A well established branded wholesale commercial bakery producing and distributing premium bakery products including artisan bread, buns and cakes.
The company had identified a few smaller competitors with strong synergies as potential acquisition opportunities however the founder was approaching retirement age and was more focused on monetizing her interests than on these growth opportunities. Three long time members of the executive management team with combined minority ownership of 25% were looking for the capital to not only buy-out the founder but to concurrently execute on one of the acquisition opportunities.
The new owners had limited additional capital to invest but were ideally looking for a non-dilutive debt solution to acquire the remaining 75% of the business. Realizing this would require a higher than normal debt load, the traditional amortizing cash flow loan was supplemented with an additional layer of patient interest only mezzanine debt. To further improve financial flexibility and cash flows during the transition, a significant portion of the interest on the mezzanine loan was capitalized and paid at the end of the term. Roynat also offered a committed acquisition line to fund future acquisitions and further consolidate their market.
Outcome and benefits
Without having to find a new equity partner, the minority shareholders were able to increase their ownership from 25% to 100% in order to provide full liquidity to the founder and facilitate her retirement. Additionally, the new owners were able to aggressively pursue their consolidation opportunity and grow their market share. The extremely patient nature of the mezzanine debt provided flexibility through the ownership transition and the acquisition integration periods.