Author:
Steve Sahara (Opus Connect Chicago Chapter Board Member)
Director, Global Financial Advisory Services at Stout
ssahara@stoutadvisory.com

The July Opus Connect Chicago event was kindly hosted by law firm Bryan Cave Leighton Paisner on the 26^th of July at their offices. Jason Berne of BCLP welcomed approximately thirty bank, private equity, and other M&A deal intermediaries and introduced the roundtable discussion topic moderated by Steve Sahara, of Stout:

“Creative Deal Structures – How to Differentiate yourself in a Competitive Market”

• An overriding theme from member conversation exchanges is that sellers value “Certainty of close / speed of close” – so nimble buyers that move quickly and have a demonstrable reputation and track record for hitting agreed milestones / deadlines may have an advantage.  Some strategic / international buyers may be perceived as having a longer / more opaque internal approval process and in such cases maybe disadvantaged in a competitive auction process.  Members seemed to also agree with comments that implied buyers who “Front Load due diligence” pre LOI stand out – the meaningful expense incurred shows commitment to deal / close.

• Chilton McKnight, from Lockton commented “It was great to hear how Opus members commented on the use of Reps & Warranties insurance and how it can facilitate getting deals done smoothly / quickly”

• Jason Berne, partner at BCLP, reasserted that he sees a lot of similarity in his deals and what was noted by some debt capital providers including how creative lending structures can be a differentiator and that including variations in collateral types, security interests and hybrid degrees of subordination in capital structures can help otherwise difficult deals get done.  Lenders who are willing to include unusual collateral pools / payment streams or partner with other lender in split collateral pools (where an ABL lender is first on some hard assets, and the enterprise lender is first on A/R and other intangible assets) can find deals that other lenders do not.  Other differentiators include being willing to accept payment streams from non-typical sources (ice machines in the south or air machines for car tires), or in high net worth financing accepting illiquid assets such as art, mineral rights or even thoroughbred horses.

• Rick Lopez from Rush Street Capital mentioned “participants discussed a wide range of alternatives and differentiation strategies reflecting the competitive market environment, including alternative like  uni-tranche structures (i.e., a single interest rate for the borrower based on a blended senior and mezz debt offering), multi-draw facilities that provided access to funds for specific capital projects, and variable rates based on debt / leverage reduction milestones”.

About the author:

Steve Sahara is a Director in the Valuation Advisory group responsible for assisting the Stout management team with the acceleration of their U.S. and international growth strategy by sourcing new relationships with law firms, accounting firms, family offices, private equity, hedge funds, financial institutions, and public/private companies from middle market to Fortune 500. Steve aligns business opportunities with Stout resources to respond to a clients’ valuation, financial opinion, investment banking, or litigation support needs. Steve has extensive experience working with client management and directors, transaction attorneys, financial sponsors, institutional investors, asset managers and administrators, regulators and accounting professionals across a broad client spectrum including industrial corporations, banks, funds, and insurance companies.

Steve focuses on valuation and dispute consulting for M&A (pre-acquisition diligence, purchase price allocation, post-acquisition disputes, fairness and solvency opinions), financial reporting, corporate and estate / gift tax valuation, business reorganizations, and expert testimony / litigation support for analyses of economic damages across the spectrum of commercial litigation and shareholder disputes.

Steve began his career in business valuation at Price Waterhouse (Chicago), was CFO/board member of a UK telecom messaging software company, and ran financial structuring/execution groups focused on debt/equity capital, funding and liability management solutions at Investment Banks: Merrill Lynch, Morgan Stanley, Lehman Brothers, ABN AMRO and Credit Agricole CIB in New York and London.