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Mezzanine and Subordinated Debt

Are you interested in selling your company?  No?  How about raising capital from an outside investor?  No?  That’s fine.  But are you operating your business as if you were interested?  If you aren’t, you should.  Why?

First, things can change and change rapidly.  You can’t say for certain that you will not need outside capital or that you – or your heirs – will not need or want to sell.  Second, if you don’t operate as if you were in the market to raise capital or sell, you are at great risk of losing your customers.  Because there are competitors, both ones known to you and unknown ones lurking in the shadow, that are operating their businesses as if they were in the market.  And those competitors are likely offering – or about to offer – a better product at a better price. 

 How do you operate as if you were courting capital?  You operate to maximize the value of your enterprise.  And how do you do that?  Make sure you have you have your 4 Elements, 3 Disciplines, 2 Glues, and 1 High-Impact Leader in place and firing on all cylinders.  Click TCA_Library_Leadership_The Golden Formula for Building Enterprise Value for The Golden Formula for Building Enterprise Value.

As one who has run a number companies and engaged investment bankers to assist in raising capital, buying companies, selling companies, and strategic planning, and one who has also been an investment banker for many years of my career, I have a pretty strong opinion about what they should be delivering to their clients in exchange for the healthy fees they receive. Here it is: TCA_Library_Capital Markets_Client Bill of Rights 

Remember the days of 120-page private placements memorandums, 60-slide PowerPoint decks, and 90-minute investor presentations?  That was way back like, what, five years ago?  Actually longer than that, but the point is that today is a whole new world.  If you have something to sell, you have to communicate it in five minutes.  Sure, if you can initially hook a prospective investor, you’ll get a longer time with him or her down the line, but if you can’t set the hook in five minutes when you first have the opportunity, you are history, at least with that investor.  The “elevator pitch” that used to be confined to venture capital is now de rigueur virtually everywhere.  Investors simply don’t have time for anything else.  And even if they have the time, they demand simplicity in the business or at least that you have the ability to express it simply.  Here is a good guideline for your pitch.

As an investment banker in the ’80s and ’90s, and again today, I have spent a large part of my career placing private equity and mezzanine debt. And in the latter part of the 1990s, I ran the largest provider of mezzanine debt in the nation in amounts less than $5 million. We built a portfolio of hundreds of investments that was worth about $1 billion. But I find that CEOs and CFOs with whom we interact still don’t completely grasp the nature of mezzanine capital. And justifiably, for if you haven’t done a few of these financings, the nuances are hard to understand. But for cash flowing companies, it is a really good form of capital and worthy of a close look if you need money. Check out our white paper: TCA_Library_Mezzanine Debt 

As an investment banker in the ’80s and ’90s, and again today, I have spent a large part of my career placing private equity and mezzanine debt.   And in the latter part of the 1990s, I ran the largest provider of mezzanine debt in the nation in amounts less than $5 million.  We built a portfolio of hundreds of investments that was worth about $1 billion.  But I find that CEOs and CFOs with whom we interact still don’t completely grasp the nature of mezzanine capital.  And justifiably, for if you haven’t done a few of these financings, the nuances are hard to understand.  But for cash flowing companies, it is a really good form of capital and worthy of a close look if you need money.  Check out our white paper: TCA_Library_Mezzanine Debt

We are back in the homebuilding finance and advisory business!  In the 1990s, my team at Montgomery Securities built the top-ranked franchise on Wall Street for financing homebuilders and handling their M&A and other advisory needs.  We advised KB Home, Del Webb, Schuler Homes, DR Horton, to name a few single-family builders, as well as a number of manufactured home producers and community developers.  The past few years, of course, virtually no homebuilder was building enterprise value.  Homebuilders were just trying to stay alive.  With the homebuilding market coming back, and solid prospects for rebuilding enterprise value, homebuilders are needing strategic advice, CAPITAL, and M&A advice.  See this.  We are here to help. www.traversi.com 

And we know how to price it, structure it, and close it!  We specialize in private placements.  If you have a client or know of a company that needs $5MM to $30MM in private equity or mezzanine debt, give us a ring.  http://traversi.com/private-placements/ 


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