Capital Ideas | Corporate Finance Associates | Newsletter Q4 2015

 
Capital Ideas for Middle Market Businesses

 

Welcome to this issue of Capital Ideas, our newsletter dedicated to business selling, business buying and financial resources for mid-market companies.


5 Key Techniques of Successful M&A

By Dan Vermeire, Managing Director
Dallas Office
Corporate Finance Associates

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Today’s market has brought many sellers off the sidelines – and for good reasons. Cash is plentiful and buyers are aggressive. If you’re thinking of jumping in, you need to know how to get a premium price, and how to lower the risk in a successful transaction. Knowing these 5 Key Techniques will help.

  1. Know How to Manage Confidentiality
    Attention to confidentiality can make a big difference in how your business survives the M&A process. Imagine if your customers, employees, suppliers and competitors all knew the details of your business and that you were seeking a transaction. You’d have some ‘splaining to do. A good M&A process is designed to protect confidentiality, and for Investment Bankers in the Middle Market, it is paramount. Strangely, most business brokers do not protect confidentiality and often post information on the internet. Be sure you have the right process and control the information flow.
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What Will Cause a Buyer to Walk Away From Your Agreed Deal?

 

By David Sinyard, Managing Director
Atlanta Office
Corporate Finance Associates

After you have made the decision to sell your business and you have an agreement with a buyer, what can keep the transaction from closing? An understanding of the review and approval process of the buyer will help understand what might happen and can potentially save you from making costly mistakes that can de-rail your deal.

A buyer (in our example a private equity group) will conduct a significant amount of due diligence on your company before it provides a Letter of Intent outlining the major terms of the agreed acquisition. This means that they have analyzed your industry, looked at your business in detail, met the management team and reviewed the financial statements that you have provided.

Read more »


Featured Transaction - CFA Portland, ME

The Situation:

John Wasileski, the owner and developer of upscale market rate senior independent living communities, was seeking to refinance one of his communities to lock in advantageous lower interest rates for the long term. The revenue streams to support the debt were multiple, including ground lease rental revenue, revenue from a tax incremental financing district, management fees and resale commission fees on the resale of existing units. The owner wished to capitalize on the leverage brought by all these streams of revenue to the project. He also wished to have a high loan to value and as a component of the loan, $2MM, be available as a line of credit to fund future construction. Additionally, a thirteen-year term, limited recourse, and a two-year interest only period on the term loan were components that were all important to him.

The Solution:

After evaluating the request, CFA worked extensively with the developer’s team to build financial models to determine and support exactly what was possible. CFA was able to demonstrate to several lenders that the developer’s request was indeed viable and could be supported by the various revenue streams. CFA marketed the loan to lending institutions who were already familiar with the borrower. Due to the complexities of the requests from the developer, CFA felt that to introduce a new lending source, one with no knowledge of the developer, would never have given the needed results within the desired time frame.

CFA closed the loan, meeting all of the developer’s requirements on time and under favorable terms. The loan was ultimately underwritten by a local banking institution that had previously done business with the developer.

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