Securing New Financing to Fund Expansion through Acquisitions
A brand-name restaurant franchisee looking to fund an acquisition
A strong-performing brand name fast food franchisee was enjoying rapid growth thanks to a number of successful acquisitions. Recent acquisitions had consumed their cash, but they identified a fantastic opportunity to acquire a competitor for $12MM. Unfortunately, their incumbent lender refused to offer 100% of the financing and time was of the essence as they were nearing their LOI exclusivity expiration.
After an unsuccessful search in their own network, the borrower turned to Cerebro’s network of over 2,200 lenders to find financing for an acquisition. Cerebro’s transactions team began with a data-driven scan of the over 2,200 lenders in Cerebro’s network and identified 25 potential lenders, many of whom the borrower had never heard of. By recording one introductory phone call with the borrower and placing it into Cerebro’s secure data room for these 25 lenders, the borrower saved a significant amount of time that would have been spent holding 25 individual calls. Any amount of time-savings was critical as the borrower needed to be sure they could close before the exclusivity period of the LOI expired. Cerebro’s proprietary technology allowed the borrower to securely transmit documents to lenders and easily track the progress of their transaction.
After a number of lenders indicated that their terms wouldn’t be competitive with the strength of the deal, the borrower selected two to move to term sheets. Both offered competitive terms, with one of the two offering them a 16% larger commitment to help refinance existing debt. With a commitment this large, the borrower was particularly sensitive to pricing– even a small increase in interest rate would push the carrying cost significantly higher. Cerebro’s expert transactions team of former lenders and bankers leveraged the pressure of competing term sheets to get the pricing reduced by nearly 20%. This lowered the carrying cost significantly over the life of the loan. Finally, this pressure moved the top lender to reduce strict financial covenants from five to only two.