This week, our Senior Vice President of Credit, Rich Levenson, walks you through how TCJ financed a management-led leveraged buyout of an aluminum component part manufacturer from its larger parent organization.
This year, we had the pleasure of working with an aluminum component part manufacturer based in the Mid-Atlantic. The company was founded in 1970. In its early years, they manufactured a wide variety of industrial components. However, in 1990, the company transitioned their focus to the production of specialized heat regulating equipment used in heavy industrial machinery.
Years later, the company was acquired by a foreign entity that specialized in metal-working. Following this acquisition, it maintained operations in the United States as the parent company’s sales and production office.
As time passed, however, the parent entity began to shift their priorities, and with this transition came a desire to offload their US-based operations.
This put the US-based management team in a tough position, as they were weary of the instability that could come with an impending change in ownership. With this in mind, company executives determined that they would like to purchase the company outright from the operating entity as part of a management-led leveraged buyout. This buyout would provide them with the opportunity to protect the jobs of their nearly 50 employees, and allow them to conduct an operational overhaul to boost efficiency.
The management buyout was contingent on their ability to improve internal operations following the spinoff. This necessitated the purchase of new equipment, which would allow for a reduction in bottlenecks and a streamlined production line.
The buyout brought two primary financial challenges to management. In addition to securing sufficient financing to fund the acquisition, the company needed a capital infusion for the upgrade of their equipment. As they started seeking financing from traditional lenders, they struggled to find a partner that would leverage all of their assets. Some would only want to lend against their M&E or accounts receivable, and others would not consider their inventory as eligible collateral.
The company came to The Credit Junction, and we quickly started having productive conversations. Following an in-person site visit where I met with their management team and walked the floor of their factory, we were able to feel great comfort in the company's operations.
Three weeks after our first conversation, we provided them with a $1.5M credit facility which leveraged their accounts receivable, inventory and M&E. This financing allowed the company to complete their management buyout, maintain all of their employees and purchase the equipment necessary to streamline their operations.
The company is now focused on strengthening customer relationships and further building out their operations.
About Rich Levenson
Rich’s role is to guide our prospective customers through the pre-funding diligence and onboarding stages of their relationship with The Credit Junction. Before joining the team, Rich worked in various underwriting, portfolio management, and credit based leadership roles for Bank of America, Citibank, and Capital One, spending his entire career in the asset based field. Rich graduated from the University of Maine with a B.S. in Finance and held Series 7, 24, and 63 securities licenses.