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I can’t tell you how many times in my investment banking careers – the first doing Wall Street deals in the 1990s and my current serving the small and middle market with sell-side and capital-raising  advisory services – I have seen companies try to get everything perfect in their own house before accessing the capital markets or pulling the trigger on a sale process, only to have the whole plan backfire when the markets correct and every potential investor runs for the exits like in a theatre on fire.  The timeless capital markets maxim is that an ideal situation for a company seeking an exit or capital is when the company is perfectly positioned and there is a tailwind in the capital markets.  But those times are relatively rare.  The more common situations are that (1) the company is not in tip-top shape but the market tailwind is strong, and (2) the company is ideally positioned but the market is blowing a headwind.  In the first situation, deals are still very doable and often at very good valuations.  In the second, they aren’t, at least at anything above a fire sale price.  Every good investment banker is constantly advising companies to always work on improving the situation they can control, but don’t let the lack of improvements keep them away from selling or financing – if that is what they need or want – when a market tailwind exists.

We have intimate knowledge of a situation right now that is a perfect example.  A fast-growing company in highly fragmented but rapidly consolidating industry – one that was fueled by exciting, disruptive technology that in turn drove the major disruption of a number of huge, well established industry players – entertained the idea of selling about 14 months ago.  Given the pace of consolidation and the high valuations accorded those companies with the best, most disruptive technology and market strategies, we advised them to immediately initiate a sale process that we estimated, based on market comparables, could produce a sales price of approximately $60MM, and possibly as high as $90MM.  We advised that market frenzies in which it was immersed are infrequent and the company should hurriedly capitalize on the favorable conditions.   The company and its investors, some of whom are name brand VCs and should have known better, decided to focus instead on polishing the company’s business model and execution, hoping that the company’s improved performance and an even frothier market would produce an even higher valuation.  Well, you know how this story goes.

Fourteen months later, the company is now finally involved in a sale process – one that was started about 6 to 9 months after our advice was rejected.  But market conditions have changed dramatically.  A full-blown industry shakeout is happening, public company comparables have plummeted, and no one wants or is able to go out on a limb and pay anywhere near what the company was worth just over a year ago.  Granted, the company is much stronger today from both earnings trend and technical risk standpoints, but it is irrelevant to the market.  The market headwind is strong and a sale above $20MM is unlikely.  In fact, sale may be impossible.  If so, the company needs cash if it is going to stay independent, but raising cash will be very difficult given market conditions.  In sum, the company’s future, indeed its existence, is at great risk as a result of its decision to wait and try for a nine-figure (or about a 10X multiple of investment) outcome when it easily had a $50MM (or about a 5X MOI) exit in its reach.  

For a PDF of the above, click here: Pigs Get Fat, Hogs Get Slaughtered…Always and Forever

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/ 

Investment Banking Firm Also Arranges Mezzanine Debt Transaction Financing

San Francisco, CA, December 21, 2011 – Traversi Capital Advisors, LLC (“Company” or “TCA”),  which meets the strategic advisory and investment banking needs of small and middle-market companies with revenues between $5 million and $500 million, announced the closing of the combination of KelleyAmerit Fleet Services, Inc. and Kelley Fleet Services, LLC.  KelleyAmerit Fleet Services is now the largest provider of comprehensive, customizable fleet management solutions for large-scale public and private vehicle fleets.

David M. Traversi, Chief Executive Officer, said, “It was our pleasure to provide M&A advisory services to, and arrange mezzanine financing for, KelleyAmerit Fleet Services in this transaction.  The combined entity is now the largest single-source provider of all-inclusive fleet management services, offering unprecedented economies of scale, quality, and depth of services.  In addition, the company is a California-certified Disabled Veteran Business Enterprise and a federally qualified Service Disabled Veteran Owned Business, which allows the company’s clients to add diversity to their supply chains.  This comprehensive solution has already earned the trust of AT&T, the largest fleet in the U.S., and a number of other major fleets, and our client looks forward to the continuing expansion of its client relationships.”   

 About KelleyAmerit Fleet Services

KelleyAmerit Fleet Services, part of the Amerit Family of Companies, is a leading provider of comprehensive fleet maintenance and management solutions for large-scale private and public sector fleets, offering customizable, single-source vendor solutions on a national level. With a proven commitment to service excellence and customer focus, KelleyAmerit Fleet Services delivers unprecedented economies of scale, bottom-line value, and streamlined process management. With headquarters in Walnut Creek, CA, the company is a California-certified Disabled Veteran Business Enterprise and a federally-qualified Service Disabled Veteran Owned Business. For more information, visit www.kelleyamerit.com

 About Traversi Capital Advisors, LLC

Traversi Capital Advisors, LLC, the investment banking arm of Traversi & Company, LLC, founded in 1999, is an investment banking and executive advisory firm specializing in private placements of equity and debt, merger and acquisition advisory, restructurings, and executive advisory for companies with revenues between $5 million and $500 million in the following industries: Business Services, Financial Services, IT/Software, Manufacturing, Clean Technology, Media and Entertainment, Food and Beverage, Real Estate and Building, Lodging and Hospitality, and Sports and Recreation.  The Company maintains corporate offices in San Francisco, CA.  Its phone number is (800) 689-7941.  Its website is located at www.traversi.com.

For a PDF of this press release, click: TCA_Press Release_12_21_11


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