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A Look at High Profile Independent Acquisitions

Over the last 12 months, several major independent equipment leasing companies have been acquired. Banks and private equity firms were some of the major acquirers, with People’s United Bank buying LEAF Commercial Capital and Solar Capital taking on SLR Equipment Finance. What has led to this spike in activity, and will it continue?

Independent equipment leasing companies are getting bought up left and right. In just the last year, notable independents LEAF Commercial Capital, SLR Equipment Finance, Ascentium Capital and ECN Capital have been acquired by a variety of purchasers, including private equity firms, banks and public business development companies.

While the recent influx of independent acquisitions might seem higher than usual, this is not a new trend. In fact, it dates back to the 1980s, according to Bruce Kropschot of The Alta Group. Kropschot explains that in the 80s, a number of new buyers entered the market, with savings and loans, other thrift institutions and the former AT&T regional telephone companies looking to enter the leasing industry. While most of these firms eventually exited, the attractiveness of successful independent leasing companies endured. The cycle has traveled in line with the economy, with activity falling in 2000 when the dot-com bubble burst. The sector progressed until 2008 when the Great Recession hit. Even during the downturn, however, the equipment leasing and finance industry fared relatively well.

Since 2011, the equipment finance market has been growing, and M&A in equipment leasing, especially for independents, is as strong as ever.

The need for competitive funding and an exit strategy drives the sale of the independents.

“Independents are typically owned by the management that started the business,” Kropschot says. “They need to look for liquidity at some point and time. Most independents will someday be acquired.”

The recent acceleration of acquisitions has a lot to do with the current environment, as independents are dealing in an M&A market that favors them immensely.

“Given the relatively low cost of capital, we’re at a time where evaluations are at very attractive levels for sellers and there’s no certainty that this will continue into the future,” Kropschot says. “Many independents are feeling like they may want to have an exit strategy or sell over the next three to five years, and this could be an opportune time. However, there’s no assurance that the high valuations will continue into the future.”

The benefits stretch beyond high valuations, however, with independents often gaining access to costly performance-related benefits from these deals.

“A number of independents don’t necessarily have the resources available to them to go out and upgrade technology platforms or invest heavily in certain areas of the company,” Kropschot says. “Partnering with an acquirer like a bank is a more efficient way to do that, since larger organizations often have greater systems capabilities and can provide economies of scale.”

From the acquirer’s side, there are an especially large number of reasons banks, in particular, are interested in making an acquisition.

“More and more of the banks I speak with are increasingly concerned with any acquisition they consider to be immediately or relatively quickly accretive to earnings to protect their shareholder base,” says Jim Jackson of The Alta Group.

“Acquisitions are much more likely to achieve that objective if they avoid the heavy expense burden that’s typically associated with a startup leasing company that might have little or no portfolio to provide the revenues required to offset those costs.”

“Banks see equipment leasing as a way to diversify their asset base with investments that can provide potentially greater returns within acceptable risk levels,” Jackson says. “It also provides the banks with the opportunity to provide their existing customer base with an equipment financing alternative that might not force their customers to look elsewhere for that offering.”

Nations & Solar Capital

Banks are not the only financial institutions acquiring independent leasing companies. Private equity firms have also shown an increased willingness to invest in the industry.

“I think another factor, too, that we’ve seen more recently is the interest of more private equity firms in equipment leasing. These private equity firms generally have a five- to seven-year time horizon for liquidating their investments and distributing funds to their owners,” Kropschot says. “We’ve seen a number of acquisitions of leasing companies by PE firms and dispositions of [that] interest by those PE equity firms. One of the more recent examples is Financial Pacific, whose private equity backers were able to sell their holdings very quickly and at a huge profit. That just spurred the interest of PE firms in the equipment leasing sector.”

While the potential to reap a large profit is obviously tantalizing, Solar Capital had more reasons to go after SLR Equipment Finance. It began with familiarity with the management team.

“Solar has been following Nations for a number of years. Senior members of the Solar and Crystal teams have longstanding relationships with SLREF executives having previously worked with them at GE Capital and have tremendous respect for their sector expertise and discipline in risk assessment,” says Scott Rosen, partner and specialty finance portfolio manager for Solar Capital. “We are highly selective when we look to expand our product offering and view the SLREF team as best in class.”

For Rosen and Solar Capital, the acquisition of Nations, which was built with a similar approach to business, investment philosophy and culture, is the next step in the firm’s specialty finance strategy. That began in 2010 with a $75 million debt investment in MidCap Financial, the acquisition of asset-based lenders Crystal Financial and Gemino Healthcare Finance and, finally, with a $48 million loan in 2014 to Varilease Corporation, a mid-ticket equipment lessor.

Much like the benefits an independent receives from being acquired by a bank, Nations agreed to the acquisition because of the expanded capabilities Solar Capital would provide.

