Building Products Deals: Mezzanine Debt & Capital Stack Done Right
Independent sponsor counsel for building products, focused on Mezzanine Debt & Capital Stack and the deal mechanics that protect sponsor economics and LP alignment.
Building Products deals in the lower middle market run a specific playbook. Mezzanine Debt & Capital Stack is where the structure either holds or starts to leak.
The typical building products platform sits at $10M to $150M EV with EBITDA in the $2.5M to $25M range. The thesis runs on regional manufacturer or specialty distributor consolidation. Pricing power lives in dealer contracts, not in branding. Read the dealer agreements before the LOI.
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 building products, layer in raw-material pass-through clauses confirmed 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 Building Products, 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.