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Client Case Study: Hotel Equities Joins Forces With Virtua Partners

In the recent investment in Hotel Equities by Virtua Partners, we advised Hotel Equities on a mutually beneficial transaction by providing background advice, market benchmarks for business terms, risk assessment and negotiation support.

After a year of discussions about the business partnership that they could create together, the owners of Hotel Equities, an Atlanta-based hotel management company, and Virtua Partners, a Phoenix-based private-equity firm specializing in commercial real estate, decided to formalize their relationship with an investment by Virtua Partners into Hotel Equities.

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ISSUES & CONCERNS

1. While the investment looked attractive, Hotel Equities’ owners needed confidence that the details of the transaction would result in a future business relationship that worked for them.

2. Founder and chairman Frederick Cerrone and president and CEO Brad Rahinsky were not concerned with managing the project of due diligence, which was similar to their real estate deals; they wanted experienced advice about the terms and risks of operating company transactions.

3. As conversations with Virtua Partners stopped and started, they needed someone who was present when needed, not pressing the deal but simply helping get it across the finish line.

TRANSACTION HIGHLIGHTS

1. Hotel Equities is a founder-owned hotel management business that provides services to 115 properties across 25 states and two Canadian provinces with a total of $2 billion in assets under management.

2. Virtua Partners is a global private-equity firm specializing in commercial real estate. Through a family of vertically integrated companies, Virtua provides debt and equity origination, asset and property management, debt restructuring, commercial real estate development, and fund management.

3. For Cerrone, this transaction was an important liquidity event that would facilitate succession to the next generation of management. For Rahinsky, it was the foundation for an ambitious business plan to fuel growth by deploying more than $500 million into investments in hotel management company acquisitions, organic growth and various hospitality assets.

4. Cerrone, Rahinsky, their financial advisor and director John Ellard of JOYN Financial and lawyer Kevin Armbruster of Cushing Morris Armbruster & Montgomery wanted investment banking help that would facilitate a transaction, assess deal risks and work well as part of a team to get a single opportunity over the finish line.

5. Our job was to help Cerrone and Rahinsky plan their moves, considering what aspects of the deal should be considered “market” and which not; giving insight into the financing environment being navigated by Virtua Partners; and assessing deal terms as they naturally changed during negotiation.

Oaklyn Consulting is an advisor of choice for helping privately-owned companies with capital strategy decisions and small or complex transactions. We serve as a guide, not a broker, providing middle market investment banking services as consultants with time-based billing.

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