Successfully obtaining debt helps a company achieve short- and long-term objectives and allows management to concentrate on successful operations and growth. However, avoiding the pitfalls along the way is critical.

Ed Stevens, a Partner at Focus Enterprises, has placed a wide variety of bank debt structures - from LBO and acquisition debt; to straight forward working capital lines of credit; to troubled debt restructurings; to unsecured, multi-currency, syndicated facilities. Through over 20 years of obtaining and managing bank debt relationships, Ed has learned a number of valuable lessons, some the hard way, which he shares in a new article, “Obtaining and Maximizing Bank Debt.”

Ed, a seasoned financial and operations veteran, was the CFO and Board member of four publicly traded companies and has directed over 50 merger and acquisition transactions in the United States, Canada and Europe.

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Obtaining and Maximizing Bank Debt
By Ed Stevens

Successful companies spend a great deal of time and effort developing and nurturing customer and key supplier relationships. Unfortunately, many of these same companies don't take the same approach to developing positive relationships with their bankers/lenders. Building a strong relationship with a lender is a critical element in the success of any company. Lenders, like everyone else, hate surprises.

Companies need to schedule regular updates with their bankers, including obtaining exposure to all key management. Don't hesitate to bang your own drum on good news, but always, always be up-front about bad news and have solutions ready.

COMPANIES WITH EXISTING BANK DEBT
Successful companies also put heavy emphasis on prospective new customers and targeted suppliers, but once again, often don't follow this path when it comes to banking relationships. Over time, bankers change positions and lenders change strategy.

Despite my company’s strong performance, I have been in a situation where another borrower in a somewhat related industry located 1,500 miles away hit the wall, resulting in a knee-jerk reaction from my bank’s credit officers. One lesson learned - always nurture and build at least two other potential banking relationships which fit your business. If you're not certain which other banks fit, ask a trusted advisor for help.

As companies grow and succeed, many times debt structure falls behind their success. The natural tendency is to "bump the facility a bit" each renewal. As companies grow, change and succeed, so should the structure and terms of their debt. This includes not only the level of the facility, but also issues such as interest rate, need for full guarantees, availability, term and so on. Begin by talking to your lender, but if you're not sure of the appropriate structure, reach out and seek advice from financial professionals.

COMPANIES SEEKING NEW OR REPLACEMENT BANK DEBT
The first step in seeking new bank debt is to make sure the company understands its capital needs, both in terms of amount and structure. While that sounds elementary, the process should start with laying out the strategic and tactical plans of the company, which are then reflected in financial projections looking forward for the next three years. This doesn't require "rocket science," just basic planning and modeling.

Next, I highly recommend clear understanding of the appropriate structures, terms and conditions for the type of debt you are seeking. Companies do not launch a new product or service without understanding the marketplace and the economics, and bank debt should be no different.

Once again, when in doubt, ask for help - other business owners, management and advisors are usually willing to share their experience. In many cases, the terms and conditions of debt are far more important to a growing company than shaving that last quarter point off the interest rate - I learned this lesson the hard way.

Do your homework. Find lenders who are a solid match with your business in terms of size, expansion capability, industry focus, business stage, owner objectives and so on. While finding a bank with money to lend is important, it is critical to find a lending partner capable of developing with the business - through both good and not-so-good times. In the past, my strongest banking relationship began when I learned how proud the lender was of having assisted another company through dramatic growth, change, turmoil and success.

Prepare a three to five-page data-rich executive overview about your company to share with prospective lenders. Most bankers won't take the time to fully sift through a 40-page business plan. The executive overview also needs to be tailored to address the requirements of lenders.

Approach this document the same way you would approach a proposal customized to the needs of a prospective customer. This tailoring includes the areas typically found in a business plan executive summary. Also, it should address items such as asset quality (for loan security), other debt (for possible subordination), ability and timeframe to repay and so on.

Understand and anticipate potential issues for lenders and address these issues up front. Remember, bankers hate surprises. These questions go beyond broad business trends to issues such as billing cycles, deferred or unearned revenue, customer concentrations, receivable dilution, future expansion needs and so on. In this regard, the best compliment I ever received was from a lender who wanted to know the name of the banker who helped prepare our company overview – which resulted in four banks vying for our loan.

Seek out a variety of alternatives among multiple lenders. I am not suggesting a broad email blast here, but rather a very professional and controlled process with a limited selection of lenders who, from your homework, you know will have an interest in the business and the opportunity.

Just like any other business situation, a little professional competition, structured the correct way, can dramatically level the playing field. If you don't know the prospective lenders, find someone to make an introduction, which carries an immediate badge of credibility.

Be reasonable. This goes back to the earlier point about understanding the lending landscape and appropriate terms and conditions for your company's situation. Even if you are successful in creating some competition, don't be greedy - remember that one of your objectives is a long-term partnering relationship that is rewarding to all parties.

