G2 Capital Advisors (“G2”), a leading investment banking and restructuring advisory firm, has expanded its senior leadership team by welcoming Jenny Lashway as Vice President of Finance. This strategic appointment aligns with G2’s continued commitment to supporting our firm’s evolution with seasoned and sophisticated executives.
“We have achieved considerable growth over the last many years, but we are entering an exciting period of opportunity for our firm. As G2 continues to scale, we need a complete leadership team that reflects and can support—our organizational depth. Jenny’s expertise not only strengthens our leadership team but also plays a pivotal role in shaping G2’s trajectory.” – Matt Konkle, President of G2 Capital Advisors.
Jenny Lashway joins G2 with nearly 20 years of financial experience at leading consulting firms, including Altman Solon, Huron Consulting Group, and FTI Consulting. In addition, Jenny worked in the Financial Reporting group of Boston-based hedge fund, The Baupost Group. As Vice President of Finance at G2, Jenny leads financial operations, including financial reporting, budgeting, forecasting, strategic finance initiatives, system optimization, and process improvement. Her analytic depth and appetite for solving new problems will help G2 optimize operations across diverse client needs and engagements.
About G2 Capital Advisors:
G2 provides M&A, capital markets, and restructuring advisory services to the middle market. We offer integrated, multi-product, and sector-focused services by pairing highly experienced C-level executives with specialist investment bankers. We aspire to be the trusted advisor to our clients, including corporations and institutional investors.
ABOUT THE COMPANY:
The Company developed and manufactured a revolutionary countertop molecular beverage printer. Customers use Cana’s touchscreen display to explore, discover, and create their perfect drink. The signature product, Cana One, “prints” thousands of beverages—ranging from juice to soft drinks to coffee to wine—from a single cartridge without the need for plastic, aluminum, glass or other wasteful containers.
The Company successfully developed several prototypes proving the technology works. Scaling up the manufacture and distribution of the novel product and its supply chain, however, would require a level of investment that proved difficult to bring in. Facing a difficult fundraising environment for growth capital in 2023, with current investors having reached capacity, the Company needed to weigh difficult options.
G2 helped Cana and its primary VC sponsor evaluate various paths forward, and the parties agreed to mutually execute an assignment for the benefit of creditors (“ABC”). G2 created a special-purpose entity to serve as assignee, with responsibility to pursue a sale of the assets and wind down the corporate entity.
As assignee, G2’s special purpose entity immediately launched a vigorous IP sale process with an ambitious timeline. In parallel the Assignee wound down corporate operations and oversaw the efforts of an outside equipment liquidator. Leveraging G2’s robust investment banking capabilities and contacts, the team brought multiple parties through advanced due diligence, ultimately negotiating a sale of the IP to a strategic. The Assignee then distributed proceeds to creditors.
ABOUT THE COMPANY:
Prismo Systems raised nearly $30 million to redesign cybersecurity. Backed by some of the most storied names in venture capital, the Company developed a product providing enhanced security to the software that powers modern enterprises across the software development lifecycle.
Rapidly shifting market conditions posed significant challenges to the Company, thwarting its launch of the product it had spent years developing. Further iteration could address these issues but would be costly, and stakeholders had differing levels of support for a go-forward plan. Board members needed a way to satisfy liabilities and otherwise proceed in a responsible manner.
The Company engaged G2 to serve as assignee in an assignment for the benefit of creditors (“ABC”) process. As assignee G2 would have the primary responsibility of maximizing creditor recovery by selling the Company’s assets. In addition the assignee was tasked with winding down Prismo’s operations in both the US and India, communicating with interested parties, and overseeing the distribution of funds.
Upon launching the ABC, G2 as assignee leveraged its investment banking expertise in a broad sale process. The team identified several interested parties, who engaged in due diligence around the intellectual property as they considered placing a bid. G2 brought these parties together for an auction and closed with the highest bidder at more than double the amount management had expected at ABC outset. The Assignee then distributed funds to unsecured creditors.
ABOUT THE COMPANY:
Triplet Therapeutics, a Boston-based biotechnology startup company, was formed to reimagine and develop treatment options for repeat expansion disorders such as Huntington’s disease. Founded in 2018, Triplet raised over $80 million from life sciences-focused venture capital investors and a premier venture debt provider.
Some of Triplet’s test results were promising while others revealed a concerning level of toxicity. Facing limited appetite among its investors to continue funding the company, management initiated strategic conversations with a few large pharmaceutical players. But runway was short and bandwidth limited, compromising the opportunity to run a full process. Meanwhile the Company’s venture lender favored the involvement of a professional firm with a track record of managing challenging situations and maximizing creditor recovery. Without that steward in place to guide the process and negotiate with the potential buyers, a deal was unlikely to be achieved.
