GWF Capital Holdings

Purchasing Retail Assets With Leveraged Debt.....

(Who in fact Runs the Show?)

August 2015

 

Businessman ‘A’ approaches GWF unsolicited (with no referring company/past client) as he wants to purchase multiple retail insurance agencies with long standing customer base. Each retail insurance agency is a separate purchase and has a single business broker who has offered these business assets to businessman ‘A’ as potential acquisitions.

 

GWF has an initial consultative interview with Businessman ‘A’ and determines that his project is not suitable as an investment candidate but might be better served as a combo investment/loan arrangement or as a stand alone debt based solution. GWF offers these two alternatives to Businessman ‘A’ who decides on the latter.

 

GWF forwards out to Businessman ‘A’ our customary initial due diligence checklist of forms, information and required documents in order to assess the project and its fiscal and operational merits. Upon receipt of some of the required forms several weeks later GWF consults with Businessman ‘A’ to determine which documents are either missing or need amendment prior to entering into the processing and then contract stage of the acceptance process. Agreement is reached to move forward with the condition that missing or unacceptable documentation will be forthcoming from Businessman ‘A’ expeditiously and if not received, the process would as with any lending or funding scenario slow down, hinder or even stop the process. Partial and inconsistent documents from the due diligence checklist are received from Businessman ‘A’ again and he is advised that they are required in order to consummate the project .Upon Businessman ‘A's return from extended vacation, GWF &  Businessman ‘A’ enter into contract stage with Businessman ‘A’s attorney approval of contract and the understanding that further due diligence underwriting material is necessary prior to entering into funding stage and will be forthcoming upon any demand by GWF.'

 

GWF advises Businessman ‘A’ of final docs & data required as underwriting material to move forward.  Businessman ‘A’ informs GWF that he feels this information is not necessary in his estimation to completing the funding process.  He states he can not or will not provide certain information that GWF requested due to it being in his estimation not neccessary to complete the deal. He stated the investor has enough to make a sound decision to move forward. Some of these documents are sales agreements between the insurance agencies that are part and parcel of this transaction. Businessman ‘A’ also submits to GWF LOI’s with concrete closing dates that are in direct contradiction to any tentative closing dates offered to Businessman ‘A’ throughout any discussion or consultation between Businessman ‘A’ and GWF.

 

 

GWF advises Businessman ‘A’ that it will attempt to expedite the process with the non negotiable condition that any missing, un acceptable or incomplete date from the underwriting requirements and due diligence requests will be forwarded to GWF expeditiously…If these conditions were not met then the process would stop until they were received and Businessman ‘A’ agrees. Several weeks go by with no positive response from Businessman ‘A’. As the presumed closing date mentioned in the LOI’s approaches Businessman ‘A’ now surfaces stating that he expects to be funded by the date in his LOI’s.

 

He is advised again of the lack of communication on his part, lack of receipt of the previously requested underwriting and due diligence material and that he must as with any client provide this material in an acceptable time and form in order for his project to proceed.  Businessman ‘A’ did not respond to repeated requests until two days after the closing date on the LOI’s.  

 

 

When Businessman ‘A” finally did respond, he forwarded over unacceptable photocopies, incomplete data forms in addition to the name of another firm who was presumably to take his place as the recipient of any funding. When asked about receiving more viewable copies and complete data his reply was that the date he provided just will have to be acceptable. When asked about the new firm on the documentation GWF never received a response.

 

Client was advised that his project will be on indefinite hold until he provides the requested data in its completion and then it would need to be accepted by the lenders underwriting department and approved to move forward.  Businessman ‘A’ stated he would consult with his advisors.  Our next encounter with Businessman ‘A’ was thru one of his advisors weeks later with no other explanation other than that he wanted a refund on his project expenses. In our attempts to reconcile the matter our search of Businessman ‘A” public records showed him not to be a insurance broker or even licensed in the state he purported to be working in or purchasing the subject insurance assets.

 

 

Here are some highlights of what went wrong with the actions of this client and what could have happened in order to maximize the potential of his project to culminate it to a successful closing.

 

• Client refusal to provide complete due diligence material in a timely manner

• Client deciding on his own to set closing dates without consulting with investor

• Client not allowing proper contact with potential asset owners and investor underwriting team

• Client submitting incorrect or incomplete information

• Inconsistent communication/responses time by client

• Client presuming what is necessary underwriting material sufficient for his project

• Falsifying public corporate ID and or not providing adequate personal ID information

• Failure to abide by contractual obligations

 

Obviously this scenario has it issues and is a fair example of clients who are under the impression that they control the funding aspects of the deal as well as the internal protocols of the investor.

 

Make sure you follow the directions to the letter of the investor and provide any and all documents and or requests for information in a timely manner...even if they don't seem to make sense to you. Remember the investor has certain conditions required to successfully underwrite your project and for releasing the funds to you and he has protocols he must follow......remember its HIS money until it has been released to you and until he does he makes the rules.

 

GWF is of the determined intent to provide the services it offers. With that in mind clients should always be mindful that the information requested is absolutely necessary for us to make sound business decisions on how best to serve them and our requests are not arbitrary and are made with the client and the projects best interests as our prime directive.