“Long-term we expect the permanence and structure of Solar’s capital to provide us with the flexibility to be nimble and to generate a highly attractive and defensible portfolio,” says Phil Carlson, president and CEO of Nations. “Over time, we expect Solar’s ownership to allow us to broaden the size and types of products we offer or potentially grow through tuck-in acquisitions of other collateralized credit products. Solar’s other strategies include cash flow lending, life science lending, healthcare ABL lending, specialty finance lending and middle market ABL lending. The addition of SLREF allows both Nations and Solar to be a full solutions provider to middle market clients.”

Who’s Next?

As Kropschot explains, this trend of buying equipment leasing companies is more of a cycle than an actual trend. As such, the expectation is that as valuations remain high and financial institutions like banks and PE firms are increasingly attracted to the equipment leasing space, acquisitions will continue to be prevalent.

“Since Dodd-Frank and Basel III, there has been a significant push of credit products away from the banking system and into the independent market,” Carlson says. “Credit asset managers recognize this trend and view businesses like SLREF attractive ways to broaden their platforms.”

Recent shifts in the landscape have opened up voids that independent leasing companies are moving into with great success, fueling the desire of larger institutions to buy.

“With the break-up of GE Capital and the regulation of bank-owned equipment finance companies there are a lot of opportunities for independent equipment finance companies to fill the voids left in the market,” Carlson says. “Acquisitions of companies like ours validate that investors see these opportunities in the equipment finance market.”
That means there is more to come.

“We’ll see considerable activity the rest of the year. There are a number of acquirers that are very eager to acquire,” Kropschot says. “There are also a number of companies available in the market right now. It’s just a question of when do the deals get closed.”

Read the full article here

by Phil Neuffer

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Unlock Equity in Your Existing Equipment

We help businesses looking to refinance existing equipment and generate excess cash proceeds.

Could this be you?

We recently worked with a company that had existing equipment with a current market value of $5,000,000. They had a remaining finance balance of $3,000,000 and were making monthly payments of $135,000.

They turned to SLREF to refinance the $3,000,000 balance, lower their monthly payment and generate $2,000,000 of cash/working capital so they could:

  • Purchase additional inventory and pay outstanding payables
  • Grow their business
  • Address the owners capital needs


Age of Equipment 3 years
Equipment Value $5,000,000
Refinance Amount $3,000,000
Incremental Capital $2,000,000


*Their new monthly payment is 30% lower than the original payment

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8 Reasons to Finance Equipment for Your Business

Our friends at the ELFA share with us an infographic highlighting why businesses lease and finance equipment.

The vast majority (78%) of U.S. businesses lease or finance their equipment, and today the Equipment Leasing and Finance Association released a new infographic highlighting why this method of equipment acquisition is so popular. The “8 Reasons to Finance Equipment for Your Business” infographic provides a reader-friendly, visually inviting explanation of some of the key benefits businesses enjoy when they lease or finance the equipment they need to operate and grow.

This new tool is the latest resource from ELFA’s Equipment Finance Advantage website for end-users, a one-stop resource designed to help current and potential end-users of equipment financing make the best possible decisions. The infographic showcases a variety of ways businesses can use equipment finance to their strategic advantage, including:

  • Finance 100% – Arrange 100% financing of your equipment, software and services with 0% down payment.
  • Save cash – Save your limited cash for other areas of your business, such as expansion, improvements, marketing or R&D.
  • Keep up-to-date – Keep up-to-date with technology by acquiring more and better equipment than you could if the financing option were not available.
  • Outsource asset management – Let your equipment financing company manage your equipment from delivery to disposal.
  • Accelerate ROI – Rather than paying one lump sum for your equipment, make smaller payments while the equipment generates revenue.
  • Customize your terms – Set customized payments to match your cash flow and even seasonal income fluctuations.
  • Benefit from bundling – Bundle the equipment, installation, maintenance and more into a single, easy-to-manage solution.
  • Hedge against inflation – Lock in rates when you sign your lease to avoid inflation in the future.

“There’s a reason nearly 8 out of 10 companies lease or finance their equipment—it makes good business sense,” said ELFA President and CEO Ralph Petta. “We are pleased to present this new infographic illustrating some of the important ways our industry ‘Equips Business for Success.’


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SLREF Launches its Newly Designed Website

We are pleased to officially announce the launch of our redesigned website! Take a look around and let us know what you think. The URL is

Our goal with our redesigned website is to provide visitors with an easier way to learn about SLREF and our product offerings. Visitors will find useful information about transactions we have completed, industries we serve and testimonials that highlight how we have created value for our clients all on the homepage. Also, there is a portal to view equipment we have for sale.

The new website is now mobile responsive with a seamless user experience. New features include social media buttons for Facebook, Twitter, LinkedIn and Google+.

