This Deal Will Close I wouldn’t expect financing to be much of an issue for this deal. The press release indicated that the deal will be financed with equity and debt. The equity in this instance is likely coming from pre-committed capital from PCP's limied partners, as such, this portion of the financing is basically secured. The other piece of itis bank financing. NBLY generates $50M in free cash flow, a number that should grow meaningfully in the next 2 years as the new team improve operational efficiency. Furthermore, as a private company, NBLY will eliminate the high legal and compliance cost of a publicly traded company, hence further adding to excess cash flow. As such, NBLY can sustain a much higher debt load than its currently carrying.
As a private company, NBLY can dial down/up its acquisition cadence without dealing with excessive stock volatility. This means PCP will likely use NBLY’s own free cash flow to reduce debt as soon as the deal closes, and eventually dial up M&A once interest rates are more favourable. The funding package, will likely reflect this strategy (through covenants), hence reducing funding risk to the bank or banks that will finance the deal.
Minority shareholders are unlikely to block the deal since, roll up strategies are out of favour, as such this is the best the outcome for the time being for most of them. They can also recycle into other similar companies DNTL for example of they want to main exposure to the sector.
Finally, PCP has other motives for taking this private besides the long term financial upside in my opinion. As a fully private company, PCP can maintain a much higher valuation for NBLY on the books than the previously depressed valuation. This has material implications for the fees PCP collects from LPs. The deterioration in NBLY stock price was probably forcing PCP to record a big loss on the investment (they financed the Rubican deal at $29/share), going private will eliminate this risk, and safeguard the valuation of PCP investment vehicle where NBLY is held.PCP needs this deal to close. And the deal will close. Anyone selling here is leaving 30% annual return on the table because they don’t have the patience to hold for 90 days.
I just added today in the $18s.