How one business client tapped the resources of the combined company to reach new markets and drive greater growth.1
How do you keep a business going strong? By staying nimble in the face of changing market conditions, by understanding the right times to expand and the right methods for doing so — and, in the case of Insituform Technologies Inc., by taking advantage of the resources of Merrill Lynch and Bank of America.
Insituform got its start in the 1970s, when it pioneered an advanced method of repairing aging pipeline networks. The system involves filling a felt liner, manufactured by the company, with a heat-curing resin. Installation crews pull the liner into the pipe in need of repair. After the resin is processed, it creates a new pipe within the original one — allowing crews to reline old pipes without digging or disruption. To date, Insituform has rehabilitated more than 25,000 miles of water, sewer, gas and chemical pipelines. But its original patents expired in the mid-1990s, and the company's growth slowed as competitors entered the market.
In April 2008, Insituform's board named a new CEO, Joe Burgess, to rekindle the spark that had made the company a pioneer. In turn Burgess brought in John Fortson, Managing Director in Investment Banking at Bank of America Merrill Lynch, and his team. Burgess's objective was to diversify Insituform's revenue base and to grow profits from single digits to 15% by 2012. Fortson spent several months with Burgess and his senior management team helping to analyze the company's products and find opportunities for new directions. As a result of that effort, two acquisition targets were identified.
Financing for Change
Insituform needed more cash to fund those moves, but its borrowing power was limited by the battered credit markets. Fortson worked with Burgess and his senior team to target the institutional investors most likely to be interested and to develop a concise and focused sales pitch. This helped the company raise $134.6 million in the capital markets.
To initiate credit for Insituform, Fortson reached out to Kevin Knopf, Senior Vice President and Senior Client Manager with Bank of America's commercial bank. "We were able to come together, partner in real time on a transaction and execute that transaction," Fortson says. Insituform secured $115 million in debt financing from a syndicate of banks in a deal led and managed by Bank of America. The debt financing, the proceeds of the equity offering and Insituform's cash on hand helped finance the purchase of the two target companies, which were acquired at attractive prices.
At the same time, Insituform moved its equity-based compensation plan to Merrill Lynch's fully automated platform, which streamlines expense reporting and frees up resources formerly spent on time-consuming Sarbanes- Oxley compliance, says Merrill Lynch Financial Advisor Jack Raymond.
Now Insituform is busy integrating those additional component parts and rounding out a new portfolio of products that should be ready just as global demand revs up. "We're off to a great start," Burgess says.