We will be continuously updating content with helpful information, articles, blogs, newsletters, company announcements and client successes in the Blog & News section.

Hopefully, you find the site easy to use and informative. If you experience any problems or have any questions, suggestions, feedback or comments, please feel free to contact me.

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Six Steps to Leasing Equipment

Leasing equipment provides companies with affordable access to expensive capital equipment, financial flexibility, and convenience. Careful planning and execution of equipment lease agreements will help companies get the most from these equipment acquisition arrangements.

Right now is a critical time for capital investment, as the Equipment Leasing and Finance Association predicts that businesses, governments, and other organizations will spend about $1.5 trillion on new equipment in 2015. A growing number of companies are turning to equipment lease agreements to acquire needed capital equipment, as tight credit conditions continue to make acquiring credit from traditional lenders like banks difficult.

When preparing to finance an equipment acquisition through an equipment lease agreement, the following steps are recommended:

1. Identify specific needs. It’s not enough to just determine what equipment your company needs. You also need to determine the specific needs it will be employed for and how long these needs will last. Many companies get saddled with paying for equipment long after the need for that equipment has been filled.

2. Decide whether a lease or a loan is your best financial option. Examine your company’s cash flow, tax situation, and credit to make the right decision.

3. Once you’ve identified specific equipment you need, talk to manufacturers about reliable leasing companies. Manufacturers often know the best leasing companies that businesses can acquire their gear from.

4. Get a quote from the leasing company that you’re considering and compare it to quotes from other leasing companies. The cheapest quote isn’t always the best choice, but the price you pay shouldn’t be significantly higher than quotes provided by other equipment leasing companies.

5. Negotiate the details of the agreement. Equipment leases can often be quite flexible.

6. Consult with your accountant. Crunch the numbers and use any available tax deductions from the lease agreement to your company’s advantage.

Lease agreements provide an excellent opportunity for companies to get the equipment they need to keep their businesses competitive. They also provide a number of credit and tax advantages to lessees. Nearly 85 percent of all U.S. companies lease some of their equipment from an equipment financing company, according to the U.S. Small Business Administration. Of those companies, about 79 percent say that leasing is a good or excellent means of financing equipment purchases.

Nation’s Equipment Finance provides a variety of equipment financing options for companies seeking an affordable way to gain access to quality equipment. Nation’s Equipment Finance typically provides loan and leasing agreements ranging from $1 million to $50 million, with three to seven repayment terms. To find out how Nation’s Equipment Finance can help meet your equipment needs, contact the company today.


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Plan for the Long Term with Equipment Financing

Equipment purchases are critical to the continued growth and prosperity of businesses that are capital-intensive. An equipment purchase isn’t just a matter of going out and getting a loan to buy a few trucks or machines. Equipment financing needs to be properly planned to give companies the best possible advantage in terms of opportunity, growth, and tax considerations.

When planning for a big equipment purchase, companies need to have an eye on the future with regard to usage, cash flow, and financial goals.

When and for how long the equipment will be needed is a major consideration when seeking equipment lease agreements or loans. For equipment that will only be needed on a short or mid-term basis, leasing equipment may be preferable to purchasing it. A lease will likely be less expensive and will not saddle the company with equipment it does not need and must sell afterward.

Obsolescence is another concern for companies purchasing equipment. If the equipment is likely to be supplanted by significantly improved models in the near future, a lease may be the better option, as the equipment will revert to the lessor at the end of the agreement, leaving the lessee free to lease newer equipment.

The company’s cash situation will also play into whether financing through a lease or loan is the superior alternative. Companies that are cash-poor may be better served by an equipment lease agreement, as 100 percent financing is typically available for equipment leases.

The company’s individual tax and financial situation is also an important long-term consideration for equipment purchases. Loans provide companies with tax depreciation benefits. Leases may allow lessees to expense payments. Some companies may be unable to use the depreciation benefit, so instead it makes sense for them to lease the equipment instead.

Leases also provide financial flexibility for companies. Leases can be written to account for a number of contingencies, such as early termination, extended leases, rent-to-own, and more. For companies looking for a flexible means of planning for their capital needs, leases may be a superior option.

How much credit your company will need for other expenses is also an important factor to take into consideration. In many cases, you can preserve your credit by leasing through an equipment leasing company, allowing you to borrow from traditional lenders for other needs.

When purchasing equipment, it’s worthwhile to discuss all the options, and your future needs, with your accountant and experienced equipment financing professionals. They can help analyze your company’s situation and future needs, and devise a financing plan that gives your company the equipment and the options it needs to grow.

SLR Equipment Finance provides a variety of equipment financing options for companies seeking an affordable way to gain access to quality equipment. SLR Equipment Finance typically provides loan and leasing agreements ranging from $1 million to $50 million, with three to seven years’ repayment. To find out how SLR Equipment Finance can help meet your equipment needs contact the company today.

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