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The Value of Private Equity Relationships in Tough Times

By on , Ironwood Insights

In the private equity marketplace, the market needs to be healthy for the whole investing continuum – from seed and early stage to venture to growth to mezzanine to buyout firms. Fortunately, Ironwood Capital and the lower middle market private equity industry weathered the global downturn in good shape. In fact, private equity firms provided business expansion capital to  many small businesses when the financial crisis froze many of their access points to credit and I stated as much when I testified before Congress in May 2013 , on behalf of the Small Business Investor Alliance, at a hearing entitled “Legislative Proposals to Relieve the Red Tape Burden on Investors and Job Creators.”

For instance, a rapidly growing business services company was being stifled by its bank group during the financial crisis of 2009. The CEO was unable to continue the company’s growth trajectory without refinancing its existing credit facility.

The company came to Ironwood and our team worked with the company’s existing lenders and shareholders to structure a separate credit facility dedicated to financing growth. This facility allowed the company to continue growing with the understanding that its primary bank facility would be refinanced in an orderly fashion after the credit markets stabilized.

The Ironwood facility financed growth for almost one year before it was converted to a combination of subordinated debt and equity as part of an overall refinancing. The company continued to grow for two more years and was sold at a premium valuation to a financial buyer, due in large part to its ability to grow during a period of severe market contraction.

That’s just one example of how private equity can help businesses grow, but every deal is different.  We like to think we’re creative when it comes to working with good companies, in good times and not-so-good times.

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