In the heart of West Texas, from his home office in Naples, Florida a deal was orchestrated that turned conventional wisdom on its head, transforming a struggling refinery into a multi-million dollar success story—all with zero dollars down.
“It was a classic case of hidden potential,” Derik Fay recounts in a recent interview. “The company was solid, generating $800,000 in annual net profit, and had $5 million in unencumbered truck assets. But they were drowning in $3 million of factoring debt, a $1.2 million annual burden caused by the pandemic.”
The owners were looking for a $3 million investment in exchange for a 30% equity stake, a proposition that was rejected by all traditional lenders. “Local banks, and traditional lenders wouldn’t touch it,” Fay explained. “They saw the debt, not the underlying strength of the business.”
But Derik Fay saw a different picture. “The key was unlocking the value of those trucks,” he revealed. “I structured a lease-back deal against the trucks for $3.5 million. That instantly paid off the crippling bad debt and put $500,000 into their operating account.”
The impact was immediate. “Net profit jumped to $2 million after the bad debt was cured,” Fay says. “After the truck lease payments, they were still netting $1.4 million annually, plus the $500,000 in the bank, which they used to buy new equipment, adding another $400,000 in profit.
So, they were now at $1.8 million in net profit.”
The transformation was remarkable. “The owners were now at $1.26 million annual profit at 70% ownership, versus $800,000 at 100% and a massive debt service,” Fay emphasizes. “It was a win-win.”
But the deal didn’t stop there. Fay simultaneously negotiated a merger with a larger, complementary company, the interviewer notes. And upon closing, he sold his 30% stake for $2.16 million.
“It was a strategic exit,” Fay explains. “The merged company’s EBITDA was $7.2 million, and my 30% was valued at $2.16 million. I entered the transaction solely to increase value for the owner, and to create a meaningful arbitrage profit for myself; not to become an operator or long term owner.
And the original owners? Their equity tripled overnight.
The mechanics of the deal were ingenious. “It was all about creative financing and strategic partnerships,” Fay says. “I saw the opportunity to leverage their assets to eliminate their debt and create exponential growth.”
“The real takeaway,” Fay concludes, “is to look beyond the surface. Don’t be afraid to think outside the box and create win-win situations. That’s always where the real value lies.”
This West Texas deal, while unique in structure to those looking in from the outside; including me, it is Fay’s common practice, and stands as yet another, in a long line of deals that Fay has surgically executed.
It stands as just another testament to Derik Fays ability to identify hidden value, structure complex transactions, and create remarkable outcomes for all involved.
