Financing Acquisitions Using Debt Capital

www.sccreditadvisors.com
SC Credit Advisors
Recapitalization Advisory For the Middle Market
A Stone Carlie Company
Financing Acquisitions
Using Debt Capital
For Privately Held Middle Market Companies

Table of Contents
Financing Acquisitions Using Debt Capital
For Privately Held Middle Market Companies
• Lenders Provide Ample Low Cost Debt for Acquirers 3
• Case Study: Financing an Acquisition
– Selling Company Profile 4
– Two Alternative Capital Structures (Capital Breakdown;
Capital Description; Debt Service; Net Income; Credit Ratios) 5
• Basic Considerations in Evaluating Debt Capital 10
• Capital Solutions for Different Types of Acquisitions 11
• About SC Credit Advisors 13
• Contact Information 15
For questions or to discuss these financing alternatives, please contact SC
Credit Advisors at info@sccreditadvisors.com or 314-889-1197.
2www.sccreditadvisors.com

www.sccreditadvisors.com 3
5.07x
4.56x
3.41x
4.07x
4.28x 4.28x
5.44x
0x
1x
2x
3x
4x
5x
6x
Debt Multiples of Acquisition Related
Middle Market Loans1
First Lien Debt/EBITDA Second Lien Debt/EBITDA
Other Sr Debt/EBITDA Sub Debt/EBITDA
Increased leverage (left graph) and reduced borrowing costs (right graph) are
creating opportunities for companies to grow through leveraged acquisitions.
Lenders Provide Ample Low Cost Debt for Acquirers
Source for both charts: S&P LCD
1)Lenders include: Banks, Finance Companies, Business Development
Companies, Insurance Companies, other Institutional Lenders.
EBITDA: Earnings before interest, taxes, depreciation and amortization.
L+
L+200
L+400
L+600
L+800
L+1000
All In Interest Rate Spread for
Institutional Loans Backing
Middle Market LBO’s2
LIBOR spread Upfront Fee LIBOR Floor Benefit
2)Rates on LBO (Leveraged Buyout) loans are proxies for rates on loans for
leveraged acquisitions.

Selling Company
Acquired for $100.0mm
7.1x EBITDA
Price Allocated as Below:
Other Assets /
Goodwill
$35MM
Fixed Assets
$40MM
Accounts
Receivable &
Inventory
$25MM
Case Study: Financing an Acquisition
- Selling Company Profile
Selling Company Profile*
- Selling Company is purchased for $100.0 million
through an asset purchase (allocation of purchase
price at left)
- The Seller’s annual EBITDA (Earnings Before Interest
Taxes, Depreciation and Amortization) equals $14.0
million
- Annual Depreciation / Amortization equals $4.0
million, Capital Expenditures equal $2.0 million
- The acquisition multiple equals 7.1x ($100.0 million
acquisition price / $14.0 million EBITDA)
- Note: Sale multiples for any given transaction will vary
With this starting point, we consider two (of many)
alternative acquisition financing structures
(next page)
*Note: Assumes Selling Company’s assets, income and cash flows fully support the acquisition debt.

ABL Revolver
$17MM @3%
-Two Alternative Capital Structures (Capital Breakdown)*
Year 1
Interest
$510,000
$940,000
$2,340,000
$3,790,000
Year 1
Interest
$510,000
$1,780,000
$1,980,000
$4,270,000
ABL Revolver
$17MM @3%
Equity
$40MM
Equity
$25MM
Sr. Term Loans
$25MM
@4%
(blended rate)
Sr. Term Loans
$40MM
@4.75%
(blended rate)
Accounts
Receivable &
Inventory
$25MM
Other
Assets /
Goodwill
$35MM
Fixed Assets
$40MM
2nd Lien Loan
$18MM @11%
Selling Company
Acquired for $100mm
7.1x EBITDA
Price Allocated as Below:
Alternative 1
(Average Leverage)
$60.0mm Total Debt
4.3x Debt to EBITDA
Alternative 2
(Higher Leverage)
$75.0mm Total Debt
5.4x Debt to EBITDA
*Note: Assumes Selling Company assets, income and cash flows service the acquisition debt without acquirer support.
For any given transaction, rates and terms may be more or less favorable than example above.
Mezzanine interest includes Paid in Kind (PIK) interest (i.e., interest accrued and added to principal outstanding)
Mezzanine Loan
$18MM @13%

