Leveraging Relationships for Better Terms
It’s not unusual for business owners to unknowingly outgrow their banks, especially if your relationship is several years old. You can outgrow the services your bank offers or be stuck in a loan where the terms you have may not be consistent with what can be achieved in the marketplace.
TKO Miller can work with a business owner to leverage its many relationships in the lending community to approach financial institutions that may not have been available to the business owner. We can also work to negotiate term sheets and leverage limits using our industry and market knowledge that may allow our customers to increase debt availability, receive better terms and, in some cases, remove any personal guarantees.
Making Debt Capital Assistance Work For You
As a professional debt placement group, we typically work with privately-held manufacturers and distributors, along with some select services seeking to obtain financing in the $5 million to $100 million range. We focus on corporate finance acquisition, acquisition finance and project finance.
Examples include:
- New building
- New equipment
- Growth financing for expansion
- Purchasing a company
- Refinancing
- Restructuring
- Recapitalizing
Transaction Options
Depending on your objectives, you have many options to gain liquidity from the value in your business. Here, we explore three options.
Full Sale
Full Sale With Strategic Buyer
Typically, 100% of ownership is sold. This sort of transaction is likely to maximize the purchase price. It offers limited opportunities for owners or management to reinvest in the company. It offers the potential to consolidate into existing operations.
Full Sale With Private Equity Buyer
Generally, 90% to 100% of the ownership is sold, and this type of transaction offers the potential to reach near-strategic valuations. Management may be retained, but often the owner will need to assist in the transition, exiting after a five- to seven-year hold period.
Partial Sale
Majority Partial Sale
Greater than 50% of ownership is sold. This allows for significant liquidity and the ability to bring on a growth partner. Owners need to be willing to continue to operate the business but relinquish control. The PE partner generally exits within five to seven years.
Minority Partial Sale
Here, less than 50% of ownership is sold, making it a less attractive deal for Private Equity forms. This also can reduce valuation. Partners are often willing to partially fund growth initiatives.
Debt Recapitalization
Growth Recap
Very little or no ownership is sold. Growth of the business is usually funded by bank debt, mezz debt or a combination thereof. Minimal funds are available for shareholder liquidity, and owners can retain 100% ownership, resulting in a more levered business.
Dividend Recap
Minimal to no ownership sold. Bank debt or mezz debt are used to fund a shareholder dividend. This allows for some shareholder liquidity without giving up ownership and also results in a more levered business.