Financing an Acquisition

The Company
Based in Ohio, co-owners of an office supply and office furniture company (Company A) were setting up a new, related company through the acquisition of selected assets of a similar business (Company B). The acquisition would provide the owners with an expanded market and greater inroads as a distributor of certain lines of office furniture.

The Situation
Company B (the company being acquired), having had past losses, was in its bank’s workout group. Even though there was synergy among the two companies, the owners chose not to merge them together nor utilize the financial strength of Company A to acquire Company B; they preferred standalone financing to fund the acquisition.

The Solution
Company B’s banker chose to pass in refinancing Company B with new owners. With Celtic Capital’s reputation of its ability to fund troubled companies, the bank called Celtic Capital’s Business Development Officer (BDO) for the region and brought her in to take a look.

As is typical, there was competition in the deal. While the prospective borrowers originally thought they wanted to sign with a local competitor, after a conversation with Celtic Capital’s BDO and its President, Mark Hafner, a few differentiators swayed them Celtic Capital’s way:

  • Our 30+year history and solid reputation
  • Our loan structure which included no financial covenants thereby providing the owners with the flexibility to manage the company to its business needs instead of to a particular covenant
  • Mark’s accessibility and Celtic Capital’s policy of visiting clients at least quarterly or at the client’s request

The Result
With our $1.5M A/R and Inventory Lines of Credit, the owners successfully completed the acquisition and also utilized the funds for working capital. The owners have been afforded the opportunity to expand their existing business into a new market and further develop the acquired company through increased buying power and vendor rebates.