How Coronavirus Is Impacting Lower Middle Market M&A Activity
Last week, Axial convened a virtual roundtable of members to review the impact of the coronavirus pandemic on lower middle…
BBVA Compass is one of US’ 50 largest banks and also an Axial member. Axial recently spoke to Jonathan Smith, BBVA Compass’ corporate relationship manager, to learn more about the bank’s competitive edge, business development strategy and approach to deal sourcing in the middle market.
Jon: As a global financial institution, we have a broad range of capabilities that many of our competitors may not have. We have many different financing options as well as expertise in dealing with acquisitions, specific asset purchase, and/or many different working capital solutions. We approach our clients as more of a strategic financial partner by bringing more the full value of the bank to them.
Many business owners are focused on the cost of doing business with a financial provider versus the capabilities and expertise that can benefit their business from choosing the right financial institution.
Basically, there needs to be a strategic plan towards their business that includes how they differentiate. All lenders need to know how their client’s operation differs, what their capabilities are, and why the transaction should be supported. Most senior debt providers are looking to make sense of the company’s ability to compete & create sustainable cash flow that will repay their loan. This preparation essentially includes adequate financial information (at least 3-years of financials), a current interim financial, projections as needed, sources and uses of proceeds, and the story behind the business and how they differentiate.
The bank is interested in growing its brand recognition and market share in the US. Axial is allowing the bank to expand its coverage through a different channel that had not previously been pursued with many prospective clients and referral sources. Axial has provided the bank with warm leads through campaign functionality and connecting with acquisitive companies. Additionally, we see the network capabilities of connecting us with intermediaries and business consultants.
We have been able to complete a number of different type transactions. We have been able to close acquisition transactions providing a mix of senior debt, subordinated debt, and venture capital funds to facilitate an acquisition. We have also done SBA enhanced transactions on owner occupied real estate and equipment purchase. This allows lower down payment equity into the deal, a longer amortization and closing costs could be wrapped up within the loan proceeds. We have also been able to refinance higher rate debt as companies have moved past the start-up phase. We have also provided growth capital for a firm that was looking to expand its footprint and build out the needs for a large customer. These are a few examples of what we can do, but as a full service commercial bank, we have very broad capabilities to complete most any kind of transaction.
Being able to make connections and find a workable solution that gets the transaction done. I am able to review the need presented and work through many options available through BBVA Compass towards making a deal work. I have a number of different internal resources supporting many different industry specialties, and normally, we can find a way forward towards getting the capital needed. Through the process, I get to utilize my ability to interact with a variety of individuals across multiple industries and across the country. The diverse interactions keep things interesting and keep me fulfilled in my role.