Last year Larry Miller, president of Osiris Holding, was in a bind. The business, a cemetery and funeral-home company in Trevose, Pa., was in sound financial health, the industry was rapidly consolidating, and Miller could envision profitable growth of up to 25% a year -- if he could raise enough capital to finance a series of key acquisitions.

But Osiris, with sales of around $20 million, had maxed out its credit lines and borrowing potential. Although it had financed some small acquisitions with cash, that wasn't an option as it aimed at bigger targets. Going public wasn't an option either, at least for a while. "We'd be able to sell our stock for much more later on," says Miller, "if we could just build the right critical mass first."

Rather than pursuing venture capitalists -- which Miller considered only a short-term solution, and a costly one at that -- he decided to pursue a private placement, an increasingly viable option these days. Jai Bowers, a managing director of CMS Companies, the Philadelphia merchant-banking firm Miller consulted, explains, "It includes all kinds of financings that are not publicly sold." Investors are generally insurance companies, pension funds, or other large financial institutions.

The beauty of private-placement financings is their flexibility. (See "A Mix-and-Match Money Menu," [Article link].) "Companies might raise $100,000 or tens of millions of dollars. Every private-placement deal is driven by the unique needs of the company and its owner," says Bowers. "When people come to us, we draw up a wish list. Then we sort out their possible alternatives."

Miller's needs were clear: "I wanted to raise between $10 million and $20 million, because that would increase our capacity to finance acquisitions." Miller also wanted to "keep our financing costs at some kind of fixed interest rate, because then I'd be able to factor that into potential acquisitions to see if they made financial sense for us."

Given Osiris's strong five-year record of growth and profitability, Bowers was able to help make Miller's wishes come true: he structured a deal that raised $13 million from a large local pension fund -- the Pennsylvania Public School Employees Retirement System (see "What Pension Funds Want," [Article link]) -- by selling a package of subordinated debt and convertible preferred stock, which included a fixed interest rate and dividend yield. "It took time and work to make the deal happen," says Miller, "but the results were outstanding."

* * *