Evan Vitale

Accounting Professional

Evan Vitale – Finding A Business Angel

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By Evan Vitale

Can a business angel help your start-up or expanding business with the financing you need?

Probably.

However, this are many things to learn about a business angel; how they work and, most importantly, how do you find a business angel?

Simply put, a business angel is an individual who offers the financial backing you need to fund your startup or take your business to the next level. Angels are everywhere. They are professionals, retirees, doctors, lawyers, business owners. They are successful and they are interested in finding business investment opportunities.

The most difficult part about connecting with a business angel is finding them. It’s not like they are listed in the phonebook or have a website saying “I’m a business angel, please send me your proposals.”

Instead, you have to find them. How?

  • Start by talking to family; friends and close business associates.
  • Attend networking events and meet new people. Don’t rush in with your financial needs. You need to develop a relationship and build trust. This takes time.
  • Increase your marketing and social media efforts. Make you and your business more visible. Angels will be watching your progress.
  • Earn more local public relations. Write press releases; submit story ideas to local newspapers, television and radio stations. Again, all of this will not going get the attention of a potential angel, but it might also help you earn new clients and increase your revenues.

A friend of mine would eat lunch two-three times a year with a potential angel. The angel would invite him to lunch so he could be kept up-to-date on how his business was progressing. However, my friend had no idea his lunch pal was an angel that could someday be potentially interested in investing in his startup company.

The biggest key in finding an angel is to build strong, lasting relationships. Your connections might introduce you to an angel someday or, perhaps, an unknown angel will knock on your door when you least expect it.

Evan Vitale – Capital Snapshot

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By Evan Vitale

In our six-part series on different types of capital, we offered some basic information as to the different types of capital and investors available for your business.

Here’s a quick review:

  • Debt Capital – This is capital that a business raises by taking out a loan. The loan is normally repaid at a future date, normally with interest.
  • Equity Capital – Typically you do not need to pay anything back to the investor. Instead, you are selling complete or partial ownership interest in your business in exchange for the capital.
  • Private Equity – Similar to a bank loan, private equity funds come from private individuals – or a group of individuals – who make investments or loans.
  • Venture Capital – These funds are usually for startups or growing businesses and come from venture capital firms specializing in building high-risk portfolios.
  • Angel Investors – An “angel” investor is someone who is typically a family member or a friend who is really investing in the individual. They want your business to be successful, but they are not looking to gain huge profits from their investment.
  • Investors – Investors are those who seek to grow their investment and earn an ownership stake in your company with their investment.

Evan Vitale – Blackstone Group to Buy Majority Stake in Service King

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Blackstone Group has agreed to buy a majority stake in Service King Collision Repair Centers from the Carlyle Group with a view to fund the company’s future growth, according to sources familiar with the matter. The Wall Street Journal reported Tuesday the deal values Service King at about $650 million, citing a person familiar with the matter.

Carlyle will recognize a return of nearly four times its initial investment from the sale and will retain a significant minority stake in Service King, whose management will increase its own minority stake as part of the deal, sources said.

Washington, D.C.-based Carlyle acquired a majority stake in Service King in August 2012, with plans to expand the company nationally. At the time, the Richardson, Texas-based company operated 49 collision repair shops in or near Texas’s major cities. The company, which traces its roots to 1976 when its founder Eddie Lennox took out a $10,000 loan and repaired vehicles from his own garage, now operates 177 centers across 20 states.

Blackstone’s investment in the company comes as another private-equity-backed collision repair chain is on the auction block. Palladium Equity Partners LLC has hired an investment bank to sell ABRA Auto Body & Glass, which could fetch $500 million or more, sources familiar with the matter said last month.

The move underscores Blackstone’s pursuit of smaller, high-growth deals as steep market valuations make traditional buyout deals more expensive. As of the end of the second quarter, the firm had $17.7 billion available to spend on private-equity investments.

Evan Vitale – Private Equity Investment Model

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It was not until after World War II that what is considered today to be true private equity investments began to emerge marked by the founding of the first two venture capital firms in 1946: American Research and Development Corporation (ARDC) and J.H. Whitney & Company.

Private equity companies manage funds, which typically invest in unlisted companies. There are several stages in the private equity investment process starting from collecting capital for the fund and ending with returning committed capital and realized returns to fund investors.

