Monticello Capital

Investment Banking
Private Investment
Corporate Advisory Services

Corporate Advisory Services

Our Corporate Advisory Services case studies:
Strategic Advisory Services Marketing Strategies & Positioning
Business Acceleration Services Corporate Transformation Services
Change Management Research & Due Diligence Intermediator
Research & Due Diligence Deal Manager Corporate Board Composition & Quality
Corporate Board Performance Organizational Development & Design
Cost Control

Strategic Advisory Services

The Big Stall

A manufacturer of highly-specialized technical equipment for the environmental industry approached Monticello Capital for advice and direction during its growth and recapitalization stage.

The company’s existing working capital was almost exhausted, having been largely spent on internal investment, research and development, and building equipment prototypes.

The client’s market turned out to be particularly tough to figure out: It was diffuse, it crossed industrial sectors, its geography was widespread, and there were multiple technologies involved.

After engaging Monticello Capital as strategic advisors, the company embarked on a major capital restructuring.

Simultaneously, the company began a new market-entry revenue enhancement strategy.  The result was an increase in state and local government sales, lease-out arrangements, and licensure of proprietary technology.

The company was successful in follow-on rounds of equity and debt financing managed by Monticello Capital, won an international award, and was later acquired.  That sale netted the founders and investors an internal rate of return in excess of 37 percent.

Marketing Strategies & Positioning

Alone on a Plateau

A charismatic, driven entrepreneur had grown his company to a position of prominence in the medical devices industry.  The client’s market included several tertiary and quaternary medical specialties.

Still in charge of his firm and its majority shareholder, the CEO had invented and patented new products, built a new manufacturing facility, created a vertically-integrated distribution methodology, and enjoyed a reputation for delivering premium products among opinion-leading medical doctors.

The debt and equity capital base was solid; free cash flow was more than adequate.  Ongoing research and development had reached the 510(k) approval stage for several breakthrough products.

Yet the company’s sales had plateaued.  Multiple unsuccessful strategies had already been tried.  Each seemed to be worse than the last, and sales teams were frustrated.

Monticello Capital entered as a capital and strategic advisor, creating a vastly revamped marketing plan and a capital restructuring that provided much greater cash flow for operations and internal investment.

Several unproductive salespersons departed the company, and new economic incentives resulted in enormous gains.

Brand equity-enhancement advertising was abandoned for a very precisely targeted series of campaigns, concurrent with new product launches, all guided by this investment bank’s market research.

The company’s sales almost doubled in the first year, while net-net-net margins did double -- all while the medical technology manufacturing sector in general was experiencing a temporary decline in growth during a recession.

Business Acceleration Services

R&D’d to Death . . . or Near-Death

The information technology company was enjoying modest success and acceptable growth, principally from a huge expansion in federal IT contracting during its development stages.

But most of its capital had been invested internally in research and development of a new interactive technology -- not quite “bet the company,” but close.  If successful, the R&D effort would certainly result in an industry breakthrough on an unprecedented scale.

After Monticello Capital was retained, it quickly became clear to our analysts, advisors, and reluctantly to the corporate leadership, that any breakthrough was years away, unfundable by outside investors, and far from certain.

The key to the company’s business acceleration was a focused market exploitation of several incredible advances already available out of the R&D efforts.

With a carefully developed marketing plan, new sales hires, licensing deals, and severe cost-constraining methods, four new lines of revenue were opened, each becoming unit-profitable within three fiscal quarters.

None of the new lines of revenue were government-based, and they all produced profit margins far exceeding the company’s baseline federal IT contracting business.

Corporate Transformation Services

On the Edge of Smokestacks

The referral came to Monticello Capital from an existing client, a multinational publicly-traded investment bank.

The new client firm had just been acquired through a private leveraged buyout in which management had taken a high personal equity stake.

The company was in the unusual position of operating in a very mature industry -- “on the edge of smokestacks” as its CEO once remarked -- but with the expanding pull of heightened demand in a newly-globalized market.

