Download Later-Stage Growth Companies

Capital Resource Partners’ new brochure is made up of three areas of focus.
Click on the link below to view each segment:
Family-Owned Businesses
Middle Market Companies
Later-Stage Growth Companies
FAMILY- OWNED
businesses
investing capital to help companies achieve their growth, acquisition, and liquidity goals
1
Our investment approach
Capital Resource Partners has extensive experience
investing in both family-owned and founder-led
businesses. Our mezzanine investment approach fits well
with companies that are focused on growth or in need
of restructuring their ownership but are sensitive to
dilution.
Because we have worked with families and founders
through the years, we appreciate the strong ties that
exist when a business has been in a family for generations or when a company has been nurtured by a
founder who personally identifies with its mission.
2
We also understand some of the key dilemmas management teams in these kinds of companies face: How can I
achieve my growth objectives and preserve my company
as a family business? How do I achieve some liquidity
without having to sell my company? At CRP, we’re
committed to helping families and management teams
answer those questions – and, in the process, we’re
committed to earning their trust.
Capital Resource Partners invests $5 million to $30
million of capital in the form of subordinated debt with
warrants or a combination of subordinated debt with
warrants and preferred equity. We recognize that every
company is different and not every deal structure is
right for everyone. Our ability to provide either mezzanine or a hybrid structure of mezzanine and equity is
intentional; it allows us to tailor the best capital solution
for each company.
The benef its of our capital
Our capital can be effectively used in a number of
scenarios. The benefits: maximum flexibility, cost-efficient
capital, and a partner with aligned goals.
■
Recapitalizations to enable founder’s liquidity, generational transfer, estate planning,
repurchase of an uninvolved family member’s
ownership, or to alleviate asset concentration.
■
Later-stage growth companies focused on
expansion but where dilution is an issue.
■
Incremental acquisitions for companies
which have a strong equity base, where
mezzanine is a better, less dilutive alternative.
■
Recapitalizations of companies that are
seeking flexibility for expansion or a more
comfortable level of leverage.
A key attribute to our mezzanine investment is that it
can accomplish a business’ capital raising or liquidity
needs without forcing a CEO to take the company
public or sell the business. In addition, for a management team that is weighing its options, an infusion of
mezzanine capital is a compelling solution – potentially
3 to 5 times less dilutive than the same dollar of traditional private equity. Finally, we understand that the
ultimate goal for a family-owned business is not to have
outside capital in the company forever – it is there to
accomplish an objective. Our goals are aligned. We are
focused on helping a company position itself to achieve
successful performance in growth and profitability and
then repay or refinance our capital.
Through the years we have worked with families and
management teams in a range of businesses throughout
the U.S. With particular sensitivity to the privacy of a
family-owned business, on the following pages we have
highlighted three companies with their permission and
protected the identity of three others. Ultimately, all six
offer examples of how our capital has been effectively
used to help companies in various industries achieve
their growth, acquisition, and liquidity goals.
π
3
Case studies
POLAR BEVERAGES
Worcester, Massachusetts
Polar Beverages is an independent soft drink bottler
generating revenue from three product categories: Polar
brands, private label brands, and national franchise
brands.
Capital Use: Fund acquisition of Adirondack Bever-
4
ages, a competitor in a neighboring market, in order to
position Polar as the dominant independent soft drink
bottler in New England and Upstate New York.
Result: Polar was able to eliminate its primary competition in its growing private label business, double its
manufacturing capacity, and expand its distribution area
and customer base.
The Crowley family founded Polar Beverages in 1916
and has been the primary owner and operator of the
business since its inception. Prior to the acquisition, the
family had led the company through tremendous
organic growth. Given the management team’s experience and knowledge of the beverage industry, the
company was positioned well to grow by acquisition
but needed more capital to execute its strategy. The
Crowley family wanted to maintain control of the
company. A combination of subordinated notes and
redeemable preferred stock offered a lower dilution
alternative for the company to capitalize on the acquisition opportunity and, at the same, offered liquidity for a
member of the family.
How can
I achieve
my growth
objectives and
preserve my
company as
a family
business?
Case studies
ROWLAND COFFEE ROASTERS
Miami, Florida
Rowland Coffee Roasters is one of the largest privately-owned producers of coffee products sold primarily to Caribbean Hispanic (Cuban, Puerto Rican, and
Dominican) consumers in the U.S.
Capital Use: Finance Rowland’s acquisition of its
largest competitor, Bustelo, a subsidiary of Tetley USA,
along with related brands, Medaglia d’Oro, Oquendo,
and El Pico.
Result: This acquisition made Rowland the market
leader with a 70% share of the $100 million to $200
million Caribbean Hispanic coffee market.
The company’s founding family, the Soutos, has been
involved in the production, distribution, and marketing
of coffee for over 150 years. Given the history and
involvement of current family members, it was very
important to the Souto family to maintain control of
the business. A structured mezzanine investment offered
a lower dilution alternative to an all-equity round and
allowed the company to complete the acquisition.
