Mergers & Acquisitions Advisory

Sell Side Transactions
Buy Side Transactions
Leveraged and Management Buyouts
Going Public Transactions
Going Private (Public to Private) Transactions
Recapitalizations

Leveraged and Management Buyouts
A leveraged buyout is a transaction involving a tender offer for all of a company’s common stock made by a group of investors. A management buyout is a type of leveraged buyout, where the acquiring group includes some members of the target’s management team. In either case, the result is a new owner of the company.

There are many different circumstances or events that may initiate a management buyout including generational transfers, divestitures of corporate divisions, or threat of a hostile takeover.

Leveraged and management buyouts typically rely on debt to finance a significant portion of the purchase price, as well as private equity for larger transactions.

Naturally, investors pursue investment opportunities that are likely to generate high rates of return relative to the risks involved, and are therefore likely to target traditional businesses with solid fundamentals. As such, the majority of buyouts involve mature, stable companies that have an established track record of generating strong and sustainable cash flows. An ideal transaction would be compromised of the following:

• Cash on the Balance Sheet
• Strong Projected Cash Flow
• Adequate Debt Capacity
• Strong Management Capabilities
• Attractive Industry Fundamentals
• Strong Market Position
• Attractive Purchase Price

Regardless of business fundamentals, the arrangement must provide new equity investors with an acceptable projected rate of return and give the acquired company enough financial flexibility to pursue its growth objectives and service debt. It is important that the capital structure fully considers the interest of all parties concerned, including the employees, selling shareholders, management and perhaps most importantly, that the structure is in the best interest of the business itself.