Significantly, the highly-specialized and fully-amortized manufacturing equipment could not easily be replicated in nations with low wage rate of labor.  The company’s fundamental problem was that it had no additional access to capital after its LBO and the plant was operating at near capacity.

Monticello Capital’s analysis and advice convinced the firm’s leadership that it actually could make the toughest choice available to an advanced technology manufacturer: cannibalizing its own solid safe sales for higher-margin new opportunities.

With a steady increase in net margins, post-acquisition cost controls, and rapid re-investment of the new free cash flow, a major increase in productive capacity was achieved within nine months.

The LBO debt financing was able to be accelerated through a new preferred convertible stock offering that also brought in additional expansion capital in a transaction managed by Monticello Capital.

Change Management

Change for Productivity’s Sake

The client was a major regional Internet service provider (ISP) with proprietary server farm operations and software, including a significant research and development section integrated within its technical operations.

The business itself was healthy and growing, but severe internal disarray -- much more than the usual workplace dissonance sometimes expected in the information technology industry -- seemed to be the norm here.

Monticello Capital, already retained to advise capital foundation, was asked to discern where the problem might be and what could be done. 

A series of personnel-based assessments followed, especially including one-on-one conversations with all employees, literally from the Board and CEO to the janitorial staff.

Seven areas were assessed and quantified:
  • Perceptions of business unit leadership
  • Followership constraints
  • Goals and demands on IT professionals
  • Weak spots in internal communications
  • Workspace psychological architecture
  • Internal IT compliance and effectiveness
  • Integration of financial goals, especially sales
At the conclusion of the assessment, all fingers seemed to point to one division and its manager.  On the day the CEO was briefed on our findings, he was fired and the division staff reorganized.

The event was somewhat dramatic by design, and the resultant change began rapidly.  Deep change was managed in a follow-on engagement of Monticello Capital, concurrent with the successful capital raise.

Research & Due Diligence Intermediator

Sometimes More Than Language Needs Interpreting

During a major round of international industry consolidation, Monticello Capital was retained by a US company that was about to be acquired by a multinational holding corporation.

Cross-cultural currents were severe both within the industry and in both directions between the European acquirer and its soon-to-be new American subsidiary.

Process controls, financial re-engineering and restructuring, and significant managerial changes were all identified before the acquisition closed.

While hired as due diligence advisor, Monticello Capital’s role developed into that of chief intermediary and two-way business interpreter.

Largely as a consequence of this engagement, the American firm remained substantially intact and financially autonomous following the acquisition -- which was precisely opposite the plan that the European acquirer had going into the deal.

Monticello Capital was later retained by the parent on the sell-side as the industry consolidation accelerated.

Research & Due Diligence Deal Manager

Making the Numbers in a PIPE

A major US-based international private equity fund retained Monticello Capital as preliminary qualifier, then as deal manager for its acquisition of a specialized biomedical firm.

The transaction was a private investment in public equity (PIPE).

Working with the portfolio manager and the fund’s legal counsel, Monticello Capital advised the structure of the deal, particularly with respect to layering the transaction and linking it to specific goals, project hurdle rates, and hard revenue objectives all developed during our due diligence.

The investment concluded with remarkable success evidenced by a positive up-tick in the company’s lightly-traded public shares.

The investment did exceed the structured goals.

The fund earned in excess of 22 percent internal rate of return, cash on cash, within a 30-month harvest horizon.

Corporate Board Composition & Quality

The Half-Bad Board

The deal left a painful legacy: a corporate Board where half of the members were unqualified, led by a chairman who was second-rate in every respect.

The Board’s membership and leadership were two non-economic terms of the acquisition agreement -- so not much could be done right away.

Monticello Capital’s client was the stronger half of the transaction, now faced with the issue of what to do with its newly merged Board.

Management was firmly in the hands of the client, but governance was shaping up to be the real problem.

The solution was an investment banking innovation created at Monticello Capital: the re-election vesting.

