Capital advisory is the work of deciding what a company’s balance sheet should look like, then going out and building it. It is not the sale of a business. It is what a founder runs when the answer to “we need money” is not “sell the company.”
Engagement profile
| Focus | Capital structure and financing |
|---|---|
| Enterprise value | $5M to $300M |
| EBITDA | $1M to $20M |
| Instruments | Senior, unitranche, mezzanine, preferred, minority equity |
| Geography | United States and Canada |
| Timeline | Three to six months |
| Advisor | Senior advisor led |
What capital advisory is
Most owners of lower middle market companies meet the capital markets three or four times in a working life, and each time from the wrong side of an information gap. The lender has priced a hundred deals this year. The founder has priced one, ever. That asymmetry does not show up in the headline number. It shows up in the intercreditor agreement, in the definition of Adjusted EBITDA, in the redemption date, and in who holds the pen when a covenant is missed in year three.
Capital is priced, and it is also structured. The price is visible and negotiable. The structure is invisible until it matters, and by then it is not negotiable.
Who this is for
Founders funding growth without selling control
Companies needing capital for an acquisition, a facility, a product build or a working capital step change, who want to fund it with debt, preferred equity or a minority investment rather than a majority sale.
Owners taking chips off the table
A recapitalization converts part of an illiquid position into cash while the founder continues to run and own the business. It is the most common reason a lower middle market owner calls, and the one most often mislabelled by generalist advisers as an exit.
Family businesses funding a transition
Buying out a passive branch of the family, funding an estate obligation, or moving ownership to the operating generation. These are financings, not sales, and lenders underwrite them on entirely different criteria.
Companies whose capital structure no longer fits
A term loan maturing into a different rate environment, a lender relationship that has changed hands, an amortization schedule built for a smaller company, or a personal guarantee that should have come off two years ago.
Companies holding a single unsolicited term sheet
One proposal from one fund is not a market. It is a starting point, and it is almost always the worst set of terms the company will see.
Where the market sits in 2026
Founders are routinely quoted terms that sound reasonable in isolation and are not reasonable relative to the market.
Leverage has recovered without returning to peak
GF Data reported total debt at 3.9x trailing twelve month EBITDA across all tracked deals in the first quarter of 2026, with senior debt at 3.3x, against a 3.6x trough in 2023, a 4.0x peak in 2021 and a long run series average of 3.7x. Platform transactions specifically ran lower, at 3.5x total and 2.3x senior. A founder told that 3.0x total leverage is aggressive is being told something that is not true of the market, though it may well be true of that particular lender.
Equity contribution remains historically high
GF Data put average equity into middle market platform transactions at 54.7% in the first quarter of 2026, against a 57.6% peak in 2025 and 53.6% in 2021. Sponsors are still writing large cheques, which is exactly why structured and junior capital has become a live alternative for owners who do not want to sell a majority.
Junior capital is expensive and honest about it
GF Data put average first quarter 2026 pricing at 7.4% for bank senior debt, 11.6% for unitranche and 13.2% for subordinated and mezzanine debt, each down 30 to 40 basis points year over year. Middle market direct lending contractual spreads generally ran 450 to 550 basis points over SOFR entering 2026, against roughly 300 to 320 basis points for new issue single-B broadly syndicated loans. Ninety day average SOFR was approximately 3.67% through April 2026, and the effective federal funds rate stood at 3.63% on 11 August 2026. Lord Abbett observed spreads widening roughly 50 to 100 basis points since late 2025, alongside less leverage, more covenants, fewer payment in kind accommodations and tighter documentation.
There is a great deal of capital looking for these companies
The Alternative Credit Council and AIMA put the global private credit market at US$3.5 trillion at the end of 2025, measured across corporate, asset backed, real estate and infrastructure lending. Abundant capital does not make terms good. It makes terms available, which is a different thing, and it is why a competitive process changes outcomes more reliably than a negotiation does.
The instruments, and what each one costs
Senior debt
The cheapest capital available and the most tightly governed. The negotiation is not the rate. It is the leverage and fixed charge covenants, the definition of EBITDA and which addbacks survive into it, the excess cash flow sweep, the permitted acquisition basket, and whether the founder’s personal guarantee comes off at close or never.
Unitranche
Collapses senior and junior into one facility at one blended rate from one lender. It buys speed and certainty and costs the difference between the blended rate and a bifurcated structure. For a founder running a bolt-on acquisition against a deadline, that trade is often correct.
Mezzanine and subordinated debt
Sits behind the senior lender, prices in the low to mid teens, and typically combines a cash coupon with a payment in kind element and sometimes warrants. The advantage is that it is debt: it does not vote, it does not dilute absent warrants, and it goes away when repaid. The risk is that PIK compounds quietly, so the balance at maturity is materially larger than the balance at funding.
