When capital was really plentiful, Purchasing Power CFO Ron Oertell says his company's focus was on making sure it had many options.
"We established separate SPVs, we established staggered expiration dates — one fixed, one variable — really to give ourselves options in the capital markets so that coming in today's environment, we have the ability to flex and to talk to multiple parties and knowing that we can adjust to the situation," Oertell said at the Atlanta Smart Business Dealmakers Conference. "We're going to ride out our fixed rate because we locked in at 2 percent, so we ride that for a long time. But really we're looking to different options going forward."
Previously, he says the company looked at the 144A market to lock-in a really strong rate. That gives them a little flexibility going forward for that vehicle. What he says they're looking towards is changing priorities to look at things they can do to pivot in the future if the company sees new opportunities.
"We never want financing to drive our business decisions," he says. "And so, we're looking more towards bilateral agreement or some type of private debt transaction and moving away for the moment from the 144A market."
Oertell says counterparty risk is always on the list of things to think and worry about. But a couple of years ago, super-regional bank failures were really not part of the equation, though it is now.
"It's very much one of the top-of-the-list items," he says. "And we've actually thought about doing something that we lock in all the capital immediately, so we take any counterparty risk off the table. It's also, we've looked to go up with regard to smart banking partners, international banks, and otherwise to try to minimize that. So, it's certainly a focus, and we'll turn down term sheets from groups that, let's say they have a large exposure to commercial real estate or otherwise. These are things we think about that really aren't directly related to our business."
For companies that might be looking to private equity for a capital injection that moves their business forward, he says finding the right partner and looking outside just the dollars is really critical, in part because of the time horizon. It's also important to ensure there's alignment and understanding that every company is going to have speed bumps and different innovation cycles.
"If you're on the early days of the private equity investment, they'll often say invest, invest, invest in your company," Oertell says. "(In the) later years of the horizon, there's less willingness to add on acquisitions because they want to make sure they get the immediate return. There's a lot of squeeze on the CapEx dollars and investing in your company. So, making sure that you as the operator have the same time horizon as your private equity group is just extremely critical."
It's also important to understand what can really shut down the business and that the company has flexibility going into various deals.
"Understand how are you going to have to adjust and pivot? It's not just can I get the lowest cost of capital, but there's so much more to the picture," he says. "So, get out there and network, get out there and create a buzz, but then understand that there's a holistic picture you got to think about."
