Auto Aftermarket Deals: Mezzanine Debt & Capital Stack Done Right
Securities and M&A counsel for independent sponsors structuring auto aftermarket transactions, from LOI to close to the capital markets that open up afterward.
An independent sponsor closing auto aftermarket transactions in the $8M to $90M EV range has a defined set of moves at the Mezzanine Debt & Capital Stack stage. Most of them are not in a generic M&A textbook.
The typical auto aftermarket platform sits at $8M to $90M EV with EBITDA in the $2M to $16M range. The thesis runs on service-center or specialty-shop regional roll-ups. Technician shortage is the single biggest valuation risk. Underwrite the bench, not the bays.
How Mezzanine Debt & Capital Stack actually gets structured.
Target senior leverage at 3.0x to 3.5x EBITDA, mezzanine at 1.0x to 1.5x on top.
Negotiate an intercreditor agreement that does not throttle the operator.
Structure mezzanine with PIK toggle and warrants priced into the IRR model.
Confirm covenant headroom of at least 20 percent at close.
In auto aftermarket, layer in technician retention pool defined and funded as part of the Mezzanine Debt & Capital Stack workstream.
Letting the lender pick the intercreditor terms. Those terms decide what the operator can do on day 180.
"The capital stack is a contract, not a spreadsheet. Read every page of every term sheet."Jason Powell · Mezzanine Debt & Capital Stack
The deal is one thing. The capital that opens up after close is another.
Capital after close is where the IRR actually gets made. The right introductions at month nine through month thirty are where this practice works as hard as it does at the LOI.
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Mezzanine Debt & Capital Stack for Auto Aftermarket, on independent sponsor terms.
Independent sponsor counsel that already speaks fluent deal-by-deal economics, structures clean LPAs, and travels with capital markets relationships for what comes after close.