Preferred equity
Carries an accruing return, a liquidation preference ahead of common, and a redemption or put right at a stated date. It is frequently marketed to founders as equity that does not dilute. It is more accurately capital with a deadline, and the redemption date is the single most consequential term in the document.
Minority common and structured equity
The only instrument that genuinely shares risk. It is also the one that introduces a permanent counterparty with governance rights, information rights and a view on when the company should be sold.
The terms that decide who owns the outcome
Founders negotiate valuation. Investors negotiate structure. Structure wins.
Liquidation preference
In the venture and growth financings Cooley tracked in the first quarter of 2026, 98.2% of deals carried a 1x preference and 96.4% were non-participating. Those are the market standard terms in that dataset. A participating preference, or a multiple above 1x, is a departure from market and should be priced as one.
Accruals and redemption
Cooley recorded accruing dividends in 2.4% of first quarter 2026 deals and redemption provisions in 6.1%. An accruing preferred with a redemption right is a bond wearing an equity label. It sets a date by which the company must sell, refinance or lose the argument.
Governance
Board seats, observer rights, and the list of protected actions requiring investor consent. Consent rights over budget, indebtedness, acquisitions, senior hiring and sale of the company can deliver control to a minority holder without a majority of the shares.
Exit provisions
Drag along, tag along, put rights and a defined sale window. A minority investor with a drag right and a five year window is, functionally, a seller of the company on a schedule the founder did not set.
Definitions
Adjusted EBITDA, permitted addbacks, change of control, and the mechanics of any earnout or ratchet. These are drafted rather than negotiated, and they are where value quietly moves.
Common mistakes
- Running the process with one lender. A single term sheet cannot be benchmarked. Competitive tension is the only reliable pricing mechanism available to a private company.
- Optimising for the highest leverage on offer. The lender offering the most debt is frequently the one asking for the tightest covenants, the fastest amortization and the most aggressive sweep.
- Treating preferred equity as free equity. The accrual and the redemption date convert it into a fixed obligation with a fuse.
- Presenting unadjusted financials. A quality of earnings view prepared before the process rather than during diligence materially changes the EBITDA a lender underwrites, and therefore the dollars available.
- Ignoring the intercreditor agreement. In a stressed quarter it governs who can act, when, and against whom. Founders sign it without reading it because it is between the lenders. It is not.
- Confusing a capital raise with a sale process. Different materials, different counterparties, different diligence, different timeline. Running one as though it were the other produces a bad version of both.
Illustrative example, not a specific transaction
A family owned industrial services company generating $6M of EBITDA needs capital for two things at once: an acquisition of a competitor, and a buyout of two non-operating siblings. The first proposal received is a majority recapitalization at a headline enterprise value the family finds attractive. It also transfers control.
The alternative is a financing rather than a sale: senior debt at a conservative multiple, a mezzanine tranche behind it, and no outside equity. The family retains all of the common. At market pricing of the kind reported for the first quarter of 2026, the cost of that capital is well below the value of the equity that would have been surrendered, and the debt amortizes away while the equity would not have.
The right answer depends entirely on the company’s cash flow durability, customer concentration and the family’s tolerance for fixed obligations. The point is that the two paths are rarely compared side by side, because the party presenting the first proposal has no reason to present the second.
This example is provided for illustration. Specific details, parties and outcomes have been omitted or generalized. It does not represent a specific Windsor Drake engagement.
How the process works
Diagnostic
What the balance sheet can support, what the plan actually requires, and what the owner wants to be true in five years. This stage frequently ends with the conclusion that less capital is needed than assumed, or that the timing is wrong.
Structure
Instrument selection and target ranges for leverage, pricing, amortization, covenants and governance, set before any counterparty is approached.
Materials
A lender and investor package built to the standard institutional credit committees expect, with the model, the addback bridge and the diligence file assembled in advance.
Market process
A defined universe of banks, private credit funds, mezzanine providers and minority equity investors, approached on a controlled timetable so term sheets arrive together and can be compared.
Term sheet negotiation
Comparison on structure, not headline rate. Pricing, leverage, covenant headroom, prepayment, governance and exit terms evaluated as one package.
Documentation and close
Credit agreement, intercreditor, shareholder agreement and closing mechanics, with counsel, in the detail where value is retained or lost.
Who leads this practice
The capital advisory practice is led by Bruce Goldstein, Senior Advisor. He is a registered Investment Banking Representative of Independent Investment Bankers, Corp., a FINRA member firm, CRD 2288224. He has held the Series 79 since 2014 and the Series 24 since 1993, has been registered since 1992, and has no disclosures on the public record. His registration history includes Sandler O’Neill & Partners from 1992 to 1995, Keefe, Bruyette & Woods from 1997 to 2001, and Milestone Advisors from 2002 to 2005. He was also a founding partner of Middlemarch Partners, which is not a broker-dealer and therefore does not appear on the registration record.
