TABLE OF CONTENTS A billion dollars isn't what it used to be.
Nelson Bunker Hunt
Chuck Brennan, chief executive officer (CEO) of Byzantine International, had completed the transaction after several months of hard negotiating with the firm's board of directors. Along with other senior members of management, he had proposed to take the company private by offering shareholders a substantial premium to the current market price. Although the initial offer was met with significant skepticism from the board, he was able to gain considerable credibility by obtaining financing from Jacob Carter of Carter and Associates, a well-known investor in highly leveraged "middle-market" transactions.
Jacob Carter had been able to finance about 10 similar transactions in related industries during the 1980s and 1990s using relatively little capital. The methodology had been simple. Find target firms with consistent historical earnings growth, solid management, little debt, substantial tangible assets, and mature technologies and production processes in industries with largely stable growth rates. Such firms often displayed predictable cash flows well in excess of their reinvestment requirements. Carter reasoned that the unencumbered assets could be used as collateral for new borrowing, and the excess cash flow could be used to cover the subsequent increase in debt service requirements.
The remaining ingredient for the success of Carter and Associates was to motivate the...