Lastly, don't burn any bridges in the process. As discussed earlier, bankers change positions and lenders change strategies. In another past experience, a lending officer with a bank who flatly turned us down moved to another bank. Because we didn't take the turn down personally and continued to foster the individual relationship, two years later the new bank joined our lending syndicate and brought a significant increase in capacity for acquisitions.

THE BOTTOM LINE
Companies should approach their banking and lending relationships with a mindset similar to the way they approach customers, key suppliers and new markets. This is a key lesson that I learned from an early mentor. With that approach in mind, reach out for the experience of others to assist and guide you through the process, whether it's other business owners, management or trusted advisors.

By leveraging a varied network of banking relationships, Focus Enterprises is able to assist a wide variety of firms -- including portfolio companies of private equity groups -- in successfully obtaining debt and expanded banking relationships.

Companies utilizing Focus investment banking services can expect to accomplish three important objectives: (1) management remains focused on operational execution; (2) the company gains access to and credibility with a broad range of financial institutions and, through Focus, (3) the company leverages years of operating level experience in placing debt to meet long-term company objectives.

For more information about obtaining and maximizing bank debt, contact Ed Stevens at 202-785-9404, 301-926-4903 or ed.stevens@focusbankers.com.

Four Firms Join Focus in Sharing Their Expertise on Ownership Transition and Capital Preservation Events for Middle Market Companies
NEW BREAKFAST PROGRAM EXCLUSIVELY FOR OWNERS AND CEOs TO DEBUT OCTOBER 8, 2003

Selling all or a portion of your company to derive liquidity should not be considered in a vacuum. Rather, careful preparation is required. Consideration of various alternatives is vital, taking into account the development of a management team, succession planning, transaction tax consequences and management of the process.

Attendance, by invitation only, will supply business owners and CEOs with an opportunity to gain a wealth of valuable financial information quickly and easily. Program presentations include the following:

Various Types of Liquidity Events and Factors That Drive Up the Value of a Business -- Marshall Graham, Chairman, and Doug Rodgers, Managing Partner, Focus Enterprises, Inc., outline the various types of liquidity events and processes including negotiated transactions, the auction, mini-auction and the partial sale. The 12 Value Drivers of a business also will be presented.

Succession Planning, Often Overlooked, Always Important -- Richard J. Chagnon, Senior Vice President, Organizational Consulting, Right Management Consultants, emphasizes the importance of succession planning as a key element in the M&A or ESOP process.

Advantages of a Leveraged ESOP Transaction for Privately Held Companies -- James F. Higgins, Jr., a principal and shareholder of Shared Equity Strategies, explains the ESOP process with special emphasis on the advantages to a privately held company and its shareholders.

Strategies to Manage the Tax Impact of Liquidity Events -- John E. McCullough, Esq., McCullough & Nicholas P.L.C., introduces a variety of strategies: (a) Accumulation of Wealth--Deferred Compensation; (b) Selling Your Company & Preserving Your Wealth--The 754, A Tax-Deferral Strategy for Sales to 3rd Party Buyers; (c) Estate Planning for Retirement; (d) Family Limited Partnerships; (e) Other Estate Planning Vehicles and (f) Family Foundations.

How Much Do You Need? A Unique Approach to Pre-Event Planning and Personal Wealth Management -- Joseph M. Perta, Vice President and Michael A. Bono, Vice President, Bernstein Investment Research and Management, bring together a sophisticated understanding of the capital markets and in-depth knowledge of how various estate planning vehicles work, sharing a framework to help business owners best meet their personal financial objectives, both during and after the transaction planning process.

Participation, strictly limited to company owners and CEOs, is $49 each, payable in advance by check to Focus Enterprises. To register for the date and location of your choice, click here or call 301-657-9363.

Currently Active Deals
Although our firm has over 21 years of experience across many verticals, Focus currently has active transaction engagements in the following business sectors:

• Application Software, CRM and LIMS Applications
• Business Process Outsourcing
• Digital Video Surveillance and Networks
• Fire Protection
• Government IT Contracting
• Government Program Management and Organizational Change Management
• Healthcare
• HVAC Products
• IT Services and Staffing
• Manufacturing
• Medical Devices and Equipment
• Pharmacy / Distribution
• Physical Security Integration and Access Control
• Promotional Products Distribution
• TeleHealth
• Warehouse, Distribution and Logistics

Our transaction process provides us with up-to-the-minute market knowledge in these sectors which may be of interest to you.

Address your inquiries to Focus via e-mail to info@focusbankers.com, by telephone to 202-785-9404 x341, or by fax to 202-785-9413.

Lifeline Systems Acquires the Healthcare Business Unit of March Networks Corporation

Lifeline Systems (NASDAQ:LIFE) has acquired the Healthcare Business Unit of March Networks Corporation. Focus Enterprises represented and advised March Networks during the sale transaction process.

