Sleepless in Philadelphia: A Dramatic Closing
Closings can take on a somewhat surreal atmosphere. In one
transaction valued at $20 million, the buyer intended to finance the
transaction with $10 million in secured bank loans, a $5 million loan from the
seller, and $5 million in equity. However, the equity was to be provided by
wealthy individual investors in amounts of $100,000 each. The closing took
place in Philadelphia around a long conference room table in the law offices of
the firm hired by the buyer, with lawyers and business people representing the
buyer, the seller, and the several banks reviewing the final documents.
Throughout the day and late into the evening, wealthy investors (some in
chauffeur-driven limousines) and their attorneys would stop by to provide cashiers’
checks, mostly in $100,000 amounts, and to sign the appropriate legal
documents. The sheer number of people involved created an almost circus-like
environment. Because of the lateness of the hour, it was not possible to
deposit the checks on the same day. The next morning a briefcase full of
cashiers’ checks was taken to the local bank.
Case Study Discussion Question
1. What do you think are the major challenges faced by the
buyer in financing a transaction in this manner?