Here’s the situation: you’ve got what look to be three live deals on the go, two quarterly report to write, a term sheet to issue, file docs from the Bluestreak deal we announced on Wednesday, 897 emails in the inbox that can’t all be spam, an overdue email to write to your only sibling, and a colleague has come across what sounds to be a neat opportunity that’ll take a few hours to go-see-return.
Drop everything. Off we went.
Background: Software firm in business for two decades. Large install base. Great maintenance, p.s. and licence rev. Double digit revenue. Spent some money to build out a new region, and it didn’t work as planned. Current chartered bank is unhappy, and want their small 7 figure loan back asap.
Liked the guy, what they do is essential for their customers, has lost only 2 clients in 2 decades, etc. We are going to try to do the bank takeout deal for him, AND provide some incremental growth capital to finish the new software release. And that’s “true growth capital” and not funds that need to start coming back after 30 days.
Before the meeting, he had a bank literally looking to him to take care of them personally even though the loan was for the business. After the meeting, and if due dili proves out the story, he’ll “be out from under the bank” (his phrase). Not the mention the new capital, and happy customers/suppliers.
Morals for both sides:
1. When you turn down a deal, try to help the person understand what the issues are and how they might overcome them. This deal was referred to a colleague of mine by a local agent primarily because he put alot of effort into a prior opportunity, even though we ultimately weren’t able to issue a term sheet. The agent was so impressed by the professionalism and courtesy displayed last year that Craig was the first and only call. That it was a tech deal was a bonus, but half of the deals we do have zippo to do with tech (like jets, wind farms, composting and diagnostic tests).
2. Don’t be turned off just b/c the existing lender is unhappy. This cuts both ways, as the existing lender invariably knows more than we’ll be able to learn during due diligence about the management team, customer experiences and historical performance against the original budget. That being said, we’ve taken out banks at several portfolio companies and it is no secret that the companies thrived thereafter (such as Basis100, Meikle Automation, CriticalControl and EMS to name a few).
3. If you are a CEO or CFO and you’re getting pressure from your current lender, don’t assume that the only way out is to spend the next couple of years operating under a forebearance agreement or in the workout group. There are a few specialty finance firms such as ours that will put the resources into learning enough about your business to see if we can get you the capital you need, and on the timeline you want. We have attracted some very talented people, we know how to price a deal, and there’s no bureaucracy.
4. Focus your own time on people/firms that want to sincerely try to do a deal. Whatever the reason. We get calls every day from someone looking to kick the tires. They seem too busy to actually meet with you, but they really need to know asap: “What could you do here,” “What would it cost,” or the unspoken “We need a fall back if Goldman doesn’t invest”. The most successful firms in any sector learn to focus their resources on opportunities that have a good chance of happening, and not the ones that are unlikely to proceed. Life is short. Don’t waste it. This does not undermine point #1, but actually buttresses it. The other party wanted to do something, but we ultimately weren’t able to help; but because the agent felt his client got a real hearing, he came back with a do-able deal within 4 or 5 months.
We love this business. We have the capital. We don’t get paid to say “no”. © So, please call.