Merit Capital Partners

Dunn-Edwards is a leading manufacturer and distributor of high quality paint in California, Arizona, and Nevada. The Company, founded in 1925, was family-owned for more than 75 years. The Company offers more than 400 products through more than 60 store locations. The Company’s strong reputation and consistently high quality products have resulted in extreme loyalty among high-end paint contractors and consistent growth.

Given its relatively consistent performance over the years, the Company, owned by three Edwards brothers, came to a crossroads in 2001. The brothers contemplated several options including an outright sale. Ultimately, two brothers decided to sell their interests in the business to a newly formed ESOP. The third brother retained his interest in Dunn-Edwards.

Merit Capital Partners was approached to support the recapitalization and ESOP transaction. While many subordinated lenders avoid transactions involving ESOPs and those without a significant institutional equity sponsor, Merit is comfortable with these situations. Merit has worked with a number of ESOPs in the past and utilized its experience and understanding to complete the transaction. Further, Merit does not require an institutional equity sponsor in its transactions, frequently working directly with management teams and entrepreneurial owners like those at Dunn-Edwards.

Merit invested $20 million in subordinated debt in Dunn-Edwards. Following three very successful years under the ESOP’s ownership, Merit negotiated for the repayment of its debt and the repurchase of its warrant. Merit earned a good return for its investors while helping to facilitate the successful recapitalization ESOP transaction at Dunn-Edwards.