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InterFlex Group is a market leader in producing value-added flexible packaging for poultry, meat, produce and bakery companies. Its owner, Stephen Doyle, a hands-on investor, acquired the company in 1999 after an in-depth market study convinced him that a strategic approach to managing the niche manufacturing business could turn InterFlex into a significant growth opportunity. In his first years running the business, Doyle set his sights on improving efficiencies with a customer-centric focus. He streamlined and consolidated operations, built new plants, made acquisitions, and undertook building proprietary information systems that went well beyond "just-in-time delivery". Doyle not only wanted InterFlex to analyze and anticipate customer needs -- he wanted to use optimization systems to produce and deliver orders at the lowest cost to the customer.
As these initiatives neared completion, Doyle began to think about buying out his minority shareholders. The time was right: the company had weathered major challenges and was on an upward path. The question was whether to arrange the financing with subordinated debt using the in-house team or to seek outside advisory services. After all, Doyle came from a financial background in investment banking, consulting and private equity, and his CFO had been a senior lender. Experience told Doyle that his InterFlex team had its hands full running the business and it would be more productive to turn the project over to a firm that specialized in this type of transaction. Steve Doyle explains, "At about $60 million in revenues, I knew we wouldn't be a fit for the major Wall Street firms. I was looking for a boutique investment banking firm focused on middle market companies in the size range of $20 million to $200 million, with established relationships with debt and equity capital sources, that we could rely on for unbiased advice."
Reworking InterFlex's balance sheet became an urgent priority when InterFlex's main senior lender was acquired and the bank's new management decided InterFlex was not a fit anymore and should find a new lender. At the same time, Doyle was just beginning a restructuring of some operations that were not meeting expectations. "Time was of the essence." He said. "We didn't have time for an investment banker who had to learn the business." Doyle turned to Tom Courtney, whose work he had followed from a distance for over 15 years since they had been at business school at Wharton together. Courtney, whose expertise is advising middle-market businesses on financial matters, sprang into action.
Quickly grasping the situation, Courtney was impressed with what he saw and developed a 3-step solution:
Starting in late 2003 The Courtney Group worked with InterFlex to develop a credible strategy and action plan to satisfy the existing lenders and buy InterFlex time until the operational restructuring was complete and a new senior financing could be put in place under favorable terms. Courtney kept the lenders informed and helped make sure InterFlex met its deadlines.
The first phase provided for a smooth transition until The Courtney Group arranged for the existing senior debt to be refinanced, in early 2004.
In 2005 The Courtney Group advised InterFlex on a leveraged recapitalization in which Stephen Doyle first bought out InterFlex's minority shareholders, then, as the 100% owner, sold a substantial amount of stock to Red Diamond Capital, an investment firm with a focus on packaging companies. This transaction diversified Doyle's net worth and brought in a strong financial partner dedicated to InterFlex's continued growth both through investments in new plant and equipment, and through add-on acquisitions.
In Steve Doyle's own words: "I think the savings of time and getting the job done right in the first place are well worth the cost involved. Much of the pre-screening and pre-sorting was handled by our advisor so we could focus on running our business. But even more expensive in the long-run would be getting the wrong people as partners. The Courtney Group personally knew the people we were talking to and had a history of dealing with them that we could benefit from, both in deciding which financing alternatives to choose and in negotiating the deal."
"The interesting thing is that the project started out as a $6 million sub-debt financing, but we ended up doing a much larger transaction involving both debt and equity," according to Doyle. "As our investment banking advisor, The Courtney Group developed some good sub-debt proposals for us but also created a broader range of options for us, including some things that we were not originally considering." And from a personal perspective, Doyle observes, "I had built a lot of value in the company, but essentially all of my net worth was in the business. I am still very excited about the prospects for my company, but I can sleep better at night knowing that everything I have isn't concentrated in one place. Now I have a great financial partner committed to the growth of my business, have diversified my investments, and still have a huge upside as the company continues to grow successfully."
Asked about the assignment, Tom Courtney reflects: "This was a complex set of transactions that involved a lot of judgment calls. What was the best thing for the company? What was best for Steve Doyle? What was the right timing of the different steps? What would people agree to and when? And it was important to wait until the deal was ready. I saw an opportunity for Steve to take some chips off the table and at the same time to strengthen InterFlex's financial position for future growth."
"There were two areas where The Courtney Group was particularly helpful and added a lot of value to the several financings we completed together," says Stephen Doyle.
"First, was the depth and appropriateness of Courtney's contact base. They had a deep pool of potential financing sources, had long-standing relationships with the right people at the financing sources, and helped us move along much faster and more efficiently than we could have ever done on our own. The Courtney Group was able to create a targeted process which created a very attractive set of options."
"Second, was the quality of the advice and the ability to be a great sounding board to me during negotiations. In the end, the decisions were mine to make, but I got a lot of help from The Courtney Group in presenting options, thinking through them, figuring out when to stand firm and when to compromise on important issues."
"The Courtney Group was always focused on what was best for the company and for me. In some of the transactions under consideration The Courtney Group would get a fee that was half of what it might be in other scenarios. But I felt that there was never any conflict - they always wanted us to do the deal that worked best for us. They did a great job for me and I will always be grateful for their help."
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