What is a Colsolidation Practice? A Case Study.

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Doing a roll-up or consolidation play is more than just repeated M&A. It requires a holistic approach that requires planning, planning and more planning.

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What is a Colsolidation Practice? A Case Study.

  1. 1. What is a Consolidation Practice? A Case Study Presented by Bart Greenberg Manatt, Phelps & Phillips, LLP For the Inland Empire Business Forum
  2. 2. What is a Consolidation Practice? It is Much More that Numerous, Repeated Acquisitions It is a Holistic and Integrative Approach to each of the Following: Acquisitions Financings Real Estate Leases Other Material Contracts The Following Case Study Is Illustrative of this Point:
  3. 3. In the Beginning . . . Holding Company X
  4. 4. What Happened Next? 35 Acquisitions 18 Stock Purchases 17 Asset Purchases Financings Seller Financing Secured Unsecured Preferred Stock Financings Mezzanine Debt Facilities Vendor Assisted Financing Secured Unsecured
  5. 5. The Resulting Corporate Structure Holding Company A B C X Y D E F G AA BB H I J K CC DD EE FF 1 2 3 4 GG HH 5 6 7 8 II JJ 9 KK LL
  6. 6. The First Restructure Goals: Correct Corporate Structure Certain Subsidiaries at Wrong Level Simplify Overall Corporate Structure Confusion from Operational Perspective Confusion from Investor Perspective Reduce Costs Associated with Structure Legal Cost of Separate Entities Liability Risk of Many Entities Not Chase Any Third Party Consents
  7. 7. After First Reorganization Holding Company X Y D E F G H AA BB CC DD 1 EE FF GG HH II
  8. 8. What Happened Next? 6 Acquisitions 1 Stock Purchase 5 Asset Purchases Financings Seller Financing Unsecured Preferred Stock Financing Vendor Assisted Financing
  9. 9. The Resulting Corporate Structure Holding Company X Y D E F G H I AA BB CC DD 1 EE FF GG HH II
  10. 10. The Second Restructure Goals: Two of the Same as the First Restructure Simplify Overall Corporate Structure Reduce Costs Associated with Structure Prepare for Anticipated Credit Facility Not Chase Any Third Party Consents
  11. 11. The Resulting Corporate Structure Holding Company X Y D E F H I AA BB CC 1
  12. 12. The Anticipated Credit Facility New Lender Requested Company to Transfer Secured Assets of Company “Y” (constituting 10 facilities) to Newco Legal Issues to Effect Drop-Down of Assets: Only One Landlord Consent Notice Only to Four Other Landlords “Notice” to one Secured Creditor
  13. 13. The Resulting Corporate Structure Holding Company X Y D E F H I Newco 1 AA BB CC
  14. 14. The Credit Facility No Consents Required
  15. 15. Lessons to Be Learned
  16. 16. Planning, Planning and Planning Some Key Considerations: Broad Prospective Consent of Creditors to Subordination Relaxation of Typical Negative Covenants on the Following: Mergers and Restructurings Investments in Subsidiaries Certain Transfers of Collateral Broad Flexibility to Conduct Transactions with Affiliated Persons In Sum, LEGAL Planning for All Anticipated Possibilities of Growth
  17. 17. Thank you!

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