The Company engaged G2 to serve as assignee in an assignment for the benefit of creditors (“ABC”). This out-of-court insolvency proceeding, which is governed by state statute, is a faster and cheaper alternative to bankruptcy. Upon launching the ABC, the Company’s board and management resigned, with select staff assisting in the ABC effort on a contract basis. As Assignee, G2 launched a process to sell substantially all of the assets including test results, technical documents, patents and other intellectual property.
As assignee G2 managed the wind down of corporate operations and put on its investment banker hat during a vigorous marketing effort to find an acquirer of substantially all of the assets. A global biopharmaceutical company emerged as the leading contender in the competitive bidding process. After the Assignee negotiated a significant increase from the initial bid the parties executed an asset purchase agreement. The proceeds provided a meaningful recovery to the secured creditor.
In mid-November each year, operators, investors, advisors, lenders, lawyers, and service providers meet in Las Vegas for the annual convergence of industry insight and expertise: the Restaurant Finance & Development Conference. G2’s Heidi Piché and Jenn Faulk attended and synthesized the key themes coming out of the three-day event.
Everyone is approaching 2024 with caution. Brands wary of consumer cost-consciousness are breaking from existing strategies to test traffic-driving discounts and value offerings. Operators fatigued by ongoing challenges are looking for an exit—likely leading to a spate of seller activity. Lenders are watching how consumers react to recent price increases, subsequent traffic declines, year-over-year profit margin trends, and the overall share-of-wallet relationship as they assess internal credit appetites.
What does all this mean for restaurant operators looking for a life raft—namely, capital or a change-of-control transaction in 2024? We’ve broken down the four most important insights.
Bigger is Better
Why scale matters more than ever.
It is simply more expensive to do business today. The cost of inventory, labor, real estate, and capital improvements have all risen. What’s more, the borrowing index has surged by 200 bps compared to 2022, coupled with elevated risk premiums being charged by lenders. For many, the price to secure the capital is at a premium, but for those who can scale, mainly through acquisition, opportunities await, including:
- Bolstered buying power and cost synergies on overhead
- Easier access to capital due to size and scale
- Premium platform valuations gained through multiple arbitrage
When waiting to raise capital is wise.
While gaining market mass is one winning strategy, holding tight is another. That’s because there are fewer active lenders today—most with more restrictive credit risk appetites and many prioritizing existing relationships. What’s more, many lenders are reducing leverage at underwriting and covenant setting by at least half a turn. The depth of the syndication market also poses challenges, requiring larger commitments from the top-tier banks. This exclusive credit club leaves a lot of restaurant operators out; therefore, if you have the runway, sit tight with your existing agreements.
If you are still considering borrowing, be aware that most banks require ancillary business, meaning business owners are tying up funds that in prior years could have been used for growth—and are increasingly coming forward with personal deposits to meet requirements. If you are exploring private credit to fill the gap left by the tighter senior credit market, be prepared to pay a premium on top of what senior lenders offer.
Which deals are getting done.
The dynamics may seem complex, but the reality is that strategic and private equity groups have capital to deploy and are still actively looking to acquire businesses. Another benefit: Given deal scarcity, strong assets still command competitive processes and high multiples.
Here’s what we expect to see in terms of deal flow and close rates in 2024:
- Conference participants expressed optimism about the prospects for increased M&A activity in 2024, particularly for well-capitalized, credit-worthy companies looking to scale, acquire alternate revenue channels, or underwrite cost synergies.
- Despite a disconnect between buyers and sellers over the last two years, operating trends have stabilized, leading to a compression in the bid/ ask spread between buyer and seller.
- Fatigue is expected to prompt more owners to ask, “Is now the right time to sell?”
- Due diligence will take center stage, resulting in more extensive analyses performed over a longer period and posing higher investment committee hurdles.
More deals and diligence mean a potentially lower close rate but an overall healthier M&A year, resulting in the survival of the fittest.
How to make a successful exit.
Given today’s market, you must prepare well ahead of an exit. Consider the past and present: Do you have a strong historical track record and the right team to support your business going forward? Are you confident that your operations are strong today and sustainable in the face of future market shifts?
At G2, we are available as a proactive resource to help assess your financial and operational health as well as strategic alternatives. Our sector strength gives us a point of view on where the restaurant industry and lending community are headed—and how not to get left behind.
To learn more about how our industry insight can support your business goals, contact our Consumer & Retail team.
G2 Capital Advisors (“G2”) is excited to welcome Reed Upson as Managing Director of Capital Markets. Located in Denver, Reed counts himself as part of the recent Rocky Mountain migration that has brought more lenders and sponsors to the region. Formerly the Head of Capital Markets at the San Francisco-based debt advisory firm Business Capital (BizCap), Reed has supported companies with capital raises, refinancings, and financial restructurings and has a depth of credit underwriting, transaction execution, and business development experience. To introduce Reed and get his take on current capital markets, we sat down with him to ask five fast questions:
- Welcome to G2! What drew you to our firm and convinced you to come aboard?
