Management Buyouts (“MBO”) & Management Buy-ins (“MBI”)
Management teams may at times find themselves presented with the opportunity to buyout the current equity ownership. This type of transaction can lead to the management team owning a considerable minority interest or, under the right conditions, even majority ownership of the equity of the company when partnered with the right investment or private equity firm.
Similarly, top performing executives who have a track record of delivering value for shareholders may discover opportunities in underperforming companies. If partnered with the right investment or private equity firm, these executives may be able to acquire an underperforming company in order to exploit those opportunities to enhance the value of the company. In these circumstances, these executives become part of the post-transaction management team in order to effect the changes required.
The process of conducting a management buyout or buy-in is a delicate undertaking that is easier to manage with the help of an investment banking team. It is also a time-consuming and arduous exercise that can easily distract the management team and hamper the company’s operating performance, possibly putting at risk the owner’s interest in selling the company or the investment group’s interest in providing capital to support the contemplated transaction.
Mid-Mark’s client-centric process ensures that clients experience a focused and efficient process and achieve an optimal transaction arrangement. Mid-Mark’s M&A advisory services assist clients in navigating the key milestones of a management buyout or buy-in transaction, consisting of the following components:
• Interview company stakeholders to identify the desired transaction structure and terms
• Perform extensive due diligence of the business, its products and services, target markets and future growth opportunities
• Research and identify potential capital providers that would have an interest in partnering with the management team on the contemplated transaction
Negotiation of Preliminary Deal Value and Terms
• Assist management in the preliminary negotiations of the transaction with the existing equity ownership
Marketing Material Development
• Prepare non-confidential one page teaser for distribution to potential capital providers and private equity firms, which adds efficiency to facilitating the signing of non-disclosure agreements
• Develop a confidential financing memorandum that highlights the key investment merits of the opportunity, outlines the sources and uses of the contemplated transaction, and details the preliminary deal value and transaction terms.
• Build a model, to be used with the confidential financing memorandum, that demonstrates to the potential capital providers how their capital will be used and when the company could reasonably repay or redeem the capital being sought
Marketing the Transaction
• Distribute marketing materials to potential capital providers and assist potential capital providers in understanding the high-level operational aspects of the business and the ideal structure of the transaction
• Provide weekly status updates to the client
• Assist potential capital providers in understanding the desired transaction objectives of the stakeholders of the client as well as guiding the potential capital providers towards an ideal financing structure and terms that are aligned with the client’s desired outcome
• Negotiate the key points of the letter of intent with the optimal buyer that satisfies or exceeds the client’s objectives
Evaluation of Financing Options
• Perform comparative analysis on term sheets or letters of intent received
• Negotiate the key points of the term sheet or letters of intent with the optimal capital providers that satisfies or exceeds the client’s objectives
• Preparation and updating of the data room throughout the transaction process
• Coordinate data sharing between the client and the potential buyers with a focus on managing the associated risk involved in sharing potentially sensitive information
• Negotiate the finer deal points of the loan or investment documents with the selected capital provider in accordance with the client’s desired objectives
• Assist the client’s advisors in reviewing and suggesting revisions to the language used in the loan and investment agreements and related documents
For more information about our investment banking services, please contact:
Jamison Carson, CPA/ABV