Refinancing & Transactions

Refinancing and Capital Raising

Sourcing an appropriate replacement lender, adjusting the loan size, or sourcing incremental debt or equity capital.

Debt Restructuring

Negotiating short and/or long-term modifications to the loan agreement that are reasonable and achievable.

Business Sales

Preparing the company and its management for sale, sourcing potential financial/strategic buyers and executing the sale.

Acquisition Due Diligence

Assessing acquisition targets to identify red flags, propose solutions and estimate potential EBITDA enhancements.


MorrisAnderson’s clients often need access to additional capital. We are savvy and experienced at sourcing replacement financing (i.e., refinancing cases) or finding additional capital if possible. We source multiple loans each year and have an extensive network of long-term relationships with substantially all the large banks, many mid-size and local lenders as well as the constantly growing universe of non-traditional “alternative” (i.e., non-bank) lenders.

Access to capital depends on valuations of the Going Concern Value of the company and its underlying assets. No one lends at 100% of these values, but in general you can borrow approximately 60% to 80% of the objectively determined value depending on risk factors associated with the business.

The Going Concern Value of a business, especially middle market businesses, (that are MorrisAnderson’s typical clients) is primarily a function of trailing earnings (typically the last 12 months) adjusted for any abnormal and one-time events (good or bad). A such, a business that is underperforming or financially distressed becomes more valuable if its earnings, (usually measured by EBITDA) increase.

As a side note, companies are typically better off staying with their current lender than trying to refinance when they are in financial distress because the current lender may well be lending more right now than a prospective lender would be willing to lend. Lastly, it is always much easier to get additional capital from your existing lender if the ownership group is also willing to put in additional new capital via a risk sharing plan.

Often in a distressed scenario, a company has cash flow problems and is perhaps even bleeding cash which makes it difficult in the near term to comply with its loan agreements in terms of financial covenant compliance and/or its ability to make debt payments as agreed. In these cases, MorrisAnderson regularly assists clients with negotiating reasonable forbearances or amendments to the original loan agreements so that the company’s covenant requirements are adjusted to match the circumstances.

A lender’s willingness to make changes to its loan agreement is typically a function of four factors:

  1. Does the lender want to keep the loan?
  2. Is management and its consultant credible so that financial projections are viewed by the lender as realistic and reliable?
  3. Has management aggressively taken action to improve financial performance?
  4. Has ownership agreed to some type of credit enhancement to reduce the lender’s risk (e.g., capital injection, pledged an additional collateral, executed a personal guarantee)?

Having MorrisAnderson as an advocate for the company in these tough negotiations with a lender’s Special Assets or Loan Workout Officer will substantially improve the odds of getting the best possible deal under the circumstances.

For one reason or another, some businesses need to be sold. For example, the business may require more capital and the owner is either unwilling to or unable to provide it.

Perhaps the cash bleed of the business is so large that neither the owner nor the lender is willing to fund losses other than to provide a short-term bridge to a sale of the company. Perhaps the industry has changed, and the business no longer has the critical mass to survive and therefore, is simply no longer viable. Perhaps ownership is no longer interested in the business and simply wants to exit. Perhaps the company has an over-leveraged balance sheet, and the lender is unwilling to consider a loan restructuring and simply wants to exit the loan in the near-term.

Whatever the reason, MorrisAnderson actively sells multiple middle-market businesses each year. The methods used to sell a distressed business are totally different than methods used to sell a profitable and growing business. Prospective buyers of profitable businesses are typically strategic and financial players who see growth and synergy.

However, you sell distressed business to primarily financial buyers by laying open all the problems of the company upfront and by selling the financial arbitrage opportunity of a successful turnaround. Strategics don’t often purchase businesses in a turnaround mode because it is risky, costly, and messy managing through a turnaround situation.

The final sub-service under our Refinancing and Transactions service line is Acquisition Due Diligence. Acquisition Due Diligence entails performing an assessment of a potential acquisition target for a client to highlight key problems and to propose recommendations to fix them as well as the estimated financial impact (EBITDA and liquidity improvement) of the fixes.

In summary, MorrisAnderson provides the following sub-services and skill sets under our Refinancing and Transactions service offering.

Refinancing and Capital Raising

Many of MorrisAnderson’s clients are cash poor and frequently unhappy with their current lender. When a company is financially distressed and has low or negative EBITDA, it is generally not a good time to switch lenders. Of course, if your current lender has told you that you must repay this loan as they want to terminate the relationship, then you have no choice but to seek alternative financing.

We regularly refinance loans, and pride ourselves on getting the largest loan commitments reasonably possible. Our long-term history and superior reputation in the market has awarded us with positive relationships at pretty much every sizable lender in the U.S. Seeking refinancing is not simply a matter of making a few calls, having a few meetings, and collecting loan term sheets.

