Leveraged Buyout Financing | Lantern Capital Advisors | Achieving Leveraged Buyout Financing

Leveraged Buyout Consulting Practice: How Lantern Capital Advisors Executes Leveraged Buyouts

Private equity firms like the Carlyle Group, Kohlberg Kravis Roberts and many others have made huge returns for investors through leveraged buyouts. Using a little financial engineering and a lot of debt, these firms buy companies with little money down. While these types of transactions lead by private equity firms create spectacular returns for investors, they often shortchange the seller and management teams that drive the business. Thankfully, owners and managers can use these same financial tactics to buy and sell their business and have the benefit accrue to them.

How Most Leveraged Buyouts are Done

Private equity firms do hundreds of buyouts a year. Their typical approach is to offer to buy a controlling stake in a company using leverage they obtained from banks based on the financials of that company. Often times these firms commit very little of their own money to purchase the business. With little cash invested, these deals create spectacular returns for the buyout firm.

Equity firms or buyout firms also collect large fees up front, as well as additional advisory fees while operating a company they've acquired, and a big share of the investment profits. The average annual management fee to do business with a private equity firm is about 1.5% to 2.5%. The average share of profits is about 20%. While buyout firms give the management team some ownership, it’s usually less than 20% of the company, across all of the individual management. The equity firm is interested in profits, and their own exit strategy. This type of buyout is the most common and is typically called a Sponsored Leveraged Buyout, where the equity player is the “Sponsor.”

Non-Sponsored Leveraged Buyouts

For financially healthy businesses, there is another approach that utilizes the same financing techniques but management gains operating control. In fact, management can end up owning 85% to 100% of the Company depending on the situation. These types of buyouts are called Non-Sponsored Leveraged Buyouts, and Lantern Capital Advisors specializes in these types of buyouts, because it leaves control with the management team.

Next Learn About: Non-Sponsored Buyouts and Lantern Capital Advisors

Leveraged Buyout Services and Lantern Capital Advisors

Learn More About Buying Out A Partner Or Business Owner

Lantern Capital Advisors: How We Raise Capital

Leveraged Buyout (LBO)

Leveraged Buyout Financing

Lantern Capital Advisors helps management and minority shareholders execute leveraged buyouts that realize control of the business while allowing them to create significant value.

White Paper Library:

Management Buyout Strategy

“Creative Management Buyout Strategies”

Download from CFO.com

August, 2008

Chris Risey - Atlanta

Abstract:

Private equity firms particularly those that focus on buying smaller companies (less than $100 million in value), will often structure the financing of a buyout utilizing limited amounts of their own equity and aggressive debt structures. While such an approach can create spectacular returns for their investors, management and the sellers can often end up feeling shortchanged. Thankfully, owners and managers can use their own creative buyout strategies to create substantially more value for both buyer (management) and seller (owner).

Selling Your Company

“Selling Your Company: How Selling Your Company To Management Can Be An Alternative Exit Strategy”

Download from CFO.com

April 2010

Chris Risey - Atlanta

Abstract:

Business owners often overlook selling their company to management as a possible exit strategy. But for solid companies with good cash flows, selling your company to management may yield a higher financial value for the owner and a much brighter future for the business, management, and the seller. This white paper discusses the benefits of the strategy of selling to management, and illustrates it with an example of a company that successfully completed a leveraged management buyout after proactively pursuing other alternatives.