Establishing a fund

Private equity fund managers raise capital from institutional investors to establish private equity funds. Typically, investors include both private and state pension funds, funds of funds, life insurance companies, foundations and other institutions. Often the fund manager also commits capital to the newly established fund. Private equity funds are typically organized as limited partnerships with a life cycle of approximately ten years. Capital is called from investors when the investments are made into portfolio companies. The fund manager acts as an advisor to the fund and is responsible for the decision making process, such as making investment and exit proposals and developing the investment targets during the ownership period.

Mapping potential investments

The private equity fund manager maps potential investment targets for the fund. Typically, the targets need to fulfill certain criteria in terms of size, industry and life cycle phase in accordance with the fund’s strategy. Additionally, the fund manager evaluates the attractiveness of each target based on its value creation and exit potential. Investment targets are usually sourced either through proprietary networks or by participating in auction processes. Efficient deal sourcing therefore calls for strong business networks across the fund’s target geography.

Making an investment

After a fund manager identifies an investment target, a more detailed analysis of the business is performed. This due diligence analysis usually involves going through the company’s financial and legal documents, as well as evaluating its commercial attractiveness. Negotiations with banks to arrange financing are also initiated at this stage. Provided that bank financing is available and due diligence findings support the investment, final negotiations regarding the transaction are initiated.

Developing the target company

Once the investment is made, the private equity fund manager starts developing the company based on a detailed value creation plan. In addition to financial capital, the manager supports the target company by providing sector knowledge, operational experience and access to a wider business/industry network. This usually involves taking a seat on the target company’s board.

Exit

Private equity investors are temporary owners. Therefore, a portfolio company is usually held between 4 to 6 years, during which the value creation plan is being implemented in cooperation with the management team. There are several alternatives available for the private equity fund to exit the investment. Most commonly exits take place through:

  • Trade sale to an industrial buyer
  • Secondary sale to another private equity fund
  • Listing through initial public offering (IPO)
  • Sale to the management group

Once the exit is finalized, the initial capital and proceeds from the investment are returned to the fund investors.

Evan Vitale – Orlando Development and Investments

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Evan Vitale OrlandoCentral Florida and Orlando finished last year off with some promising investment sales, brand new developments, and leases.  That’s good news for the local economy, and hopefully a harbinger of more good housing/investment news to come.  There appears to be an interest in investing in the area, attracting investors who have cash and are looking for the next big moneymaker.  Investments of these sorts do more than offer a way for struggling properties to have a second chance at success.  We are seeing a boost in property values, construction jobs as a result of new developments and refurbishing, and more taxes taken in by local governments.   Biz Journal posted a list of some of the more notable closings, and I wanted to share some of that list here.

The first new condo complex in nearly ten years is going up in New Smyrna Beach.  The property is being financed by Eckell Development, who plan to break ground in just a couple months.  The plan is for a $16m condo development with nineteen units right on South Atlantic Avenue.  Units will be in the million dollar range.

Canadian companies like Highyon Shopping Center Investment Funds are getting in on the action.  This company bought the many commercial properties of Parkwood Plaza in Orlando, including a 150-thousand sq ft retail center.  Along with the purchase is included thirteen acres of land yet to be developed.  The purchase was just a little over ten million dollars.

In southeast Orlando, in Lee Vista, a 35-thousand sq ft space was leased by American Woodmark Corp.  American Builders & Contractors Supply leased a similarly sized space in Maitland, and Rite Rug leased a 25-thousand sq ft lease in southwest Orlando.  What exactly will happen with all of these properties remains to be seen, but it seems more and more like this is an exciting time to be living in Orlando.

Pine Ridge Dairy sold a 750-thousand acre plot in Fruitland Park in Lake County to the villages of Lake-Sumter, who plan on building over two-thousand residential units, a completely new neighborhood.  Adventist Health System is expanding, leasing another nearly 20-thousand sq ft of space in downtown Orlando.

One of the bigger sales of the last quarter of last year was by Cushman & Wakefield of Florida, who sold a 300-unit apartment complex in West Orlando to the Atlanta-based Carrol Organization.  The deal was over $35 million.

Here’s to some promising years in the near future!