Phoenix, AZ & Salt Lake City, UT
This client was looking to purchase a competitor’s 30-year old, privately-owned home hospice care and staffing company AND its commercial real estate in 2 different states (from its original founder/owner).
However, the business he wanted to acquire was losing money in EBITDA for the 3rd year in a row. Thus, even the seller’s own specialist and business broker said the acquisition could not be done with any commercial loan. However, the buyer saw that its true value was in the fact that it had a large market share and owned its own commercial buildings — and we saw that too.
At first glance, this would seem like a counterintuitive investment. However, the forecasted revenues on a pro forma showed that once the business was controlled by new management, profits would DOUBLE in Year One, post-closing.
Our careful review showed that the acquisition was loaded with owner discretionary expenditures (as many closely held companies are). Once these expenditures were accounted for and removed, the commercial real estate, stable cash flow and good credit of the borrower and its principals made for a sensible loan. We we able to close the transaction with a single loan that covered both the business and its multiple properties.