Using a Carrot to Say Yes
Fibre-Craft, a family-owned consumer goods company that sells arts and crafts supplies as well as non-electronic toys manufactured in China never fully recovered from The Great Recession. By 2013 it faced a serious liquidity trap and lenders were on the verge of liquidation. But Ravinia Capital saw a different outcome and it knew just the right carrot that would lead to success.
Finding Mutual Interests Among all the Parties
Ravinia Capital was impressed with the firm’s products; it felt there was demand for its unique arts and crafts supplies which inspired creativity and imaginative play in young children. Tom Goldblatt and Eric Welchko understood the heart of the enterprise and felt it could be flourish with a new financial structure. To keep the company going, Ravinia induced the lender – North Mill Capital – to accept a financial incentive that would be commensurate with their risk and make them a partner in the successful sale of the company. Ravinia won the confidence of stakeholders, and then the principals travelled to China and convinced the vendors to manufacture orders at a lower price. Using its emotional intelligence – and the right carrot -- Ravinia Capital persuaded all stakeholders to agree to the plan.
An Intensive Sell Side Process
With sufficient capital to keep Fibre-Craft operating, Ravinia Capital brought in a new CEO and CFO – people with experience in the toy industry – who added credibility to management and were skilled at business development. A vigorous, exhaustive and robust sales process got underway that included outreach to more than 1,000 key contacts, writing of a thorough CIM, a heavily attended virtual data room and webinar. Telling the story required some finesse because buyers had to get comfortable with a difficult situation. Ravinia Capital was very transparent in isolating every risk and explaining it, and collaborating with other experts to help buyers see the potential and underlying value of the business.
Extraordinary Results
Because Ravinia Capital used a stalking horse strategy to generate more interest in the deal, the seller was able to get a price that enabled everyone to get paid, including the incentive fee to the lender. Today, Fibre-Craft is thriving. Jobs were saved and talented people are engaged with new and exciting product development, spurring on children’s’ imaginations.
Comment from one of the original lenders
“Tom and Eric stayed with this transaction through the whole process, creating unique and tailored solutions to hard problems. They were always there, always available and always brought their best thinking,” says North Mill Banker Tom Siska. “We couldn’t have been more pleased with the outcome.”
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