How To Execute Management Buyouts
Private equity firms like the Carlyle Group, Kohlberg Kravis Roberts and many others have made huge returns for investors through buyouts. Using financial engineering and a lot of debt these firms buy companies with little money down. While these types of transactions 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.
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.
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 management ownership, it’s usually less than 20% of the company. This type of buyout is the most common and is typically called a Sponsored Leveraged Buyout, where the equity player is the “Sponsor.”
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 Management Buyouts.
Next Learn About Non-Sponsored Management Buyout Financing
Lantern Capital Advisors works with management teams to achieve management buyout financing that allows management to achieve operating control of the company. Learn About How Lantern Capital Advisors helps management teams achieve management buyouts using non-sponsored management buyout financing.
Accomplishing a buyout where management owns a significant portion of the equity requires some out of the box thinking that can go against the conventional wisdom for financing management buyouts. Lantern Capital Advisors suggests five important strategies for both completing a buyout and maximizing management ownership.
Buyout A Business Partner: Learn How To Buyout A Business Partner
Many times in business, one owner wants to buyout another owner, or one business partner wants to move in a different direction from the other business partner. Lantern Capital Advisors works with management teams to achieve management buyout financing.
Raise Capital Process: Learn More About How We Raise Capital
As consultants, Lantern Capital Advisors has a defined process to raise capital. Learn about our three phased approach to raise capital to finance management buyouts.
WE ARE NOT A BROKER. WE ARE NOT AN INVESTMENT BANKING FIRM. Lantern Capital Advisors is a corporate financial consulting firm that specializes in corporate financial planning and executing management buyouts, specifically geared towards raising capital for established growing companies.
Lantern Capital Advisors does not accept referral fees, broker fees, or equity as any compensation from any client or institution.
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Contact Lantern To Assist You On Your Management Buyout/MBO Financing
Our methodology is very efficient, effective and proven. We can very quickly package a company for the market, confidentially solicit institutional interest, and negotiate proposals – clients can expect term sheets as soon as three to five weeks after engaging Lantern to manage the management buyout financing process, and achieve financing in as little time as eight weeks.
We pride ourselves on being FAST, TRUSTED, and COST EFFECTIVE.
Lantern Capital Advisors believes that a company’s best interest is to look for and secure multiple management buyout financing options (MBO Financing) in order to achieve the best financing terms.
Lantern Capital Advisors prides itself on being FAST, TRUSTED, and COST EFFECTIVE.