Silicon Valley Bank - Starbak Communications

Division: Phoenix Management Services, Phoenix Capital Resources


Client

Starbak Communications was a video technology company operating in the video communications market space. The Company was based in Boston, MA with revenue of approximately $10.0MM and a total private equity/venture capital investment in excess of $50.0MM.

Problem

The Company had extensive private equity investment from two separate funding sources, who ultimately could not reach a cooperative settlement with regard to the direction of the Company, thereby creating extensive disruption to the Company at both the operating and Board of Director level. Ultimately, the Company did not achieve its goals and objectives, despite a mature management team, structure and extensive investment, leading to capital shortfalls. As a result, its senior lender was unable to provide additional finance capital under the disruptive state of the Company.

Solution

As a result of the instability outlined above, neither of the equity participants was prepared to invest additional funds into the Company and could not reach agreement upon the valuation that would allow either to buy-out the other investor(s). This coupled with the Bank’s inability to extend beyond the current credit facility, left the Company with no other option but to begin a wind down process. The selected method, an Article IX sale process (the “Transaction”), which is a consensual wind down with the senior lender, allowed for the opportunity to sell the Company as a going concern.

Phoenix Capital Resources was engaged to effectuate a sale, within a 90 day period, that would maximize the ultimate value of the Company’s material and intrinsic assets. The challenge to PCR was the fact that another intermediary, who had substantially over-valued the business to the marketplace, had previously marketed the Company. As a result, there was significant deal fatigue in the marketplace, with very limited initial interest. Phoenix was successful in identifying new potential buyers of the Company, who would continue to operate the business as a going concern. Further, Phoenix marketing efforts rejuvenated some of the prior potential strategic buys and ultimately succeeded in creating an auction atmosphere. The resulting transaction provided a maximum value for the assets thereby satisfying all of its secured and unsecured creditors, left a potential opportunity for the equity stakeholders to recover some of their investment and allowed for the Company to continue as a going concern with a stable, growth oriented future.