For most business owners managing a company is all about managing risk…calculated risk.  And, when a business owner begins the selling process, it’s also about managing risk.  As a veteran of the middle-market M&A industry, I’ve had the good fortune to work with many private business owners as they begin the selling process.  If I had only one piece of professional advice to impart it would be this:  “Holding out for a better price doesn’t always lead to a larger bank balance in the end.”  Too many times during the past five years business owners I’ve worked with have fallen into the timing trap.  When their businesses were booming and the economy was robust, they decided to delay a sale or partial sale in the hopes that by waiting, they would be able to cash out at a higher price.  “I’ll just wait a couple more years, and then I’ll sell.”  That was a risk they were willing to take.   For most of the “waiters”, that did not happen.  When the recession hit full force, many of those businesses simply didn’t make it or their businesses retracted significantly.  The cash out was zero or greatly reduced making a sale highly undesirable.  Read more »

As a middle market investment banker, I talk with business owners every day who are thinking about selling a company.  They proclaim that they are finally ready to move on to another chapter in their lives and it’s now time to sell the business that they have spent a lifetime building.  Interestingly, many of these business owners have done little or no planning for their business exit and although they may be ready to sell…their business isn’t.  Learn how to.. Read more »

It’s no secret banks across the country have tightened their lending standards, and in many cases actually reduced the size of their commercial lending portfolios, as my recent newsletter article “Banking On an Old Model for New Loans” points out. Over the last eighteen months, many business owners have found their banks unwilling to support them beyond their present lending level, regardless of their strong lending history, current condition, or the length of the relationship. However, as banks recognize that the economy is slowly recovering, some are beginning to make new commercial loans. While capital for senior debt financing is once again beginning to flow, it does so within a new set of realities: less leverage, more collateral required, stricter covenants and higher pricing spreads. This new environment requires borrowers to find collaborative ways to work with the few active albeit cautious lenders.

We have experienced success participating multiple community banks in deals that are attractive with a solid sponsor, but too big for any one lender to take on alone. Why community banks? While many large national and regional banks are in holding patterns, the smaller community banks that have survived in this environment have done so due to traditionally conservative credit standards and a local market focus. These banks are lending, but with stricter guidelines than in the past, and at maximum loan amounts that are down from their historic levels.

Partnering on loans is not an every day practice for community banks, and the process is different than closing a deal with a single lender. Choosing the right combination of lenders is critical, and requires strong relationships with each one. These multi bank loan structures take creativity to develop and longer to close than single-lender loans, as multiple stakeholders are involved. Having an experienced adviser to quarterback the deal from application through closing is critical to successfully combining lenders.

posted by Peter Ventre