COYNE TEXTILE SERVICES
Syracuse, New York
Coyne Textile Services is one of the largest industrial
laundry and uniform rental companies in the U.S. Its
customers represent a variety of industries and markets,
from convenience stores and local gas stations to large
utilities, manufacturing facilities, and service providers.
Capital Use: Refinance Coyne’s balance sheet in order
to reduce its senior debt.
Result: With a more comfortable level of leverage,
Coyne was better positioned to take advantage of
growth opportunities in its market.
Coyne was founded in 1929 by J. Stanley Coyne at the
age of 20 on a site which remains the company’s
headquarters. Recognizing a market opportunity,
Stanley started his laundry business to provide gas
stations and similar operations with clean garments,
towels, and mops on a regular basis. The company grew
over time expanding into contiguous markets, building
new processing facilities, and making acquisitions in a
highly fragmented marketplace. However, even as the
company grew with Stanley’s son, Tom, as CEO, the
Coyne family was always hesitant to take on a private
equity partner or go public because preserving their
ownership position was so important. A subordinated
debt investment with minimally dilutive warrants
allowed the family to remain true to its goal but not at
the cost of growth.
5
Case studies
6
JEWELRY COMPANY
Florida
Leading upscale retailer of fine jewelry, watches, and
giftware located in regional shopping malls across the
country.
CARPET COMPANY
California
Manufacturer and marketer of high quality solid color
wall-to-wall carpet sold to carpet retailers, interior
designers, and home centers.
Capital Use: Recapitalize balance sheet to provide
liquidity for founder and generational transfer to his
four sons, two of whom were active in the business.
Result: Founder achieved liquidity and family equity
was preserved.
Capital Use: Provide founder with substantial liquidity
and recapitalize the business into a newly formed
corporation, jointly owned by CRP, an equity sponsor,
and management.
Result: Founder was able to take a significant equity
stake out of the business but stay involved. Two new
institutional partners helped the company achieve
aggressive growth in its fragmented market.
The company was founded in the early 1900’s and
opened its first store in Florida in 1937. After 19 years,
the founder passed the business on to his son, who led
the company’s expansion. As he grew older, he wanted
to do as his father had done, and pass the company on
to his sons. A subordinated debt investment allowed him
to gain liquidity and keep the business in the family.
The company was founded in 1977 and achieved
profitability in its first full year of operation and remained profitable thereafter. It was able to achieve
consistent results through the quality of its carpet
products, good customer service, and a commitment to
faster turnaround than its larger competitors.
The new transaction in the form of subordinated debt
and equity achieved two goals. Founder was able to gain
substantial liquidity but stay involved financially and
operationally in the business with a meaningful equity
stake. Management’s incentives were newly tied to
performance with the creation of a stock option pool
based on per annum growth.
Case studies
How do I
achieve some
liquidity
without having
to sell my
company?
COLLECTION COMPANY
New Jersey
Provider of consumer debt collection services and
accounts receivable management of past due accounts
for credit grantors such as American Express, Bank of
America, and others.
Capital Use: Provide founder and CEO partial liquid-
ity, create a stock option pool for management, and
provide the company with growth capital.
Result: Both CEO’s financial planning and company’s
growth goals were successfully aligned. Because of the
capital raise, the company was able to roll out its
aggressive marketing effort and execute its acquisition
growth strategy.
Since its inception in 1980, the founder built the
company into one of the largest credit collection
agencies in the country. He accomplished this by
expanding its core customer base, effectively utilizing
technology, and identifying attractive, growing segments
of the credit collections industry. A subordinated debt
and equity investment allowed the founder to liquefy
some of his equity stake without selling his business.
At the same time, he was able to align management’s
incentives with the growth and success of the company.
7
MIDDLE MARKET
companies
investing capital for acquisitions, recapitalizations, and buyouts
1
Capital Resource Partners has extensive experience
investing mezzanine and equity capital in a wide range
of privately-owned middle market companies. We work
closely with management teams to help them accomplish their strategic objectives whether it is a recapitalization to reduce the company’s level of leverage or
refinance current institutional capital, a change-ofcontrol or management buyout financing, or the
execution of an acquisition growth strategy.
CRP invests $5 million to $30 million of capital in the
form of subordinated debt with warrants or a combination of subordinated debt with warrants and preferred
equity in eight industry verticals: consumer products
and services, financial services, healthcare, information
services, manufacturing, distribution and industrial
services, media, communications and cable, retail and
restaurants, and software. Our mezzanine investment
approach works well for established businesses seeking
cost-efficient, long-term capital.
We have invested in over 75 privately-owned companies
since 1987 and have experience working with companies trying to acquire competitors, expand their geographic coverage, enhance their customer bases, build
new facilities, finance incremental acquisitions, identify
operational improvements, and fund internal growth
initiatives.
I need
f lexibility for
expansion
and a more
comfortable
1 level of
leverage.
2
Middle market investments
COYNE TEXTILE SERVICES
Syracuse, New York
Industrial laundry and uniform rental company.
Capital Use: Recapitalize balance sheet to reduce
senior debt.
Result: With more comfortable level of leverage,
company was able to take advantage of growth opportunities in its market.
ePREDIX
Minneapolis, Minnesota
Provider of automated selection and assessment solutions for the human capital management industry.