In working with March, Focus Partners have come to know the electronic security sector quite well including systems integrators and manufacturers that provide CCTV video surveillance, access control and intrusion detection systems as well as most of the major providers of personal emergency response systems, nurse call systems, wandering systems and infant protection systems.

Many firms that we called on during our representation of March are active buyers; some companies in this segment want to enter into strategic partnerships and others are interested in selling.

Focus Enterprises Adds Seventh Partner

WASHINGTON DC, September 18, 2003--Focus Enterprises, Inc., the region’s premier investment banking and consulting firm providing merger, acquisition and corporate finance services for middle-market and smaller company clients, today announced the addition of a seventh Partner, Jack Bergstrom, who will be based in Charleston, SC.

“Adding a seasoned professional like Jack to our team reinforces the unique value proposition this firm offers to our clients,” explained Marshall Graham, Chairman of Focus Enterprises. “Jack Bergstrom brings significant C-Level operating experience to client engagements, which is invaluable in this current mergers, acquisition and corporate finance environment. Our team will especially value Jack’s unique expertise in healthcare and biomedical services as well as his presence in the Southeastern U.S.”

Jack Bergstrom has over thirty years of management experience in both large corporations and smaller independent companies focusing on electronics, consumer products and, most notably, healthcare and biomedical services.

Early in his career, he spent 17 years at Corning Inc. in a variety of roles, eventually serving as General Manager for the Midwest and Southern regions of Metpath (now Quest Diagnostics), the largest clinical laboratory company in the world.

In 1990, Mr. Bergstrom became COO of Odyssey Biomedical, a venture-backed startup genetics testing company, acquired by Genzyme a year later. Next, Mr. Bergstrom joined National Health Laboratory/Laboratory Corporation of America, ultimately becoming Senior Vice President of Sales.

When the firm merged with Roche to form LabCorp, Mr. Bergstrom and a few partners raised private equity funding to purchase American Medical Laboratory (AML). Under his leadership, AML became the nation’s third largest lab company, growing to $300M in sales. AML was purchased by Quest Diagnostics in 2002.

Prior to joining Focus, Mr. Bergstrom was a Senior Advisor to the Office of the Chairman of Quest Diagnostics, leading the establishment of Quest’s hospital sales strategy. Mr. Bergstrom also has served on the Board of Directors for Corporate Healthcare Services, Medical Lab of Virginia and Shared Laboratory Services Inc.

Mr. Bergstrom has an M.S. in Economics from the State University of New York at New Paltz and an M.B.A. from the University of Massachusetts. He also was a US Navy Officer.

Corporate Finance: A Primary Focus Financing Activity

As one of our primary financing activities, the firm seeks to match the requirements of our clients to those of domestic and, at times, international capital sources. Our contacts range from large industrial corporations interested in a combination of equity and operating relationships to financial institutions seeking straight investment opportunities to financial investors seeking not only portfolio diversification, but also portfolio complement.

Focus also provides significant expertise in debt funding and refinancing through a broad network of commercial banks, mezzanine / subordinated funds and asset based lenders.

The firm acts as an intermediary between the capital source and the client company. Through our extensive network and contacts, we identify suitable investors for each situation. In addition, we advise on deal terms, assist in negotiations and transaction closing. The firm is frequently involved in advising on terms in private placement of subordinated debentures, notes, convertible preferred stock, common stock and partnership interests as well as debt placements and refinancing for both internal growth and strategic transactions.

Focus Partners are active in each step of the financing process beginning with the review of the corporate business plan. Client presentations are prepared and rehearsed after which the appropriate capital sources are identified and contacted. Focus contacts each potential investor on the client’s behalf and assists in the presentations, the “term sheet” negotiations, and in closing the transaction.

Over the years Focus has assisted many clients with their corporate finance and capital formation requirements.

About Focus Enterprises, Inc.

For 21 years, Focus has successfully assisted clients with corporate development consulting assignments; merger, acquisition, and divestiture engagements plus capital raising and capital formation assignments. In a mixture of services uniquely beneficial to clients, Focus integrates consulting and transactional expertise with superb research capabilities and precise, proven methodologies.

Unlike larger investment banks, Focus processes are optimized and proven effective in our target marketplace -- private companies or operating units with revenues in the $5 million to $100 million range.

Six full-time Focus Partners provide over a century of C-level operating experience in a variety of industries. Operating nationally and internationally, Focus works with buy- and sell-side corporate clients, private equity groups, holding companies and early stage venture capital firms in the following areas:

• Technology (hardware, software and services)
• Media and Communications
• Telecommunications
• Government Contracting
• Aerospace
• Manufacturing and Distribution
• Retail
• Healthcare