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.
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 Company achieves 80% of its forecasted annual income over the next 5 years, the manager’s ownership stake will increase to over 42%. In addition, other key management and the selling owner also own 13% of the equity. If the Company achieves near its financial plan, the key management along with selling owner are positioned to own 55% of the Company’s equity.
Today, the manager serves as CEO and works with a ‘hands-off’ investment fund that gives him autonomy to set the Company’s strategic direction and run the day-to-day operations.
Unique Financing Challenges:
- The division had limited operational and financial history less than three years
- The manager had limited personal capital to invest
- Manager wanted a significant ownership stake and control of the company after the management buyout
- The transaction needed to be done quickly to realize the opportunity
Lantern helps companies secure capital from a variety of financing alternatives to help owners take capital out of their business and provide for some owner liquidity financing.
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Lantern Capital Advisors helps growing companies secure financing from a variety of capital sources. Our fees are based on our time and do not vary based on the financing or funding sources our clients choose. Our fees are ofter a fraction of the cost of those charged by investment banks or brokers for a similar service. Our process allows us to provide early feedback direct from funding sources within weeks of starting a project.