Partnership for success
The level of partnership needed in transactions like the ones Arena Investors initiates might surprise many, but it is what can make the outcome a tremendous success for all involved. The story of one of Arena’s recent investments, partnering with a testing, inspection, and certification company, is a great representation of this.
The company, headquartered in the southwestern US, performs specialized technical inspection and certification services primarily for semiconductor equipment for biopharma. The company was founded nearly 40 years ago and has more than 200 employees globally.
One of our managing directors had worked with the company previously and had spent several years working with its executives, so when they needed additional funding, the company reached out to their relationship here at Arena. Though the company had spoken with other potential investors, given the historical relationship, they chose Arena.
Arena refinanced the company’s pre-existing debt and bought out its existing financial investors’ equity.
Arena saw what was possible with this organization, partnering with a strong management team that was eager to drive organic and inorganic growth. Arena recognized that the core business had a very stable revenue and cash-flow stream that it could underwrite and saw low-hanging fruit that would drive top-line growth and margin expansion.
Arena, along with the company’s management and board of directors, built a comprehensive plan to increase revenue by adding new end markets, building a sales and marketing team, expanding the board of directors and strategically acquiring businesses with complimentary offerings to expand the company’s capabilities. In addition, Arena provided the company the tools it needed to professionalize the organization by overhauling systems and deepening the already strong management bench.
In approximately two years since the original transaction, the company has doubled revenue and EBITDA, reduced customer concentrations, executed a successful M&A strategy, built a multi-faceted sales and marketing team, and has begun upgrading its suite of systems (CRM, accounting, etc.).
This deal was born partly from that pre-existing positive relationship that our Arena team had with the company’s management team. Many Arena deals don’t start out with that particular advantage—but our deals often work on many levels, for both Arena and the borrower, for the same underlying reason: alignment. A borrower’s team wants to build and expand, and they can look to us for our knowledge and resources to do it. In this case specifically, by bringing a private equity orientation to a credit transaction, we helped with many areas of their business, and for many borrowers like this one, this concept can create immense value for both parties.