Growth Financings & Recapitalizations

Rapidly growing companies quickly outgrow their capital structures. Unaware of the breadth of financing alternatives, companies take measures to maintain short-term growth, often resulting in hastily developed, inefficient capital solutions that are inconsistent with the Company's long term growth plans. These reactive financial decisions are based on capital constraints that can significantly limit a company's ability to grow their business to its full potential.

Tunstall works with companies to develop business plans without regard to capital requirements. Tunstall then develops the most efficient strategy and capital structure to enhance long-term value, comfortably aligning structure and capital providers with the growth strategy.

Case Studies

Software Company

$22 million

The Situation:

A small 20 year old software company with a great product in an evolving market was determined to grow. Over the years management had launched several initiatives including expansion into new products in entirely new markets.

Our Solution:

After reviewing their current growth strategies and using a planning approach which assumes capital is unlimited to finance a growth plan, we encouraged the Company to consider selling its flagship software on a rental basis or ASP as it's commonly referred to in the industry. The valuations for successful ASP companies at the time were very high. Historically the Company had sold its solution for over $1 million per solution and as a result the sales process was long and the market small. This new pricing could make the sales cycle very fast and highly scalable and open up the market to small customers.

Building on this new model, management then identified a strategic acquisition that was already servicing a growing segment of the market. Tunstall helped management secure a letter of intent to buy the company. Complied in the business plan, this $8 million in revenue and $500,000 in net income Company raised $22 million of growth and acquisition capital, maintained control, as well as the ability to earnback substantial equity based on performance.

The Result:

Within three years, the new ASP based product was growing at 60% per year annually while the total Company experienced 40% annual growth. Within five years of our initially planning exercise, management sold the business to a strategic buyer for $92 million cash. At the time of the sale management owned 55% of the Company.

School Supplies Manufacturer

$35 million

The Situation:

The Company was suffering from working capital constraints and an improper capital structure given the combination of its growth (more than 30% annually) and seasonality (60% of the Company's revenue occurred during the back to school season).

Our Solution:

Tunstall helped to develop a financing solution that included a seasonal over-advance, allowing the Company to exceed its borrowing base as it built inventory to fulfill its seasonal order requirements.

The Result:

With a clear understanding of the financing alternatives, Tunstall was able to recapitalize the Company with a new capital structure ideally suited to serve its seasonal working capital needs.

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