He has also sat on the other side. He was a founding partner in a MasterCard issuing business and the founder of an online consumer lending company, so he has raised the capital behind a balance sheet as a principal, not only advised on it. His record is verifiable through FINRA BrokerCheck.
Regulatory note
Windsor Drake is not a broker-dealer. Windsor Drake provides capital structure advisory, financial analysis, preparation of lender and investor materials, and process management. Securities-related services, including the offer, placement or sale of debt or equity securities, are provided through Independent Investment Bankers, Corp., a FINRA member firm, under a separate engagement with that firm. Bruce Goldstein is a registered Investment Banking Representative of Independent Investment Bankers, Corp. Nothing on this page constitutes an offer to buy or sell any security or a solicitation of any such offer.
Capital advisory questions
What is capital advisory?
Capital advisory is advice on the structure and sourcing of the capital a company uses to fund itself: senior debt, unitranche, mezzanine, preferred equity, minority equity and hybrid instruments. It covers what to raise, from which type of provider, on what terms, and how the resulting structure behaves over the life of the instrument. It is distinct from sell-side M&A because the owner is not selling the business.
Does Windsor Drake place securities itself?
No. Windsor Drake is not a broker-dealer and does not offer, place or sell securities. Windsor Drake provides capital structure advisory, financial analysis, preparation of lender and investor materials, and management of the process. Where a transaction involves the offer or sale of securities, that activity is conducted through Independent Investment Bankers, Corp., a FINRA member firm, under a separate engagement with that firm. Bruce Goldstein is a registered Investment Banking Representative of Independent Investment Bankers, Corp.
How much debt can a founder-led company carry in 2026?
GF Data reported total debt at 3.9x trailing twelve month EBITDA across all tracked middle market transactions in the first quarter of 2026, with senior debt at 3.3x, against a long run average of 3.7x total. Platform transactions specifically ran lower, at 3.5x total and 2.3x senior. Any individual company’s capacity depends on cash flow stability, customer concentration, capital intensity, working capital swings and sector, and companies below $5M of EBITDA generally see lower multiples than the reported averages.
What does capital cost in the lower middle market right now?
GF Data put average first quarter 2026 pricing at approximately 7.4% for bank senior debt, 11.6% for unitranche and 13.2% for subordinated and mezzanine debt. Middle market direct lending contractual spreads generally ran 450 to 550 basis points over SOFR entering 2026, against roughly 300 to 320 basis points for new issue single-B broadly syndicated loans. Ninety day average SOFR was approximately 3.67% through April 2026. Lord Abbett observed spreads widening roughly 50 to 100 basis points since late 2025 alongside tighter covenant packages. Preferred equity prices above subordinated debt because it sits behind it.
What is the difference between a minority recapitalization and a majority sale?
In a minority recapitalization the owner sells a non-controlling stake, or issues preferred equity, takes cash off the table, and continues to own and run the business. In a majority sale the owner transfers control and typically retains a rollover interest with limited governance rights. The two are often presented as alternatives at similar headline valuations, but they produce entirely different outcomes for control, future upside and the timing of a second liquidity event.
Which terms matter most to a founder in a minority or preferred investment?
Liquidation preference, accruals and redemption, governance, and exit rights. Cooley’s first quarter 2026 data on venture and growth financings showed 98.2% of deals with a 1x preference and 96.4% non-participating, with redemption provisions in 6.1% and accruing dividends in 2.4%. Beyond the preference itself, the consent rights list, board composition and any drag along right determine whether a minority investor can effectively control the timing of a sale.
When is a recapitalization the right answer instead of a sale?
When the owner wants liquidity but not an exit, when the business still has a growth path the owner intends to lead, when a family transition needs funding, or when the current market for the asset is worse than the market the owner expects in three to five years. It is the wrong answer when the business is already at its ceiling, when the fixed obligations created would not be comfortably serviceable in a downside case, or when the owner is genuinely finished.
What size companies does Windsor Drake advise on capital structure?
Companies with enterprise values between $5 million and $300 million, in the United States and Canada, from offices in New York and Toronto.
Sources: GF Data first quarter 2026 leverage, pricing and equity contribution reporting; Cooley Venture Financing Report, first quarter 2026; Alternative Credit Council and AIMA private credit market sizing, year end 2025; Lord Abbett middle market direct lending commentary; Federal Reserve effective federal funds rate as at 11 August 2026. Registration detail per FINRA BrokerCheck.
Windsor Drake Research · Published 13 August 2026