DVB HERDS CATS – NSCSA ACQUIRES 30.3% OF PETREDEC

By Matt McCleery

As any experienced shipping banker knows, bringing private equity into an existing operating company is generally a brutal experience. The main challenge usually revolves around valuation. Here’s how it works: typically, the financial advisor brings in one or two types of investors, each of which comes with their own unique challenges.

The first of these are the financial buyers. This group brings nothing to the party but money and, maybe, “a guy who used to work in the business.” Take that last part for what it’s worth. This “guy” generally knows only about enough to be dangerous and slow down meetings. While sometimes these types of investors give the shipping company a “promote” of, say, 10-15% of the equity, typically they assign zero value to anything that isn’t big and doesn’t float and can be releveraged by someone else. The typical reaction of the shipping company, whose management have dedicated their lives to learning the industry, to this valuation technique is “take a long walk off a short pier.”

The next group of potential investors are those strategic in nature, such as other shipping companies. We once had a cover of Marine Money entitled “Herding Cats” with a lovely illustration of a farmer trying to round-up wild cats, a good analogy for bringing together two shipping companies. What usually happens here is that each shipowner thinks the others ships, company, people, maintenance programs, ship management, chartering relationships, crew, banks, and maybe even food¸ are inferior to their own. And then there is the issue of rights conferred upon minority interests. As any good shipping banker and investor knows full well, being a minority interest in a private company can really stink. These sorts of deals generally do not go far.

This is only an excerpt of DVB HERDS CATS – NSCSA ACQUIRES 30.3% OF PETREDEC

Content is restricted to subscribers. To continue reading please Log-In or view our subscription options.