I first met Ben Wright, Chief Operating Officer at G2, about seven years ago in San Francisco—the G2 office was one floor above my office—and I got to know Ben pretty well. I was impressed by G2 early on: its focus on industries and integrated multi-product approach got my attention.
Over the years, I’ve watched G2 service companies’ complete life cycle, supporting growth and navigating distress with bigger, more sophisticated, and increasingly complex deals. From my perspective, the G2 model is different from anything in the market today, and its growth has been both subtle and significant. I’d say the firm is a sleeping giant in the middle market, and I’m excited to grow professionally within its integrated platform.
But what really sold me was coming out and meeting everybody in Boston. The team maintains an all-in, entrepreneurial attitude. The people have a refreshing balance of empathy and intelligence, backed up by tremendously deep product and industry knowledge. It’s an impressive group of smart, low-ego people.
- What are you most looking forward to as Managing Director of Capital Markets? What industry and practice synergies are you excited to explore in this role?
While I have capital markets experience across G2’s industry sectors, my ability to now partner with our industry experts is a powerful differentiator. It lets me have nuanced conversations with bankers and lenders struggling with liquidity challenges and rising default rates. In addition, I’m able to pull in specialty groups like restructuring, to address clients’ complex situations. And, because our executive team is largely made up of former operators, G2 leadership brings an authentic appreciation to each engagement. Our team members have sat in our clients’ seats.
I’m also excited to tackle larger, more institutional challenges through private equity partnerships, like raising equity to recapitalize—either a minority raise to help grow a business or a majority recap to return capital to limited partners (LPs). Or bringing other creative financing solutions to the table, such as mezzanine financing and preferred equity structures, which are helping increase portfolio companies’ cash flow by retiring higher amortizing debt structures.
- The interest rate hikes that began in March 2022 have profoundly affected capital markets, inflating valuations and borrowing costs. How does the current environment create challenges and opportunities for our clients? How do you expect the market to change in 2024?
I don’t think there will be a massive shift in interest rates, especially over the next year. Could rates come down a little bit? Perhaps. But what’s more likely is that strategics and sponsors will adjust to this new normal Eventually, sponsors will have to start returning capital to LPs, and companies will have to transact—and there will be clear winners and losers. Companies with better leverage profiles and capitalization can take advantage of add-on acquisitions. Companies on the other side of that coin will face new challenges: “What do I do? Do I sell? Do I recapitalize? What are my options?”
G2 is uniquely positioned to address both sides of that equation, which is exciting.
I imagine on the lender side, there will be a lot more distress with banks specifically—and some cracks on the private debt side, too. After the whirlwind of M&A activity in 2020 and 2021, many of these businesses now have increased debt, reduced valuations, and face a looming maturity wall in 2024 and 2025. While lenders had previously been happy to amend and extend, I think hard decisions are coming, and the market is going to start seeing more refinancing activity being forced on companies from lenders, especially banks.
Capital markets advisors will have to get more creative with stretch pieces like preferred equity or mezzanine financing to fill the gaps. The positive backdrop to all of this is that despite the uncertainty in the market, there is still a lot of capital out there—and private credit fundraising is at an all-time high. It’s my job to figure out from where to source it and how we can structure it to best support our clients.
- How have you generated new business and steered clients through challenging market cycles?
My business has been built on relationships with trusted advisors—lenders, attorneys, and CPAs with clients facing default and needing capital to either exit or pivot. I’ve tended to work with the same clients over time and across multiple situations—whether they’ve hit a speed bump or they’re continuing to grow. Anchoring long-term relationships will be easier at G2 as our investment bankers are so plugged in and can stay on top of industry-specific needs. There’s a natural progression of working alongside our clients’ business evolution.
As a capital markets advisor, that parallel momentum is essential. I’m in the market every day, talking with lenders and investors and figuring out what the capital markets are actually doing. At G2, the question goes beyond, “Can we raise this capital or not?” Our team can see the sector-specific implications and the restructuring opportunities. With G2, the greatest value I can pass on to our clients is to anticipate what’s next and act as a comprehensive resource through any market cycle.
- When not sourcing debt and equity, how do you spend your time?
I have two young kids who keep my wife and me pretty busy. As a family, we lean into all of Colorado’s outdoor activities—hiking, skiing, and biking. I’ve had to dial back my golf game, but I’ve gotten back into tennis.
Like the markets, Reed is in perpetual motion and will be a tremendously valuable addition to G2’s team. For more information on G2’s capital markets capability, visit us online or contact our team leaders.