At MorrisAnderson we proactively put together a loan package that is meant to address typical lender data requests and areas of interest. Our Loan Package includes:

  • Loan Teaser – one- or two-page description of the loan commitment requested, the company, its financial performance, and its collateral
  • Story Board – the logic behind the company’s distress, the Turnaround Plan and how lender risk can be mitigated
  • Refinancing Package – key documents explaining the business, its historic financials, its projected financials, and key supporting information
  • Virtual Data Room – well organized database of documents to assist lenders doing due diligence

We have raised senior debt, junior or subordinated debt and other debt capital structures for our clients. Similarly on the equity side, we at MorrisAnderson utilize our 40+ year history and extensive network to help our clients search for and communicate with equity capital providers that understand your needs, whether that be funding for growth opportunities, new capital expenditure investments, or to get the business through a challenging time.

In addition to providing these equity financing options we help you sift through your choices, weighing the pros and cons with each potential partner and assessing short terms and long terms implications.

Debt Restructuring

If a company is in financial distress, it is likely that its loan agreement with its lender will need to be modified or restructured. Furthermore, Debt restructuring can be a complex and financially sophisticated exercise often involving millions of dollars. This could be as simple as some temporary reduction in principal payments and a re-set of financial covenants, or it could be a much more complex restructuring including a new injection of capital, a reduction to total debt, new warrants issued and may more complexities.

Debt Restructuring may involve negotiating short-term modifications from current loan covenants, getting some principal amortization relief, deferring supplier payments to a longer time frame, or reducing debt levels via a debt for equity exchange.
Regardless of the situation, Debt Restructuring always involves difficult negotiations with lenders and other creditors. As such, it is invaluable to have an experienced and skilled professional leading these negotiations. MorrisAnderson consultants have a “been there, done that” skill set that usually represents an investment with great ROI for our clients.

Business Sales

When a business needs to be sold, MorrisAnderson has the experience and business contacts to help our clients get the optimum price under the circumstances. Over 90% of the companies that we sell are financially distressed and are typically lower middle market in size.

Selling a distressed business is a very different process than selling a solid, profitable, growing business. The likely buyer for a profitable business is “strategic” in nature and as an advisor, you are selling synergies (cost reductions via consolidation) and growth strategies (sales and product expansion) to the prospective buyer. For a distressed company the likely buyer is “financial” in nature and as an advisor you are selling a Turnaround Plan to mitigate the buyer’s risk and improve profitability from an investment baseline that is likely near Asset or Liquidation Value.

The only way you can get maximum price when selling any company is by creating a competitive atmosphere where multiple buyers want the company. At that point the skill of the MorrisAnderson investment banker becomes critical. The goal is to work with the buyers to create a competitive, auction-like environment, or in some cases to create and execute a real auction to maximize value.

Our approach to selling distressed companies is to start out explaining why this is a challenging and tough situation, to ensure the potential buyer has the tolerance for buying a turnaround as many potential buyers do not.

We gather names of potential buyers from these sources:

  1. Owner(s), management, and lender
  2. Industry Research
  3. MorrisAnderson’s proprietary contact list

To prepare for the sale, we develop the following documents in advance:

  1. Non-Disclosure Agreement (NDA) – we are adamant about protecting customer pricing, employee lists, and other sensitive information from current competitors. All prospective buyers sign an NDA before they get any detailed data
  2. Sale Teaser – one or two pages describing the business in general terms on a no-name basis that is sent to all prospects along with the NDA
  3. Confidential Information Memorandum (CIM) – thorough book describing virtually all aspects of the company in detail
  4. Virtual Data Room – well organized database of documents to assist prospective buyers doing due diligence

Business Sale Process

  1. Prepare all sales information and documents (per above)
  2. Develop sales prospect list
  3. Send out Teasers and NDA
  4. Secure signed NDAs from interested prospective buyers
  5. Send out CIM to interested prospective buyers
  6. Maintain communication with interested prospective buyers answering questions and coordinating calls with management (1-hour maximum call length)
  7. Solicit Indications of Interest (IOI) with preliminary value range and any key deal terms
  8. Narrow down IOIs to a short list of 3 to 7 for half-day, on-site management presentations and meetings
  9. Solicit final Letters of Intent (LOI) with prices and key terms subject to due diligence
  10. Deliberate with management and select one LOI to pursue
  11. Sign LOI and grant 60 days Buyer Exclusivity (always required by a credible Buyer)
  12. Facilitate the due diligence process
  13. Negotiate Sale Agreement
  14. Close Sale

Acquisition Due Diligence

For instances in which our clients want to buy a business, they engage MorrisAnderson to be part of the due diligence team to perform a review of cash, accounting, its operations, management, and other aspects of the business. This provides better protection against fraud and a misrepresentation of cash and financial statements by the buyer.

Our work includes a Business Assessment of the acquisition target enabling our client to benefit from MorrisAnderson’s viewpoint on the problems we see and potential solutions. This Assessment may simply validate the client’s assumptions, or it may include new insights and issues that our client’s team had previously not recognized. Our work in this area is not a Quality of Earnings type report typically done by an accounting firm, but rather it is a diagnostic report on common sense financial and business issues that we’ve seen through our hands-on experience over the years. Our focus on distressed businesses gives us a unique and powerful understanding of the key drivers to success and more importantly from a due diligence perspective, the issues that should be considered deal-breakers.