Capital Structuring

Smythe has the financial expertise and deal experience to help you raise the debt or equity financing you need to achieve your business objectives. Our mission is to help clients achieve the optimal terms and conditions, while ensuring their non-financial objectives are met.

Our structured process for optimizing terms includes preparing robust financial models and effective marketing materials, creating competitive tension amongst a pool of qualified investors, and then leveraging this tension to negotiate optimal terms for our clients.

Ultimately, our clients make all the decisions, but leverage our financial expertise, deal experience and market knowledge every step of the way.

Raising capital from traditional or non-traditional lenders, or private equity capital providers can be a complex endeavour.

Our structured process involves the following:

  • Preparation phase
    • Prepare detailed, robust financial models that provide potential investors with a lens of  historical and forward-looking profitability, cash flow and return on investing in your business. The free cash flow allows lenders to determine how much debt capacity your business has.Produce a confidential information memorandum, which is essentially a marketing document that effectively communicates the strengths and opportunities of your business. This is the primary document that lenders and investors will rely on when crafting their term sheets.Produce a teaser document which is an anonymous business profile (discussed further below).Prepare a dataroom – an effective process requires that the qualified pool of lenders/investors have access to the appropriate information in a timely manner. Momentum is a big component of deriving value from an effective process.
    • Qualified lenders/investors – determine which parties you’d like to approach as part of your process.
  • Marketing – after preparing your marketing documents and your list of qualified parties, you are ready to start marketing the opportunity.
    • This involves sending out the anonymous business profile, or teaser, to the qualified list of parties. The teaser will contain high level information on your business that will provide sufficient information to potential purchasers to determine whether they are interested in pursuing the opportunity. If they are, they would execute a non-disclosure agreement.The next step includes providing the confidential information memorandum, access to the dataroom, and holding Q&A sessions with interested parties.Shortlisted parties would have the opportunity to meet with management in order to assess fit and ask high-level business strategy questions to supplement their due diligence.The marketing phase includes interested parties submitting their high-level term sheets for consideration.Our job at this phase is to work with you to determine which is the favourable party from a non-financial perspective. Depending on the term sheets, we would then negotiate with your selected party or parties to achieve the best terms.
    • This stage ends with the signing of a non-binding letter of intent or term sheet.
  • Closing phase – in this stage, your legal counsel will play a primary role in drafting and negotiating the definitive legal agreements, which outline in detail the terms of the letter of intent, and legal terms such as reps & warranties, indemnities and other terms and conditions.
    • Our primary role in this stage is to deal directly with our client and the investor/lender for any business issues that the respective legal teams can’t resolve directly.
    • Concurrently, we are ensuring that the lender/investor has all the necessary documentation required to complete their due diligence, including updated forecasts and financial information.

This article demonstrates that raising capital at optimal terms is a complex process requiring financial expertise, deal experience and market knowledge. If you’re considering raising capital, reach out to one of our M&A advisors noted below.