An Acquisition Case Study

Acquisition of a Company that manufactures and services military aircraft parts and devices. In addition, the company has a parts distribution channel and very large inventory of surplus parts.

The Challenge

While profitable overall, the Company has not maximized its various strengths. The merchant bank, who will own 70% of the stock when recapitalization is complete, plans to strategically sell down the inventory which turns over slowly and focus on parts which have a more constant turnover to more efficiently utilize capital. Additionally, the new owners will increase the emphasis on the value added parts manufacturing business as its own profit center. The proceeds of the surplus parts sales will fund the repayment of the seller note and provide capital to expand the higher value added manufacturing operations.

The Solution

Accord facilities (factoring, inventory revolver and M&E term loan), combined with a new real estate mortgage (provided by a local bank), provided 100% of the funds required to pay off current lender and fund 100% of the payment to the current owners at closing, (50% of the total purchase price with the balance being long term seller notes and other payments). The transaction included U.S. Government and foreign A/R, as well as, an advance against surplus inventory at lower advance rate.