Jared Pawelka
Member of TAMA 1-844-MIDAMGC (643-2642)

Recapitalizations & Turnarounds

Occasionally a firm will reach a point where their capital position has been depleted or weakened due to a confluence of factors, our team specializes in guiding firms through recapitalizations and turnarounds. These situations are particularly sensitive for management teams and their employees; nobody likes uncertainty and when competitors smell blood in the water real damage can be done. Jared and his team help management teams refinance, recapitalize and re-position their firm in a confidential manner. Often what begins as a distressed situation ends with a more firmly footed company. Any management team wanting to redirect and strengthen their capital position should call Jared.

The goal of a Recapitalization is to improve the stability or diversity of capital. The process involves not only injecting new capital, but also swapping or refinancing one type of financing for another. Some of the most common recap results are tax minimization, improved liquidity and easier exits for equity holders. While recaps can reduce earnings, firms that deleverage are typically perceived as less risky and more profitable.

A turnaround situation is one in which the company is faced with foreclosure, bankruptcy, liquidity, change of control or other hostile activities typically due to prolonged underperformance. Potential remedies include selling assets, terminating employees and sourcing additional capital. While it may not seem like it, many times investors and lenders can be pacified with a thoughtful plan of action that specifies steps to rectify a breach or adverse condition. Refinancing is not always the answer, our has advised in many distressed situations.

The single most valuable tool in these situations is a cogent plan with the appropriate resources to execute it. Turnarounds begin with few options, navigating the pros and cons of each requires time and attention. Often there are more options than a management team might think; the sooner the situation is addressed the more options are preserved.

In the case of debt, occasionally the terms or structure of the obligation can be modified in a mutually agreeable manner. In the case of a pending change of control or other equity dilution, emergency short-term financing can stave off a calamity and buy time to adjust to current conditions. The most valuable resource a firm can develop is a strong management team; their steady leadership is a comfort to both funders and stakeholders. Mid-America Growth & Capital can help a good management team steer the company away from trouble by systematically reviewing operational and financial options.


 

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