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The Handbook of Financing Growth: Strategies, Capital Structure, and M&A Transactions, 2nd Edition

The Handbook of Financing Growth: Strategies, Capital Structure, and M&A Transactions, 2nd Edition

Description

The Second Edition of The Handbook of Financing Growth has been designed to help leaders and advisors gain a solid understanding of the financing strategies, sources, and transactions that will allow them to excel in such an unpredictable environment.

Written by an experienced group of practitioners who operate within this dynamic market—and fully updated to reflect new market realities—this reliable resource outlines the full spectrum of funding alternatives currently available to emerging growth and middle-market companies and presents the practical strategies and techniques you need to be aware of when considering the capitalization, growth, or sale of your, or your client's, company.

New material found in this Second Edition includes detailed discussions of positioning a business for value creation before the transaction and how your financing strategy fits into the overall plan for growing and raising capital as well as creating an exit. Among various techniques, the authors address buyouts and recapitalizations as two alternatives to create shareholder liquidity and potentially finance future growth. A new chapter on M&A addresses the acquisition process and how to fund acquisitions and external growth initiatives, while additional case studies highlight bank financing alternatives and growth equity.

Preface xv

Acknowledgments xxi

About the Authors xxiii

PART I The Financing Process 1

CHAPTER 1 Introduction 3

CHAPTER 2 Planning and Alignment (Begin with the End in Mind) 7

An Overview of the Planning Process 8

Strategic Planning 10

Updated Forecast 27

Business Valuation 27

CHAPTER 3 Acquisitions, Recapitalizations, and Exits 37

Acquisitions 37

Selling the Company, Creating Shareholder Liquidity 41

CHAPTER 4 Capital Structure and Financing Strategy 45

Assimilating the Drivers 49

Developing Liability Limits 63

CHAPTER 5 Sources of Capital and What to Expect 69

Bootstrapping Sources and Techniques 72

Individual Investors (Private Placements Not from Angels or Institutions) 82

Angel Investors 83

Commercial Banks 95

Asset-Based Lenders 100

Commercial Finance Companies 115

Leasing Companies 116

Private Equity 119

Venture Capital Funds 122

Mezzanine Funds 152

Buyout Funds 157

Hedge Funds 164

Strategic or Industry Investors—Corporate Venture Capital 166

Merchant Banks 168

Community Development Initiatives and Government Agencies 169

Micro-cap Public Entities 193

Royalty Financing 196

CHAPTER 6 Equity and Debt Financings: Documentation and Regulatory Sources of Capital and What to Expect 203

Basic Definition of Debt and Equity 203

Debt Instruments 206

Loan Documentation 212

Equity Instruments 260

Equity Investment Documentation 264

Compliance with Securities Laws 292

CHAPTER 7 Expert Support—The Players and Their Roles 301

Counsel 301

Board of Directors 303

Investment Bankers 306

Accountants 312

Consultants/Advisers 315

Summary 317

CHAPTER 8 Closing the Deal 319

Process Check-In 319

Final Perspective 326

PART TWO Case Studies 329

CASE STUDY 1 Asset-Based Lender, Receivables Financing 332

CASE STUDY 2 Asset-Based Lender, High-Risk Loan 336

CASE STUDY 3 Asset-Based Lender, Assignment for Benefit of Creditors 339

CASE STUDY 4 Asset-Based Lender, Acquisition 344

CASE STUDY 5 Asset-Based Lender, Turnaround Funding 348

CASE STUDY 6 Asset-Based Lender, Growth Financing 352

CASE STUDY 7 Commercial Finance, Trade Financing 356

CASE STUDY 8 Angel Investor, Initial Funding and Sale of Company 359

CASE STUDY 9 Venture Capital, Early Stage Growth Equity 362

CASE STUDY 10 Royalty Financing 365

CASE STUDY 11 Venture Capital, Growth Equity 367

CASE STUDY 12 Community Development Finance, Growth Funding 370

CASE STUDY 13 Debt with Revenue Sharing 375

CASE STUDY 14 Mezzanine Investment 377

CASE STUDY 15 Private Equity, Acquisition through Exit 378

CASE STUDY 16 Private Equity, Management Buyout/Partner Exit 380

CASE STUDY 17 Private Equity, Restructuring 382

CASE STUDY 18 Private Equity, Acquisition with Management Participation 385

CASE STUDY 19 Private Equity, Public to Private Transaction 388

CASE STUDY 20 Private Equity, Buy-and-Build Strategy 393

PART THREE Financing Source Directory 397

Suggested Use of the Directory Section 399

APPENDIX A Corporate Finance Primer 523

APPENDIX B Financial Statements 551

APPENDIX C Discount Rates 563

APPENDIX D How Fast Can Your Company Afford to Grow? 567

APPENDIX E Notes about Start-Ups 583

APPENDIX F Accounting Principles—GAAP and IFRS 587

Glossary 591

Notes 623

Index 633

"The Handbook of Financing Growth, Second Edition remains the most important book on financing to be published in far more than a decade. If there is a way to do a business finance deal, it is covered in this book. Not only does the book explain how to do most all types of financing, it tells you why some companies succeed while others fail. The book is a true reference book that you can turn to when you need an answer, or when you need inspiration."
Marilyn J. Holt, Founder of Holt Capital,