Insights

Divesting to Access Capital

January 4, 2018 //

Raising money in difficult markets is a current problem. We’ve read in the press about how banks are tightening credit facilities, and there is a cautiousness in the capital markets. A number of companies are now facing the challenge of how to grow their businesses or raise money in the face of this uncertain market.

An alternative approach to raising capital

One area of the market that has continued to be fairly strong is the appetite for good-quality companies. This opens the door to a different strategy for raising money that many progressive companies are starting to adopt:

  • Perform a core/non-core analysis of their operations—what assets are core to the focus of the business and what assets are non-core?
  • Divest those non-core assets to a strong financial buyer.

At Stillwater we’ve developed a database of 5,000 active buyers with extremely deep pockets who are looking to acquire good-quality companies.

This strategy has two additional advantages:

  1. It allows a company to generate immediate capital without diluting shareholders’ equity.
  2. It also provides a way of strengthening the balance sheet without having to raise money from banks or other financial service companies.

 How long does it take?

The timeline that we at Stillwater have been experiencing from the start of this process to the finish tracks fairly well with, and in many cases is faster than, what most companies are experiencing in arranging financing. We’re seeing on average five to seven months from start to finish.

The process of divesting non-core assets has the added benefit of allowing the management team to focus on core operations. Management teams frequently find it difficult to hit their targets when they disperse themselves across broad sectors of their operation that are not in focus with their strategic plan.

Stillwater has worked with a number of companies to help them segregate the core/non-core and then to handle the divestiture of the non-core operations as a means of raising capital.