In an article published in the Community Bankers Association of Georgia’s Communities First e-newsletter on October 3, 2018, John Thomson discusses private equity investments in middle-market companies and outlines ways to protect customer interests when owned by a hedge fund, private equity firms or family office. Community banks take pride in the relationships they build with local businessmen, and when businesses are acquired by private equity firms, those relationships tend to vanish.
“If a customer that is owned by private equity becomes distressed, and the credit facility is downgraded, banks must move quickly to protect their interests. The obvious goal is to maximize the return from the business and the collateral without engaging in costly litigation. Unfortunately, there is often no clear and defined roadmap to assure success,” says John.
Start off by taking a hard look at the company’s financial situation and make the delicate negotiations to ensure stability and treat the marketing of a company as an ongoing factor to consider. After liquidating the company’s collateral assets,
Though private equity firms and family offices purchase middle-market companies with the intent to grow the business and increase revenue, running into financial difficulty is inevitable for some, and if parties can act quickly when a company falls into distress, potential outcomes will dramatically improve.