Gibraltar Business Capital has considerable experience working with private equity firms to develop flexible and creative financing that supports the success and growth of their portfolio businesses.
Recently, Gibraltar closed on a $3 million facility to fund a strategic turnaround plan for a national IT consulting firm. The deal was referred to Gibraltar by a private equity group that owns the company.
Post-Recession Trends Disrupt Revenue Streams
The consulting industry is changing. With the results of the last recession lingering in the thoughts and financial strategies of many clients, they are increasing demands for outcome-based pricing over traditional hourly billing and putting downward pressure on fees.
In addition, these clients are placing more emphasis on short-term, project-based needs than long-term relationships. Moody’s Analytics calls this the “a la carte model” or the “uberization” of the consulting industry. “Clients choose the services they need and when they need them and end the engagement on the completion of the project.”
Both of these ongoing trends — outcome-based pricing and uberization — expose consulting firms to increased revenue volatility.
Talent “Pools” Can Improve Financial and Operating Performance
One response to volatility that is proving effective is a change in talent management practices.
In spite of the pressure on consulting firms to lower rates, the salaries of skilled individual consultants continue to rise. It can be more cost- and operations-effective for firms to reduce the number of consultants on staff and shift to using independent contractors to supplement teams as needed.
“Crowdsourcing” reduces fixed overhead. Fewer full-time employees mean lower office-related and benefits costs. By working to establish a pool of vetted external contractors, a firm can continue to pay for top talent while increasing its diversity of expertise and its capacity to respond successfully to opportunities that might otherwise be too large or too immediate to handle.
Gibraltar’s new client recently undertook a business restructuring plan to change over to this talent model. The turnaround is expected to offer reduced labor costs and a more nimble go-to-market strategy. However, the right kind of working capital facility was needed to provide intermediate stability and fund implementation.
Gibraltar’s Private Equity Expertise Results in Financing Geared to Next-Level Results
This IT consulting client refinanced a previous loan with a new $3 million accounts-receivable-based credit facility from Gibraltar.
The owners’ primary reason for consulting with Gibraltar was this lender’s experience working with private equity firms. Targeted expertise was a critical factor in producing the positive outcome — financing that sets the company up to grow successfully and increase in value.
Gibraltar has become a preferred lender in structuring deals like this one, through its:
- Flexible responses to the unique needs of portfolio companies. No two companies are alike; financing transitional companies is not a one-size-fits-all process.
- Speed to close. Swift action can be crucial and Gibraltar’s decision makers understand. They make themselves available for high-level input and quick approvals.
- Open-minded, entrepreneurial approach to credit structuring. Gibraltar’s team is trained to listen, think differently and take unique circumstances into account.
- Best-in-class service. Gibraltar prides itself its increasing roster of financial sponsor clients and on funding multiple deals for returning sponsor clients, a demonstration of their trust in Gibraltar’s ability to produce results.
Gibraltar offers credit facility capacity between $2 million and $20 million to serve mid-market businesses and their unique needs. In 2018, Gibraltar broke a significant record, reaching $150 million in total commitments for the first time in the company’s history. Its customized financing solutions are helping Gibraltar clients overcome short-term capital challenges, navigate complex transitions, and take advantage of growth opportunities.