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Capital Raise Advisory: How to Raise Debt & Equity Capital

Business owners and managers often face frustrating and challenging issues related to meeting the capital requirements of a company. Typically, ownership and management understand the operating initiatives that need to be accomplished to move forward, but are impeded by financial constraints or other non-operating difficulties. Allowing an investment bank such as Matrix to assist in evaluating capital alternatives allows management/ownership to remain focused on the business as additional capital is secured.

Below we have assembled information and resources to help business owners consider their options.

  • What kind of capital options are available?
    Will they own a part of my business? There are a number of financial instruments at the disposal of investors. Depending on the business, transaction dynamics, and the shareholders’ goals, it quickly becomes apparent which of these instruments is most appropriate for a given transaction. Broadly speaking, capital raises can take the form of debt raises (senior or subordinated debt) or equity raises (preferred or common). Each has its distinct advantages and disadvantages. The variety and uniqueness to each enables business owners to use a “menu approach” to find the capital solution most appropriate for their situation. Often times there is a blend of capital raised which might include more than just one type. Investment bankers are always seeking the least expensive capital available to minimize or avoid dilution.
  • How much does the capital cost?
    The cost of capital is different based on which form of capital is selected from the “menu” (discussed above). Debt instruments typically charge interest that affects the profitability of a business.  The return to the debt investor is often fixed; but has priority claims to cash ahead of the company’s ownership. Alternatively, equity investments (preferred or common) take a subordinated position in the capital structure (paid after the interest and debt), but participate in the upside of the business alongside fellow shareholders.
  • How long will a transaction take?
    Matrix generally estimates a typical capital raising process will take approximately six months to complete, from the moment we receive preliminary information about the company to the time when all legal documents are fully executed. However, the time it takes to complete a capital raise can vary substantially based on a number of factors. Similar to a sale process, the process assumes multiple capital providers are vying to be selected as the ultimate partner. Matrix’s capital raising process is designed to be exceptionally efficient and has helped many businesses and their owners quickly raise the capital they need under optimal terms.
  • Will they try to change my business?
    While some investors are more hands-on than others, generally speaking, your business shouldn’t change much, if at all. There may be minor tweaks such as additional reporting requirements or the formation of a formal Board of Directors, but it should largely remain business as usual. If the investor didn’t believe in the business you were running and your vision for the future, they likely wouldn’t have provided you with capital in the first place.

The contents of this publication are presented for informational purposes only. While Matrix Capital Markets Group, Inc. and MCMG Capital Advisors, Inc. (“Matrix”) believe the information presented in this publication is accurate, this publication is provided “AS IS” and without warranty of any kind, either expressed or implied, including, but not limited to, the implied warranty of merchantability, fitness for a particular purpose, or non-infringement. Matrix assumes no responsibility for errors or omissions in this publication or other documents which may be contained in, referenced, or linked to this publication. Any recipient of this publication is expressly responsible to seek out its own professional advice with respect to the information contained herein.

What our Clients Are saying

  • “Lots of emotions were involved in making our decision to divest. While those emotions are important, there are business interests that need to be organized. Any family business considering to make such a change must have professionals that advise them well in advance of the ultimate sale. I could not dream of attempting a deal alone. The Matrix team are well versed in the intricacies of our industry and gave us good counsel as we navigated the transaction. Additionally, we are happy to call the team friends,”

    Carlton Revere, President and CEO
    Revere Gas, Inc.
  • “The Matrix deal team worked tenaciously to guide this extraordinarily complicated transaction to closure. They saw the tremendous fit between our desire for a long-term, growth oriented partner and McCarthy’s unique understanding of the industry, and provided sound analysis and counsel to both sides throughout the process. We look forward to working with Matrix on our next transaction.”

    Todd Flemming, President & CEO
    Advantor
  • “Our family has owned and operated CWD for over three decades, and in that time, one of the best decisions we made was to hire Matrix to represent us in the sale of our business. We were extremely impressed by the level of attention and commitment we received throughout the transaction process, and would highly recommend the Matrix Consumer and Industrial Products Team.”

    Patrick Pluck, Vice President
    Connecticut Warehouse Distributors, Inc.
  • “Given the complexities surrounding this transaction and the different shareholder groups involved, I couldn’t be more pleased with the outcome achieved. The Matrix deal team did an outstanding job positioning the Company to maximize value and navigating around potential deal hurdles throughout the process. Mike Morrison and his team delivered the best partner for management and the Company as it continues into its next phase of growth.”

    Jim Raymond, President and CEO
    ShelterLogic
  • “Our Board of Directors, executive management team, and Schmuckal family members explored many options before selecting Matrix to run a structured process and guide us through the sale of the family business. While it is emotional and challenging to sell a business, we felt the time was right for the family to find another company with the culture of a “family owned and operated” business to take our operation into the future. Matrix provided a high-level of professionalism and ran a very productive process that helped us accomplish our goal. We thoroughly enjoyed working with the Matrix team, including Spencer Cavalier, Andrew LoPresti, and Martin McElroy, and are genuinely excited for our customers, employees, and shareholders to be selling our business to True North Energy.”

    Kevin Severt, CEO
    Schmuckal Oil Company