2002 capital update buying and selling a company in a tough economy july 17, 2002 anderson school at...

2002 Capital Update

Buying and Selling a Company

in a Tough Economy

July 17, 2002

Anderson School at

UCLA

Los Angeles, CA

Debt Structure and Funding

Typical Capital Structure:

EBITDA $ 25 million

Purchase price - 7 times EBITDA $175 million

ABL or Cash Flow Financing $ 50 million

Tranche B Lenders $ 25 million

Equity or Mezzanine $100 million

Debt Structure & Funding

Lack of access to senior debt on a cash flow basis.

Cash flow lenders are offering 2 to 3 times EBITDA.

Sellers seeking 6 to 8 times EBITDA.

ABL lenders: Aggressively offering financing

Often financing ends up at 2-3 times EBITDA.

Financial sponsors are forced to invest 4-6 times EBITDA

Capital Summary

Senior Debt Leverage is Down

Senior Debt Pricing is Up

Equity Investments are Up

High Yield Market is Red Hot

Distressed Debt Market is Red Hot

Due Diligence is Critical

Vicky Balmot

Executive Vice President

Congress Financial Corporation

a Wachovia Company

626-304-4972

email: vbalmot@congressfinancial.com

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