliance announced the acquisition of Ecological. Details of the transaction were vague in the Company's news release, but after doing some digging, I have several key takeaways.

In short, Premier adds an impressive team, creates significant opportunity to continue to build its pipeline and brings client value add now that they have a foothold on both coasts.

Here's more detail.

1.) Premier Alliance bolstered their team overnight. Joseph Grano, new Chairman of the Board, has one of the most impressive backgrounds I've seen for a micro cap company. He is the former Chairman and CEO of UBS Financial Services (NYSE: UBS) where he helped complete the merger of PainWebber in 2000. He was also appointed by George W. Bush in 2002 to serve as the Chairman of the Homeland Security Advisory Council. Mr. Grano also served in the U.S. Special Forces as a Green Berets. Also on Ecological's website are the who's who, Governor George Pataki and Governor David Paterson.

2.) NYC energy regulation will add growth to Premier's existing pipeline. On Ecological's website, they detail NYC's Local Energy Performance Laws. In December 2009, NYC passed the Greener, Greater Buildings Plan requiring all buildings in NYC that are over 50,000 square feet or larger to benchmark energy and water consumption, perform an audit and retro-commissioning of base building systems, perform a lighting upgrade, and install sub-meters. The enforcement of this legislation, they claim, will begin in early 2013.

According to the NYC website, "these laws will reduce greenhouse gas emissions by almost 5 percent, have a net savings of $7 billion, and create roughly 17,800 construction-related jobs over 10 years."

3.) As I detail in my previous post, "Premier Alliance Group (PIMO) at the Heart of Two Burgeoning Industries", the company has carved out a niche within their energy division in California. They are doing a lot of work for Southern California Edison and their Auto-DR program and just this week announced an engineering, procurement and construction project for Schneider Electric worth approximately $625,000 in revenue.

There are synergies across the board. Premier's west coast presence and Ecological's east coast presence makes the combination seem logical. In my estimation this collaboration could be a 1+1=3 type of situation with new and existing client relationships as well as cross selling opportunities that will help build its revenue stream. Ex NY Governor George Pataki is the co-founder and large shareholder of Ecological. This provides many in-roads in the tri-state market for potential energy projects.

Small public companies such as Premier Alliance need a seasoned, trustworthy management team and the opportunity to scale through the acquisition of synergistic businesses. Mr. Grano and his team fit the bill. They have the experience, credibility, and network to help bring significant business opportunities to the company. Additionally, now operating on both coasts, Premier Alliance is in a position to scale their business through similar acquisitions.

Premier needs to continue on this path towards reaching critical mass (>$100M in revenue). At that point, the Company should have the cash flow, balance sheet and equity value to leverage themselves into a valuation multiple the size of what it is currently trading for.

Disclosure: I am long PIMO.OB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.