Demanding individual Board member performance criteria were put in place, with incentives for actual measurable results.

Nonqualified stock options for Directors were issued -- but they could only vest after the Director survived re-election by the stockholders.

A year later, every one of the weak Directors failed re-election, because they were unsuccessful in performing to the standards the Board set for itself.

The unqualified Directors’ year in office coincided with a financially retrenching year that absorbed the acquisition, and the company went on to increased revenue growth and higher profit margins.

Board standards and the option plan remain firmly in place at the company.

Corporate Board Performance

The Tough Love Board

The client company was in major transition.  The founders had purchased a clean public shell and executed a reverse merger, gaining the currency of public paper in an attempt to raise new capital.

This manner of financing always works well in theory, but the Board found that there was almost no market appetite for its now-public stock.  The legal and audit requirements of the Sarbanes-Oxley environment were also proving costly and burdensome.

A share price improvement plan was developed.

Monticello Capital suggested some bold moves, including a change in CEO and a charter for a strong executive chairman.  One tactic was seemingly counterintuitive, bringing some industry-tried and trusted executives out of retirement and actually raising the mean age of the Board significantly.

The company’s financial fundamentals became the Board’s first priority, and management was presented with an increasingly demanding series of deliverables by the newly-enhanced Board.  The Board’s hard work paid off, as the share price increased exponentially, possibly fueled by day trader interest.  New financing rounds of debt and equity were the inevitable result.

Within 20 months the firm’s market capitalization grew to 3.5 times its value at the time of the reverse merger.

Organizational Development & Design

The Off-the-Books Loans

The engagement started out as advising the multi-tiered financing of a development-stage software company with solid financials in a high growth industry segment.  The investors completed rigorous due diligence. 

The outside auditors and the client's legal counsel liked the best-foot-forward presentation and tremendous Wall Street prospects.  Then a chance remark by the chief financial officer about debt repayment became the deal's unraveling.

The ethics were clear: Monticello Capital had to put an immediate stop to our own client's financing.

Our investigation turned up two off-the-books commercial loans.  Both creditors were relatives of the CFO.  The loans were concealed so that the auditors could never find them, buried without a trace years earlier in a cash flow whirlwind of a boom cycle.

Monticello Capital's engagement quickly shifted gears: The CFO was fired, existing debt was restructured, all of the company’s management structures were redesigned, and hard core financial controls above and beyond industry standard were put in place.

Although the offering certainly failed, the company went on to outlive its competitors and grow at a slower rate.

The client eventually produced a self-sustaining revenue base and long-term profitability -- qualities rare in its industry.  Accelerative investment would have been preferable to organic growth.

But organizational agility saved the firm.

Cost Control

The Deep-Safety Save

The partnership was notable for its youth, enthusiasm, and success.

Market demand for the client’s technology kept increasing.  The CEO won a prestigious “Entrepreneur of the Year” award.  Multiple rounds of debt and equity financing had closed in record time.  Research and development prospered -- new products were being invented and selling quickly at high margin.

The company was debating new strategies, including acquiring some of its competitors, which brought Monticello Capital into the picture. 

This firm’s first reaction was alarm.  Cost control was non-existent.

We predicted two fiscal quarters until the inevitable “cash flow death spiral” of inadequate ability to service debt, pay trade creditors, or make payroll.  No more external capital investment would be possible.

As corporate advisors Monticello Capital's principals convinced the Board and management that if they did not institute radical cost-constraining measures right now, a Bankruptcy Trustee would take care of it later. 

The firm developed and implemented the following strategy:
  • Every aspect of the business and its internal culture had to change. 
  • Staff was cut severely. 
  • Every project was subjected to productivity and profitability measurements. 
  • Every person was judged on a profit producing basis. 
  • Advanced quantitative measures were developed, started, and enforced.
The result was a lean and productive organization with revenue continuing to grow but at a much slower rate, the profitability percentage almost tripling, and a successful new commercial debt financing closing as the next round of investment.