Capital Use: Fund two incremental acquisitions to
expand company’s product line.
Result: Extension of existing product line presented
cross selling opportunities, increased value to customer
base, and spurred growth.
POLAR BEVERAGES
Worcester, Massachusetts
Independent soft drink bottler.
Capital Use: Finance acquisition of competitor in a
neighboring market and recapitalize balance
sheet to restructure company ownership.
Result: With doubling of manufacturing capacity and
expansion of distribution area and customer base,
company became dominant player in an extended
region.
PROMETHEUS LABORATORIES
San Diego, California
Specialty pharmaceutical company selling branded
diagnostic and therapeutic products for digestive diseases
and disorders.
Capital Use: Fund acquisition of four branded phar-
maceutical products from a large corporate divestiture.
Result: Company’s market position strengthened with
complementary product line offering a
full continuum of care.
ROWLAND COFFEE ROASTERS
Miami, Florida
Producer of coffee products sold primarily to Caribbean
Hispanic Consumers in the U.S.
Capital Use: Finance acquisition of company’s largest
competitor and three related brands.
Result: Company became market leader in its niche
coffee market.
3
I want to make
an acquisition
but only so
much senior
debt is available
and equity
capital is
expensive.
Our capital can be effectively used for:
■
Private companies considering generational
transfer or sale.
■
Companies undertaking acquisitions,
restructurings or recapitalizations.
■
Businesses looking for capital to finance
internal growth due to product expansion.
Our investment strategy targets businesses, which have:
■
Well-established management.
■
Defensible market position.
■
Significant market share or are niche leaders.
■
Target revenues of $20 million to $350
million.
4
LATER- STAGE
growth companies
investing capital for businesses focused on growth but sensitive to dilution
At Capital Resource Partners we realize that approach
matters; that’s why ours is focused on partnering with
companies as a minority growth investor. Our goal isn’t
to run your company – it’s to maximize your ability to
run your company successfully.
2
Different stages of a company’s life demand different
kinds of capital. Our capital works effectively when a
company reaches a point where it has accomplished its
early-stage business goals and long-term capital is
needed for growth. An equity investment will cause the
existing investors in the company to risk substantial
dilution and senior financing isn’t necessarily available.
Our minority growth capital in the form of subordinated debt with warrants or a combination of subordinated debt with warrants and preferred equity is an
effective alternative.
CRP invests $5 million to $30 million in eight industry
verticals: consumer products and services, financial
services, healthcare, information services, manufacturing,
distribution and industrial services, media, communications and cable, retail and restaurants, and software. We
are creative in our structuring in order to provide the
best long-term capital solution for each company. In
some instances, this translates into making an initial
investment with a commitment for a second tranche to
be drawn down within a certain timeframe or based on
specific hurdles the company achieves. This aligns
interests and offers a comfortable source of capital for
growth.
I want to
get some
liquidity
but continue
to expand
1 my business.
Later-stage growth investments
L’OCCITANE
New York, New York
Luxury retailer of French cosmetics and home fragrance
products.
SEMPERCARE
Plano, Texas
Operator of long-term acute care “hospital-within-ahospital” (LTACH) units.
Capital Use: Fund expansion of company’s U.S. retail
Capital Use: Fund existing and future development
presence and wholesale and mail order business.
activities and working capital needs.
Result: Expansion strategy executed. Increased sales,
Result: Two tranche deal stuctured allowing company to
profitability, and brand awareness.
fund current growth initiatives and have flexibility for
growth by drawing down additional capital based on
operational and financial hurdles achieved.
ODYSSEY HEALTHCARE (NASDAQ:ODSY)
Dallas,Texas
Provider of hospice care services.
Capital Use: Finance growth strategy through acquisi-
tion of existing hospice operations and start-up of new
hospices in selected markets.
Result: Scalability of company achieved with national,
multi-site presence. Successful IPO executed.
THE RICHARDSON COMPANY
Philadelphia, Pennsylvania
Customized sales training and consulting services
company.
Capital Use: Finance expansion of sales force and
product line and pay down senior debt.
Result: Company positioned to capitalize on favorable
PAYSYS INTERNATIONAL
Norcross, Georgia
Leading third-party supplier of credit card processing
software.
Capital Use: Retire outstanding debt obligations,
purchase software rights, and position company for
long-term growth.
Result: Growth achieved through product expansion
and development of new technologies. Company sold
to strategic acquirer.
growth and outsourcing trends in market. Growth and
profitability increased.
3
4
I already have
a strong
equity base
but I need
more capital
to grow.
Mezzanine capital is potentially 3 to 5 times less dilutive
than the same dollar of equity. Our mezzanine investment works well for established, later-stage growth
businesses, in particular, companies capable of servicing
a debt instrument where:
■
Management is experienced and stable.
■
Demand for product or service is clear as
demonstrated by historical revenues and
earnings – no proof of concept risk.
■
Cash flow of company has been achieved.
■
Performance meets credit covenants.
Specifically, companies that fit:
■
Entrepreneurially bootstrapped.
■
Venture-backed.
■
Family-owned.
■
Multiple rounds of institutional investment.