Acquisition

The Situation

One of Newtek's alliance partners had a long-standing client who had recently sold a 20 year old family business and wanted to purchase a 16 year old business in an unrelated industry. The alliance partner called Newtek and asked for help in providing the financing for the acquisition.

The Issues and Needs

While the business being acquired had a record of consistent sales and profitability, the initial acquisition plan indicated there was limited business collateral available for the loan and proposed a relatively small equity injection for the purchase. Newtek's Business Services Specialist and Underwriter worked with the client to structure an acquisition package that met the goals of all parties:

1. Client wanted to purchase the business and retain the advice and help of the seller during the ownership transition
2. Alliance partner wanted to help a good client and retain as much of the client's assets as possible

The Solution

To help ensure that the seller would be available during the transition phase and afterwards as needed, a portion of the purchase price was restructured as a non-compete and consulting contract paid over a four year period. Rather than liquidating over half of the securities in the client's portfolio for the equity injection, the client was able to arrange a margin loan against a portion of the portfolio, providing the client with a portion of the required equity without liquidating portfolio assets. The remainder of the portfolio was pledged as collateral for the loan.

The Result

The alliance partner has a very satisfied client who is happily running his new company, retained a profitable account and collected a referral fee from Newtek Business Lending. Newtek has a well structured $2 million loan in its portfolio.

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