Situation

A private equity firm owned two portfolio companies in related but different middle-sized businesses that supported the homebuilding industry. The PE sponsor formed an exit strategy which involved combining the two separate businesses into a single entity and selling the equity in a 144(a) private offering.  The timeline was established at approximately 90 days.  The major issues:  both companies’ financials had been audited only to a standard below that required for a 144(a) offering, the financial systems and general ledgers were completely separate on different platforms, and one of the companies had a February year end that the investment banker said needed to be moved and audited as of December in each fiscal year. Each company had also completed acquisitions in the previous two years, adding business combination complexity to the scenario.  These factors would make integration and readiness for exit almost impossible within the deadline.

Solution

The PE company principals immediately mobilized a team of three dedicated internal resources as well as a large contingent of auditors, tax experts and valuation specialists to rebuild, combine and reaudit two years’ worth of financial statements at a 144(a) standard in less than 90 days. In parallel, a PE portfolio company CFO, now a NextLevel team member, led the creation of the holding company offering document which was prepared in the format of an S1 and prospectus. He authored the MD&A, Risk, and other business-related sections while the attorneys completed the rest of the document. The document was then updated for use as the S1 filing in support of a direct public listing of the holding company stock.

Results

After a successful road show, the PE firm was able to close the equity sale about one week past the original timeline, selling $260 million in equity to a group of 170 credentialled investors. The price was a significant multiple of the original invested capital.

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