Capital Item Brief Description
ABL Revolver • Revolving Line of Credit with a commercial bank, availability
based on Accounts Receivable and Inventory (Asset Based Loan –
ABL)
Senior Term Loans • Senior Term Loans of varying amortization. In acquisitions, these
types of loans may be provided by a commercial bank, business
development company, finance company, insurance company or
investment fund, depending on circumstances
Mezzanine Loans • Primarily a cash flow based loan provided by a mezzanine fund
2nd Lien Loan • Second lien loan (behind ABL and Senior Term Loans) provided by
business development company or investment fund
Equity • If acquirer is an investment fund (Private Equity or other financial
sponsor), this is an investment from it’s fund
• If acquirer is an operating company (strategic acquirer), this is an
investment from the acquiring entity from available cash or a
(re)financing at the acquirer level
• Capital structure will also depend on extent of operational
integration into acquirer’s existing business(es)
-Two Alternative Capital Structures (Capital Description)

-Two Alternative Capital Structures (Debt Service)
($ Millions)
Alternative 1 Alternative 2
(Average Leverage) (Higher Leverage)
ABL Revolver Year 1 Interest $0.51 $0.51
Senior Cash Flow Term Loans
Year 1 Amortization 3.00 5.00
Senior Cash Flow Term Loans
Year 1 Interest 0.94 1.78
2
nd
Lien Loan Year 1 Amortization n/a n/a
2nd
Lien Loan Year 1 Interest n/a 1.98
Mezzanine Loan Year 1 Amortization n/a n/a
Mezzanine Loan Year 1 Interest 2.34 n/a
Total Year 1 Debt Service $6.79 $9.27
Debt

EBITDA $14.00 $14.00
Depreciation & Amortization (4.00) (4.00)
EBIT (Operating Income) $10.00 $10.00
Interest Expense (3.79) (4.27)
Pre-tax Income $6.21 $5.73
Tax @35% (2.17) (2.01)
Net Income $4.03 $3.72
-Two Alternative Capital Structures (Net Income)
($ Millions)

-Two Alternative Capital Structures (Credit Ratios)
($ Millions)
Total Debt Service (last line p. 7) $6.79 $9.27
Cash Taxes 2.17 2.01
Capital Expenditures 2.00 2.00
Total Fixed Charges $10.97 $13.28
Total Senior Debt $42.00 $57.00
Total Debt $60.00 $75.00
EBITDA $14.00 $14.00
Basic Credit Ratios
Fixed Charge Coverage Ratio
(EBITDA/Total Fixed Charges) 1.28x 1.05x
Total Senior Debt to EBITDA 3.00x 4.07x
Total Debt to EBITDA 4.29x 5.36x

Basic Considerations in Evaluating Debt Capital
Consideration Items to Address
Cost • Minimize interest cost
• Hedge interest rate risk
• Minimize lender fees
• Reasonable prepayment
penalties (if any)
• Reasonable ongoing fees
• Performance/leverage-based
grid pricing
Structure (terms) • Covenants
• Collateral
• Debt service obligations
(principal and interest) are
comfortably within projections
• Ability to refinance unimpeded
• Intercreditor agreements
• Nature of external (acquirer)
credit support (if any)
Availability • Ample liquidity to fund current
operations and future growth
• Enough projected liquidity to
manage any variability in
future performance

