Vol. 7, No. 9, October 2009

HOW TO INCREASE LIQUIDITY BY OPTIMIZING CASH FLOW: In today’s troubling credit crunch, companies are discovering the strategic advantage of monetizing their accounts receivable.

In the article below, “Helping Businesses Increase Liquidity by Optimizing Cash Flow Management,” Justin A. Brownhill, Co-Founder and CEO of The Receivables Exchange, describes how the Exchange connects buyers and sellers in a real-time auction marketplace to buy and sell receivables.

Before co-founding The Receivables Exchange, Mr. Brownhill was a Managing Director at Citigroup's Corporate and Investment Bank, as well as an executive of Lava Trading, Credit Suisse First Boston, Union Bank of Switzerland, and Salomon Brothers. The Receivables Exchange provides working capital management by connecting a global network of accredited institutional investors to middle-market companies in search of capital.

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Active FOCUS Deals

Operating nationally and internationally, FOCUS is currently working with buy- and sell-side corporate clients, private equity groups, holding companies and late stage venture capital firms in the following areas:

Advertising & Marketing
Building Materials
Business Consulting Services
Business Process Outsourcing
Call Center Services
Distribution
Education and Human Capital
Electronics
Energy
Engineering
Financial Services
Government, Aerospace & Defense
Healthcare & Life Sciences
Information Technology
Manufacturing
Media
Parking Services
Retail Franchising
Semiconductor Equipment
Telemarketing
Warehouse Distribution

We have executed dozens of transactions in a range of market segments, but the same fundamentals apply across all of them. Our on-going transaction process provides us with up-to-the-minute market knowledge in these sectors that may be of corporate development interest to you.

Inquiries should be addressed via e-mail to info@focusbankers.com, by telephone to 202-470-1973 or by fax to 202-785-9413.

Cognizant Has Acquired Pepperweed Advisors

Acquisition Marks Seventh IT Deal for FOCUS in 2009, Indicates Rise in Middle Market Technology M&A

FOCUS LLC, initiated this transaction, assisted in the negotiations, and acted as financial advisor to Pepperweed Advisors, the information technology (IT) consulting service division of Pittsburgh-based Pepperweed Consulting, the largest Hewlett-Packard software partner in North America.

Closed in eight weeks, this deal combines the assets of Pepperweed Advisors’ highly specialized intellectual property and IT process models with Cognizant’s broader technology and IT infrastructure process consulting offerings. “By bringing multiple offers from well qualified strategic buyers, FOCUS created some interesting alternatives for us,” said Patrick Stewart, CEO of Pepperweed Consulting. “Due to their clear understanding of the IT services industry, we were able to close this transaction very quickly.” For more information, go to: Read more...

Helping Businesses Increase Liquidity by Optimizing Cash Flow Management

By Justin A. Brownhill, Co-Founder and CEO, The Receivables Exchange, LLC

For most businesses, 60 % of their assets are tied up in working capital, often limiting their growth and ability to maintain sufficient levels of liquidity. And in today’s economy, the credit market remains stagnant, leaving these businesses without the ability to access affordable capital. As a result, many are taking action to ensure that they will no longer be constrained by cash flow concerns.

This is where The Receivables Exchange. steps in. The company that has been called the “eBay of Working Capital” by The Wall Street Journal is specifically designed to help businesses optimize their cash flow management to increase their liquidity.

The Receivables Exchange connects buyers and sellers in a real-time auction marketplace to trade receivables. Middle-market companies (Sellers) are able to quickly and easily monetize their accounts receivable by posting their outstanding invoices to be bid on in real-time by a global network of accredited institutional investors (Buyers). By selling their receivables in an open and competitive marketplace, Sellers are able to reduce their cash conversion cycles, gain access to competitively priced capital and reinvest that cash into growing their business.

Putting Sellers in Control of Their Working Capital

The following example highlights one of the many ways that the Exchange puts Sellers in control of their working capital. The Seller’s former financing relationship placed caps on the amount of exposure that the lender was willing to accept for each of the Seller’s customers. In one case, a $2 million A/R cap on a large customer was proving particularly problematic.

The Seller’s customer is a $1 billion revenue company and had recently awarded the Seller two additional contracts which would bring the customer’s A/R balance to roughly $4 million. The former lender was unwilling to go to $4 million, but was willing to go to $3 million for an additional fee.

The Seller discovered several unique benefits about the Exchange:

Because there is a deep pool of investors available, customer caps, or limits, are non-existent.
Instead of paying a flat rate for all borrowings, the Seller is selling the invoices for competitive rates. By posting the receivables of their better customers, they are able to further reduce their cost of capital.
All costs are completely transparent: there are no hidden fees, amendment fees, contract termination fees, etc.
The lack of customer A/R caps has opened up additional revenue opportunities for the Seller.

Companies of all sizes – from $2 million to over $500 million – are using receivables to accelerate their cash flow. Members span a diverse range of dozens of industries, including manufacturing, technology, transportation, distribution, and staffing – all realizing the strategic advantage of monetizing their accounts receivable, particularly in today’s troubling credit crunch.

As more and more companies join, the Exchange plans to become the capital marketplace for growing companies. Many investment firms will find the Exchange especially compelling for their portfolio companies as an opportunity to protect existing equity share, and to ensure continued growth.

The Receivables Exchange allows businesses to sell their receivables to a global network of institutional investors and access working capital in as little as three days. The Receivables Exchange is a welcome financial tool for middle-market companies. Find out more about The Receivables Exchange.

Steven Murphy Joins FOCUS’ Washington, DC office as a Senior Advisor

Steven Murphy has joined FOCUS as a Senior Advisor in the Washington, DC office. “In his 25 years in the business, Steven has led eight major acquisitions, two management buy-outs, and a public to private sale. This is the kind of experience that helps our bankers and our clients,” said Doug Rodgers, Chief Executive Officer of FOCUS.

About Steven Murphy

Prior to joining FOCUS, Mr. Murphy was interim CEO and Director of Plasmon Inc. where he led the growth and positive cash flow turnaround of the data storage and content management business and subsequent public to private sale of four operating divisions. He also led the IBM Data Mobility services group, was CEO and President of Softek Storage Solutions Inc., and was CEO of Fujitsu Software and of its predecessor Amdahl Software. He has been a national award winner of the Ernst and Young’s Entrepreneur of the Year. Read more...

FOCUS Industry Practice Groups

► Education & Human Capital -- www.focusbankers.com/education

► Energy -- www.focusbankers.com/energy

► Food, Beverage & Restaurant

► General Middle Market Businesses

► Government, Aerospace & Defense - www.focusbankers.com/gad

► Healthcare & Life Sciences

► Information Technology -- www.focusbankers.com/technology