Addressing Capital Constraints

Many successful middle market businesses find themselves constrained by a lack of access to capital. They may have outgrown the capabilities of their bank, repaying expensive financing may be consuming all of their free cash flow, or an attractive growth initiative may demand a level of funding that goes beyond their debt capacity. For every carefully considered strategic plan there must be a supporting capital strategy, to ensure opportunities are not missed and to protect the company and shareholders from the risks of overleverage.

Key Deliverables

Improved the terms of the company’s outstanding debt, significantly increasing cash flow available after debt service

Eliminated the founder’s personal guaranty and secured incremental senior debt capacity to support capital additions and business acquisitions

Identified, screened and negotiated investment terms with multiple financial and strategic suitors to fund the company’s growth strategy and support leadership transition

Completed an equity recapitalization to meet the founder’s personal estate planning goals while preserving upside potential

Situation Summary

As the founder of a national specialty equipment rental business contemplated the next phase of his company’s growth, he questioned how best to fund continued expansion of his fleet while at the same time implementing a plan to diversify his own personal net worth and meet his estate planning goals.

Bulkley Capital focused first on refinancing the company’s debt. When we were introduced, the business had in place more than forty separate capital leases and loans, from multiple lenders and at high rates of interest relative to the then-current market. Although the company’s asset base was highly specialized and distributed throughout the country, through a targeted competitive process we succeeded in refinancing all of the debt under a single facility. By lowering the interest rate and resetting the principal repayment schedule, we reduced the company’s debt service obligation by several million dollars. Further, we were able to secure this financing, including a committed capital addition line and financing for two identified business acquisitions, without the founder’s personal guaranty.

Approximately one year following our successful debt refinancing, Bulkley Capital was engaged again, this time to represent the company in accessing junior capital to support management’s strategy for international expansion and selective acquisitions. The founder was also committed to a leadership plan through which he could pass day to day responsibility to his chosen successor and also introduce experienced resources at a board level to help strengthen the company’s management processes and add strategic perspective.

We ran a process to identify, screen and introduce multiple interested suitors, including both strategic and financial parties. The company selected a private equity fund with significant experience in relevant industry sectors as well as in helping companies establish and grow international operations. The successfully negotiated transaction ensured continued independence for the company; transition of the President role to the chosen candidate; proceeds meeting the founder’s estate planning goals; and a continuing minority interest that holds the potential for significant additional future proceeds.