Any business owner who starts to look for capital when he needs it is acting too late.

Osprey Partners works closely with business owners who need finance in order to expand their business. Finance can take the form of equity (e.g. a capital increase) or debt and the amount and cost of each must be evaluated in the context of the company's current financial situation and its future business strategy.

The key stages of the process are as follows:
I DIAGNOSE THE FINANCING REQUIREMENT
II FIND AND CONTACT POTENTIAL INVESTORS and LENDERS
III PRODUCE THE OFFERING DOCUMENT / PRESENT THE FINANCIAL MODEL
IV TERM SHEETS AND NEGOTIATION
V DUE DILIGENCE
VI CLOSING

I DIAGNOSE THE FINANCING REQUIREMENT

We begin by thoroughly understanding the client’s business: its products, services and markets, strategy, management, competition and any other factors that may affect its value. We create a detailed, integrated Financial Model of the company that shows its projected cash flows, both operating and investing, including capital expenditures and working capital, as well as prospective balance sheets, income statements and financial ratios. In this way, an accurate calculation of the amount of financing required by the company can be made, and the impact of commercial and financial strategies quantified.

We then analyse the current capital base of the company (sources of finance and debt-to-equity ratios) and design an optimal capital structure. We apply this structure to our model ie we run a simulation to check its impact on key financial indicators, before we are satisfied with it. We also consider that as capital is not freely available in the markets where we work, the “optimal” capital structure may not be achievable but will be dictated by what is available on the market.

If equity capital is required then an equity valuation exercise is important. As a first indication of value, we research similar companies and deals before proceeding to a full valuation exercise based on the Financial Model (see Valuation). The results of this exercise form the basis for negotiating the price at which a new investor will inject capital into the company.


II FIND AND CONTACT POTENTIAL INVESTORS and LENDERS

To identify potential investors/lenders, we use our extensive network of personal and institutional contacts, Osprey research databases and other advisory firms, as well as trade shows, trade organisations and conferences. We write a summary document (called an “Investment Opportunity”) which highlights the opportunity but does not disclose the company name. If a potential investor/lender is interested, and signs a Confidentiality Document, he may receive an Information Memorandum and a version of the Financial Model.

III PRODUCE THE OFFERING DOCUMENT / PRESENT THE FINANCIAL MODEL

The “Information Memorandum” (IM) which is produced documents all relevant aspects of the company and presents its prospects objectively.
Information provided to potential investors/lenders will include the Financial Model. Potential equity investors can calculate their returns from this information and potential lenders can calculate the debt coverage ability of the company. This is becoming an increasingly accepted practice and facilitates the discussion and negotiation with counterparties. It is usually to the client’s advantage to use the Financial Model prepared on his behalf as it permits him to define the parameters of the negotiation and to control the process.

IV TERM SHEETS AND NEGOTIATION

Based on the results of steps I to III and further negotiations with interested investors, we finalise a Transaction Structure. We invite potential investors to submit “Term Sheets” for review and together with our client decide how to proceed. For debt finance, presentations are made to the banks and a loan application with accompanying financial projections (drawn from the Financial Model) is prepared for analysis by the selected lender. Depending on the type of transaction, we normally lead the defining of terms and negotiations of those terms with the buyer. We work closely with lawyers on (both sides of) the transaction in order to ensure that the commercial intent is not obscured by the documentation. Throughout this process, it is our job to obtain the best conditions for our client, the business owner.

V DUE DILIGENCE

We typically act as coordinators of the various financial, legal and industry specialist due diligence teams that are sent by a buyer. We help co-ordinate with the client’s personnel and smooth what can be a disruptive and time intensive process for the client’s business.

VI CLOSING

We remain heavily involved at this stage, making sure that the lawyers focus on completing the transaction. We also help reconcile any issues that may have arisen as a result of the due diligence process.