Non-Sponsored Management Buyout Financing (Non-Sponsored MBO)
Non-Sponsored Management Buyout Experience: Lantern Capital Advisors experience encompasses helping managers and minority shareholders execute their non-sponsored MBO that realize control of the business while allowing them to create significant value.
Non-Sponsored Management Buyouts (Non-Sponsored MBO)
However, for financially healthy businesses, there is an alternative management buyout 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, and it’s the type of management buyout transaction that Lantern Capital Advisors specializes in helping owners and managers execute.
Key Requirements of Non-Sponsored Management Buyouts (MBO)
The process of completing a non-sponsored management buyout (non-sponsored MBO) is pretty much like any other kind of business financing. The key requirements for a successful non-sponsored management buyout are pretty much like any other business financing and include a quality team, proactive management, and agreement on purchase price.
Creative Buyout Math: Putting It All Together
Management Buyout Financing:
Should the management buyout financing fall short of what is desired by the owner, management and the owner can still execute the transaction, but the owner may retain a portion of the business until their “equity” is repaid. Following the math here, if a buyer purchases a company for $10Million (5X EBITDA) and can borrow $8Million (4X EBITDA) they end up owning 80% of the Company, and the Seller would retain a portion of the company, but their piece would become “the equity”. Owners are satisfied because they get a majority of their cash up front with no recourse. Buyers like it because they get control either upon the initial buyout, or as the equity is paid out to the seller over time. The Seller can be repaid over a period of time (decreasing their ownership over time). Also, most of these specialty lenders do not require personal guarantees limiting the downside risk to new owners. Over time the owner’s remaining interest can be bought out, often at a higher valuation. Most important, the value to all parties is directly driven by the buyer’s performance rather than financial engineering by outside investors.
What our clients are saying...
“I spoke with multiple financial firms about the possibility of conducting a management buyout of a particular division. Most of them seemed more interested in developing a long term relationship with the parent company than they were in securing the best possible deal for me. I was then referred to Lantern Capital Advisors and things just clicked. They listened carefully to my vision for the business and patiently explained every step of the management buyout process. They met every expedited timeline and used their extensive network to find me the best possible investment group. I don't know that a deal would have been completed without their guidance. I would recommend Lantern Capital Advisors to anyone contemplating a similar transaction.”
— JR, CEO, Consumer Products Company
“I spent years doing research and speaking to advisors, investors, and banks. I cold find no support for the find of management buyout transaction I wanted to do and believed could be done. That is, until I stumbled upon Lantern Capital Advisors. Just one phone call to Lantern and I heard the words, "it absolutely can be done!" Lantern then helped me make it happen. I will be forever grateful to Lantern Capital Advisors for their counsel, expertise, and hard work in leading us to our goal.”
— DF, CFO, Full Service Call Center