Special Series: Securing Equity Capital

December 4th, 2013 by Editor

Most window film dealers are not large enough to secure equity capital from traditional channels, such as private equity funds, family offices or pension funds, says Michael Collins, partner at Building Industry Advisors. There are, however, often sources of equity available to smaller businesses that are often overlooked. In the next few weeks, Window Film magazine will explore with Collins the opportunities available and ways to secure the capital necessary for growth in a special series.

First, Collins says companies may look to friends, family and business associates; non-competing companies engaged in the industry (suppliers); local high net-worth individuals (beware of people with no intention of making an investment); and successful business owners in allied professions, such as home building and real estate development.

Collins explains the benefits of a merger of two companies. “A true merger is similar to an acquisition in certain ways,” he says. “It provides a platform for two companies to operate together. It also affords the merged companies opportunities for selling synergies and cost reduction synergies.”

In a typical merger, companies exchange stock with one another, creating a single merged company, he adds. If structured properly, this transaction will be tax-free. “Mergers probably work best when one owner is ready to step back from the business,” he says. “The ideal merger … would be between two companies with contiguous, but not overlapping, territories.”

Matthew Darienzo, president and CEO of Solar Art Window Film in Laguna Hills, Calif., says there are various reasons window film companies may consider mergers and acquisitions to sustain businesses.

“Various owners have different reasons for selling,” says Darienzo, whose company has handled multiple acquisitions. “One owner was looking to get out of the business, another was retiring and another one actually sold the business then came to work for me because he didn’t want to own a business anymore, but didn’t want to leave the industry. There are various reasons a company would sell.

“It’s very beneficial to sell a window film company to another window film company,” he adds. “They understand the business and it’s easier to run. I don’t have to ask how it’s run so it’s a good way for me to expand my business with additional revenue … Really good installers are hard to find. When you find a company with several good installers, that’s worth the money right there. You can’t do additional installations without additional installers. I found that buying these companies was a good way to do that.”

Darienzo says he has handled his various acquisitions in a variety of ways. “In some instances, I got a small business administration (SBA) loan … If you have strong financials you can get an SBA loan because they [lendors] want you to grow. Others, I finance through my own company. I put some of the money back into the business to grow it. That’s how I do it personally, and it has been successful for me. It’s about growing a company over a five-, seven-, even 10-year span.”

For any companies considering a merger or acquisition to sustain or expand growth, Darienzo says, “Do any due diligence. Research the company. Before you take out a loan, make sure you have the cash flow. If you’re buying a business in your territory … you’re not necessarily adding all of the overhead that comes with a company but you’re still getting those extra sales.”

Next week, we’ll take a closer look at the varieties of loans and financing available, including recommendations from Collins about which may be most appropriate for your business. Look to future Window Film e-newsletters for more on this topic, including preparing for conversations with capital providers and mistakes and misconceptions to avoid when going through the lending process, as well as ways to improve your company’s capital position.

What are some of your experiences or advice when handling business loans? Comment below, or email the editor at cneeley@glass.com.

This article is from Focus on Film, the weekly e-newsletter that covers the latest news regarding window film and related products, including paint protection film. Click HERE to sign up—there is no charge. Interested in a deeper dive? Free subscriptions to Window Film magazine in print or digital format are available. Subscribe at no charge HERE.

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