New deals; how businesses are being bought.

• Author: Blake, Pat
• Position: Indiana businesses

Bob Shortle is a veteran of corporate buyouts. As senior vice president for the largest investment-banking firm indigenous to Indiana--Raffensperger, Hughes & Co.--he has orchestrated acquisitions of a number of companies, including a manufacturer, a publisher and a distributor. But none more novel than the amalgamation of Evansville's Sterling Brewery.

"This was a very unusual buyout for us because we generally work with existing companies," Shortle says of the brewery that in 1988 had been shut down by parent corporation G. Heileman Brewing. "The plant was closed and there was no business. In most of our buyouts, there is usually a business operating and the accounting staff is in place. Here, it all had to be brought together. A new company was created from scratch."

Shortle and associate Steve Cook helped local buyers Mark Mattingly and John Durnin put together a financing package of bank loans and a stock offering. Finally in late 1988, the doors of the new Evansville Brewing Co. opened for business. The venture not only saved some 100 jobs; it also preserved a 125-year-old operation and a cherished piece of Southern Indiana history.

Unusual as it was, the Evansville Brewing scenario in many ways is typical of the latest trend in acquisition financing. Deals these days are moving away from including mostly bank financing, and toward an increased amount of personal venture capital and stock offerings.

"During the 1980s, there was quite a bit of money available from not only private individuals, but also from a number of banks, insurance companies and pension funds," says Don Fischesser, president of DFA Financial Services of South Bend.

"It was fashionable to try to buy a business with very little or nothing up front, using the assets of the company as a way of leveraging the purchase price. Banks went along with this because they might charge some up-front fees that were pretty significant, plus they could get fairly high interest rates," he says.

"If you could generate enough cash flow out of the company to service the debt, then you could pay down the debt, and all the money would go directly to the owners," Fischesser says. "Everybody was caught up in that and wanted to do deals with very little down."

This freewheeling deal-making came to a screeching halt with the savings and loan debacle in the late 1980s and the consequential tightening of banking regulations. Plenty of funds are still available, but many lending institutions...