MBO Management Buyout: PE vs No-PE

MBO Management Buyout: PE vs No-PE I have a client pursuing a MBO management buyout of his company from its public parent. As we assessed different management buyout financing options, he had a big decision to make. Did he want to partner with a private equity firm (PE) or do the financing on an all debt basis through a combination of bank and non-bank lenders (non-PE)? Here is the upside and downside of using private equity for management buyout financing and what he ultimately chose. Benefits of Private Equity Led Management Buyout PE firms run the closing process – Once […]

Determining Value Early On is a Good Idea for Business Partners

Partner Buyout:  Determining Value Early On is a Good Idea for Business Partners I was recently asked if I could help a company develop a valuation methodology for their business so that if one partner wanted to buyout the other, they would already have an agreed up on formula valuing the business.     Two weeks later I got a different call from another owner asking for the name of a valuation consultant because one partner had died and they needed to get a valuation to figure out the value of the Company.  The spouse of the deceased partner was getting […]

Financing Challenges: How We Helped a Client Buy His Division From The Owner

Management Buyout Financing Challenges:  How Lantern Capital Advisors helped a client buy his division from the owner. Situation:  A divisional manager wanted to buy his division from the owner who was having financing challenges with the bank. How Lantern Capital Advisors helped execute the management buyout: Lantern helped the manager negotiate the purchase price and terms of the management buyout and secure $7 million to finance it (management buyout financing).  As part of the transaction, this division was spun out into a separate entity.  The manager invested $200,000 and received a 25% ownership stake in the new Company.   If the […]

Owner Exit Strategies

Owners of businesses typically dream of going public or performing an IPO, even though less than 1% of businesses ever achieve this.  However, for the remaining 99% of businesses out there, there are multiple viable options that owners should consider and evaluate when determining their business exit strategy.   Ideally, owners should plan for their owner liquidity event at least five years in advance of their “target date”.  However, sometimes an opportunity appears unexpectedly, and Lantern is called to rapidly evaluate the opportunity and the assist our clients in negotiating next steps.   Some strategies and alternatives that Lantern Capital Advisors has helped […]

The (Pricing) Power of Competition

The Power Of Competition We recently completed a $25 million management led buyout for one of our clients. Even after doing this for many years, I am always surprised by what I learn or what I am reminded of. In this case its, the power of competition. Or more precisely, the pricing power of competition. Without getting into details, my client was doing a management buyout. In our process, we always send the business plan out to as many financing sources as we can find. This typically means at least 50. In this case, one of the first meetings we […]

Message To Management: Don’t Wait!

Last week I got a call from a CEO of small software company. His parent was in the process of selling his company. The process of selling the business was taking longer than expected and the price was below the range the seller really wanted. He called to ask me if he thought he could lead a management buyout. After talking to him and reviewing the numbers, I told him – yes. Two days later he had a meeting with the parent and they had just accepted an offer from another buyer, and was starting due diligence. The morale of […]

Weekly What If: Buy Out Business Partner

Exit Strategies What if we buyout our business partner?  For some companies, their biggest roadblock to growth isn’t a lack of ideas, motivation or initiative. It is a business partner that has other priorities.  For companies with significant growth potential, this challenge arises frequently. One owner wants to grow; the other wants to sell.  One owner sees potential and the other sees risk. Sometimes this comes from different perspectives, stages of life or generations like in family businesses (the younger generation wants to build wealth while wants to protect it).  Owners caught in this position can go through years of […]

Selling Your Company To Management

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. Our latest white paper titled, “Sell Your Company To Management: How Selling Your Company To Management Can Be A Smart Exit Strategy”, was recently published on CFO.com. The white paper discusses the benefits of the strategy of selling the company to management, and illustrates it with an example of a company that […]

Partner Buyout: An Opportunistic Way To Build More Equity Value

Partner Buyout: An Opportunistic Way to Build More Equity Value.  Management Buyout and Leveraged Buyouts financing processes can be orchestrated in the same way in order to help individuals buyout a partner or majority owner of a business.  Partner buyouts can be financed on an all debt basis because the partner already has some equity in the business and this equity can be leveraged as the security in the business. Even during this sluggish economy, some of our clients positioned themselves to build much greater business and equity value by buying out other owners or buying out partners.  While some of these opportunities came about because owners […]

Shaken Economy Creates Management Buyout Opportunities

Management Buyout Opportunities: In a shaky economy a logical strategy for management is to focus on just hanging on to the business you have. For proactive management teams and owners it can be a time to reconfigure the business or ownership in order to realize in greater benefits in the future. Such is probably the case in recently announced buyout of Landry’s Seafood (NSYE: LDY). Looking at the proposed buyout terms, which include buying out all the outstanding shareholders at $21 per share and assuming $885 million of debt, the most interesting aspect is the upside for the future majority […]