The Situation
In the aftermath of COVID, the global semiconductor shortage was severely disrupting the domestic automotive industry. A large automotive supplier with significant customer concentration was losing approximately $30 million of EBITDA annually as production disruptions rippled through its business.
The company was 60% owned by its founder and 40% owned by an institutional strategic partner. Despite substantial collateral coverage within its borrowing base, its incumbent lender would not provide the additional liquidity needed to navigate the disruption.
The immediate problem appeared to be financing. It wasn't the only problem.
What We Did
The engagement began with a deliberately staged approach. Stephen and his team first prepared the company to refinance — developing the materials and financing case necessary to go to market — while giving the incumbent lender an opportunity to provide the needed liquidity.
When it declined, the company went to market and replaced approximately $60 million of existing financing with a new $180 million facility, providing the liquidity and runway needed to address the underlying business issues.
But the financing was structured with what came next in mind. The company subsequently renegotiated its commercial relationship with a customer representing more than 90% of revenue, transforming approximately $30 million of negative EBITDA into roughly $40 million of positive EBITDA. Importantly, the financing documentation had already contemplated the ability to make a distribution once the new customer agreement was executed.
That flexibility created the next opportunity. The resulting distribution was used to acquire the 40% minority interest held by the strategic shareholder. The founder emerged with 100% ownership of a substantially more valuable business.
Only then did the company turn toward expansion. A buy-side search identified a transformational acquisition opportunity, ultimately combining the business with another large enterprise and creating a company with more than $2 billion of revenue and over $100 million of EBITDA.
The Outcome
- Replaced a constrained approximately $60 million facility with $180 million of new financing.
- Moved from approximately $30 million of negative EBITDA to approximately $40 million of positive EBITDA following a critical commercial renegotiation.
- Used pre-negotiated financing flexibility to acquire the strategic partner's 40% minority interest, resulting in 100% founder ownership.
- Subsequently pursued and completed a transformational acquisition, doubling revenue and increasing EBITDA to $100 million while eliminating the pre-existing customer concentration.
- Financed that combination without requiring a new outside equity contribution.
Why It Matters
The best solution doesn't just solve today's problem. It preserves — or creates — the options you'll want tomorrow.
The initial mandate was to solve a liquidity problem. But refinancing the company without considering the commercial agreement, ownership structure and future strategic possibilities would have solved only the immediate issue. Each decision was made with an eye toward what it could make possible next.
