Business

Difficult Deals of Real Merit ^®

What makes Advantage Capital different is that we will consider investments which do not appeal to other private equity investors. We call these "difficult deals of real merit ^®".

By real merit we mean:

• A strong management team, with a clear CEO and separate finance director. The CEO must have a demonstrable track record of success. He/she must be a proven moneymaker.
  
  
• The target business must have clear and credible potential to grow its bottom line. If it is a turnround situation then the management team's turnround plans must be clear and measurable.



• The vendor is actively seeking to sell the target business.

By difficult deal we mean one which is difficult to finance. There can be many reasons for this. Some examples are:

• Unloved sector
  
  The target company may be operating in a market sector which suffers from generalised negative sector prejudice. It can be very difficult to raise equity capital for such a deal as the negative sentiment of the herd is so strong.

• Lack of verifiable historic results
  
  From time to time large groups of companies will move businesses around the group, creating new business divisions with no real divisional historic results. When these divisions are put up for sale a management buyout can be difficult to finance due to the paucity of verifiable historic financial data.

• Tight timescale
  
  On occasions there can be very little time in which to do a deal. The vendor group may be approaching its year-end and needs to divest a subsidiary quickly before then. Buyouts from receivership are also time critical. Transactions in these circumstances can be difficult to finance.

• Under-performance
  
  Financing an under-performing business is difficult, as it requires a large leap of faith on the part of the equity investor.

• Apparently knackered assets
  
  Sometimes a business becomes an orphan. It sits outside the core area of focus of the group and, consequently, is starved of resources and attention. Management buyouts of these businesses can be difficult to finance, as they can appear to be uninspiring investments. But quite often, they can be very attractive businesses hiding in the shade.

These are just some examples. There are many other situations where it is difficult to finance the MBO of an intrinsically good business.

In such situations, provided the deal is of real merit, Advantage Capital has the appetite to look at them and is the firm to approach. We will give you a rapid and intelligent response.