TN Investco Consortium LLC

Industry/Sector: Venture Capital

Deal Type: Placement of $60 million of tax credits

FourBridges Team: Andy Stockett, Chris Rowe, Ben Brown

Client Profile: In 2009, the State of Tennessee passed the Tennessee Small Business Investment Company Credit Act. Through the Act, the State provided funds to venture capital firms by way of tax credits. In 2010, the state legislature authorized an additional $80 million of tax credits. Venture capital firms applied with the State to receive tax credits, which would be sold to qualifying insurance companies. The proceeds were required to be invested in early stage Tennessee-based companies. Several venture capital funds formed a consortium and hired FourBridges to facilitate the sale of the tax credits to insurance companies.

Client Objectives: Each venture capital firm wanted to maximize the tax credit purchase price in order to have as large a pool of investable funds as possible. However, the VC firms also wanted to close the sale of the credits as quickly as possible so they could begin to fund opportunities currently in their pipeline.

The Challenge: Many of the insurance companies that participated in the Fall 2009 round had taken their maximum amount of tax credits, leaving a smaller pool of insurance companies to whom the credits could be sold. Some of the remaining insurance companies were unaware of the program and had to be educated on its unique features and benefits. Finally, while the placement process was ongoing, similar programs in several states were in jeopardy of being repealed due to state budgetary issues, which caused concern for insurance companies.

The Process: FourBridges had an interactive cash flow model and an extensive list of insurance company contacts from the prior TNInvestco round. The team was therefore able to quickly contact the appropriate investment and tax representatives at each insurance company to notify them of the expanded program and begin negotiations around structure and pricing.

The Result: Due to FourBridges' marketing efforts and negotiations, the $60 million of tax credits were quickly over-subscribed with insurance company demand. FourBridges was therefore able to sell the tax credits at very favorable pricing. Additionally, FourBridges achieved its clients’ goal of a quick transaction, closing the sale of the credits only 34 days after the legislation was signed into law by the governor.

Testimonials: "Thanks a lot for a job well done getting this transaction closed. You guys did a terrific job coordinating multiple buyers and multiple sellers. The result is an attractive deal for all of us – I like the price, and I like the quality of the players you brought to the table. Great job!" - Gary Stevenson, Managing Partner, MB Venture Partners

"All of you added value to the process, and I’m certain that we would not have achieved as good a result without you. It was a pleasure doing business with you and I look forward to doing more business with you in the future." - Townes Duncan, Managing Partner, Soldius Company

“FourBridges did a fantastic job on this transaction. They worked hard to identify suitable buyers and closed the sale quickly and effectively, allowing us to get to work on funding Tennessee-based early stage ventures.” - Sid Chambless, Managing Partner, Tennessee Angel Fund

FourBridges Capital Advisors is a middle market investment bank providing sell-side, buy-side, capital raising, restructuring, and strategic advisory services primarily to closely-held and family-owned businesses. FourBridges is based in Chattanooga, Tennessee, and serves clients in cities across the Southeast, including Atlanta, Nashville, Birmingham, Memphis, Knoxville and Huntsville.

Past performance is no guarantee of future results, and there can be no guarantee that these results will be duplicated in the future. Any testimonials presented herein may not be representative of the experience of other clients.