Capital Solutions for Different Types of Acquisitions
Situation Considerations Debt Capital Solutions
Conventional Acquisition
(profitable, healthy seller)
• Lowest cost of capital
• Flexibility of terms
• Minimizing risk exposure
• Senior debt: asset based /
cash flow
• 2nd lien
• Mezzanine
• Unitranche
• Hybrid (debt/equity)
Distressed Acquisition
(breakeven to negative
EBITDA, stressed existing
customers, vendors, product
issues, etc.)
• Avoid legacy liabilities
• Minimize buyer’s external
credit support
• Tie capital structure to
operational turnaround
• Senior debt: asset based
• Bridge financing
• May need to over-equitize at
purchase and refinance with
higher leverage later
Seller is Outside of Buyer’s
Industry
• Avoid new business straining
core business
• Avoid significant external
credit support from Buyer
cash flow
• 2nd lien
• Mezzanine debt
• Unitranche

Situation Considerations Debt Capital Solutions
Buyer Planning to Make
Multiple Acquisitions
• Ability to act quickly for new
opportunities
• Minimize transactions costs
• Consider Acquisition Facility
cash flow
• Senior debt: delayed draw
term loan and/or revolver
• 2nd lien
• Mezzanine debt
Most of the Value in an
Acquisition is Cost Savings or
Synergies
• Ability to service existing and
additional debt in upside and
downside operating scenarios
• Senior debt: asset based or
cash flow
• Mezzanine debt
• May need to over-equitize, at
purchase and recapitalize
with higher leverage later
Capital Solutions for Different Types of Acquisitions

About SC Credit Advisors: Overview
• SC Credit Advisors, LLC (SCCA) assists private middle market companies with
structuring and raising capital through securities registered individuals*. We also
provide credit-related advisory services to companies, lenders, financial sponsors
and high-net-worth investors.
• Our goal is to develop and implement creative and practical financing solutions for
our clients, allowing them to focus on running their businesses.
13
Typical Client Profile for Capital Raising
Ownership Private
Revenue $10 million to $300 million
Capital Needs $5 million to $50 million; growth or distressed situations
Existing Capital
Structure
Moderately to highly leveraged
Industries All industries, except development stage companies
*Securities transactions conducted through registered representatives of StillPoint Capital, LLC Member FINRA/SIPC who are also
employees of SC Credit Advisors, LLC. StillPoint Capital: 13051 Linebaugh Ave., Suite 101, Tampa, Florida 33636. ph: 813-891-9100

About SC Credit Advisors: Services
14
Corporate and Financial Sponsor
• Assisting middle market companies and their shareholders in raising debt and equity
capital (structuring, sourcing, negotiating, funding)
• Managing stressed lender and investor relationships, including facilitating the
negotiation of loan modifications with existing lender(s), forbearance agreements,
waivers, loan amendments and debt to equity swaps
• Providing operational assistance and/or leadership in turnaround situations, as needed
Lender
• Providing borrowers with capital alternatives which complement and support a lender’s
position
• Assisting the lender in exiting loans to troubled or distressed borrowers through a
refinancing or full recapitalization
• Providing operational assistance or functioning as the turnaround manager in distressed
situations to help borrowers improve operating practices and reduce lender risk
High Net Worth Investor
• Sourcing, structuring and/or evaluating complex debt and equity private
placements
• Evaluating existing investments for proper structure, risk, return and control
parameters
Securities transactions conducted through registered representatives of StillPoint Capital, LLC Member FINRA/SIPC who are also

Contact Information
Headquarters
101 South Hanley Road
Suite 800
St. Louis MO 63105
GREG PORTO
Office: 314.889.1197
Mobile: 312.339.2857
Email: gporto@sccreditadvisors.com
GREG TOBBEN
Office: 314.889.1196
Mobile: 314.458.8186
Email: gtobben@sccreditadvisors.com
A Stone Carlie Company
Securities transactions conducted through registered representatives of StillPoint Capital, LLC Member FINRA/SIPC who are also

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