May 2009    Page 1 of 1 

WHY RETAIN A FINANCIAL ADVISOR AND WHAT MAKES A GOOD ONE?  

Every company looking to raise capital to grow is by definition competing with other companies for the same resource – and these days, capital, is a very scarce resource. We are often asked why companies should retain a financial adviser when their own resources are limited due to size or market conditions. First, most companies are not familiar with the capital raising process. While the company itself may be doing well and its management team may be very capable, navigating financial markets is very different than running a company. There are a myriad of issues that range from “what type of capital can the company raise given its current state”, to “what are ‘normal terms’ in this market. What type of capital makes most sense for your particular situation? P/O Financing, A/R Factoring, International A/R Factoring, ABL Revolver, CF Loan, 2nd Lien Loan, Mezzanine Loan, Hard Money Loan, Bridge Loan, RE-backed Loans, IP Financing, Common Equity, Preferred Stock, Convertible Debt, APO, PIPE, Registered Direct? A good financial advisor is not married to one product only and can guide you to what makes sense in your particular situation and in this market. Second, most companies are ill-equipped to go into the capital raising process. Chances are that you and your company are one of the more than 95% of those seeking to raise funds that are not properly prepared. A well-articulated business plan, properly vetted financial projections, a polished investor presentation, back up due diligence materials are only some of the pieces to the puzzle that have to be in place before you go out. Keep in mind that most funding sources turn down most of the proposals they see – in other words, it is much easier for a funding sources to get to a “no” then to a “I’d like to hear more” and poor preparation is a sure way to get to a “no”. A good financial advisor is familiar with what the funding source needs to see and can help you get prepared. Third, the capital raising effort represents a significant distraction to senior management in terms of time and effort. In good times, a capital raise took 3-6 months. Today, it is easily double that timeline. You need to start preparing for a raise long in advance of when you need the capital. In addition to the preparation phase, the actual capital raising process will require significant time and attention from the senior management team of the company, which is frequently a source of surprise and frustration to the CEO and CFO. In addition, the time and effort spent on the capital raising process will, by definition, be time and effort you won’t be able to spend on growing or running the business, which may negatively affect the business and hence the capital raising process. A good financial advisor will not only prepare you for the process, but will be able to shoulder a significant amount of the workload and interaction with the investors early on. Fourth, you need committed and dedicated help in order to obtain results. Many smaller companies rely on finders, who, for a share of the proceeds, will try to find capital by casting the net once or twice. When presented with difficulties or a failure in immediate response, finders will often stop trying, seeking out more promising opportunities elsewhere. In a difficult environment, the financial advisor and the company must be fully committed to focusing on obtaining debt or equity capital in order to close the deal. Fifth, the breadth and depth of a financial advisor’s relationships are crucial to the process. What type of investors would be interested in your company? Angels, high net worth individuals, VCs, PE firms, commercial banks, hedge funds, credit opportunities funds, distressed lenders, PIPE investors? Knocking on the wrong door, with the wrong product will only lead to more time lost. A good financial advisor will have relationships with the right funding sources for your company’s particular needs. Last, but certainly not least, you should always consider the reputation of the financial advisor. Are they a FINRA registered broker/dealer? What deals have they completed in the past? What do their clients have to say about them? What is the background of their professionals? Your potential financial advisor will do due diligence on you and your company, and you should do the same.

If you are a privately-held or a publicly traded company, with $20-400 million in revenues, preferably profitable, looking to raise equity or debt, acquire a company, be sold or go public, let's talk and see if we can work together.

Volfi Mizrahi Managing Director Bryant Park Capital

vmizrahi@bryantparkcapital.com www.bryantparkcapital.com