Buying Out a Business Partner or Shareholder: Structuring and Financing the Deal
When an entrepreneur starts a new business, planning for a buyout of a business partner years in the future is rarely a top priority- but maybe it should be.
As businesses grow and evolve, so too do ownership or shareholder groups. The same partners or investors who took a company from startup to $20 million in revenues aren’t necessarily the right people to grow the company from $20 to $50 million, or $50 to $150 million, and so on.
Layer in retirements, partnership disputes and absentee or non-strategic owners receiving generous compensation, and making changes in ownership becomes increasingly more important (and costly) as the business grows.
On the next few pages, we’ll discuss:
1. When a Partner Buyout is a Solution
2. Valuing the Business
3. Structuring a Partner Buyout
4. Financing a Partner Buyout
5. Questions a Business Owner Should Ask When Raising Capital
6. Using an Investment Banker to Raise Capital for the Buyout
About Access Capital Partners:
Access Capital Partners is a middle market investment bank that provides strategic advisory services, raises capital for companies (growth, refinancing, restructuring, acquisitions, partner buyouts, management buyouts, leveraged buyouts), and helps business owners sell or recapitalization their companies.
We are shareholder centric and have deep experience in the middle market. With over 100 transactions representing over $8 billion in volume, business owners leverage our experience as they navigate through inflection points and ultimately achieve personal liquidity.
Financing Acquisitions Using Debt CapitalGreg Tobben
SC Credit Advisors provides financing advisory services for middle market acquisitions. The document includes a case study comparing two capital structures for a $100 million acquisition - a more conservatively leveraged structure with $60 million total debt and an alternative with $75 million total debt. It also discusses considerations for evaluating debt capital and different capital solutions for acquisition types such as conventional, distressed, or those involving multiple acquisitions. SC Credit Advisors aims to develop tailored financing solutions to allow clients to focus on running their businesses.
Making the Most Out of the Independent Sponsor Model - Access Capital Partners Greg Tobben
For most independent sponsors, especially new ones, it’s helpful to get perspective on how different groups have implemented the independent sponsor model and learn what’s working for other groups and what’s not.
As advisors to this expanding group of investors, we speak regularly with both new and long-time sponsors, as well as independent sponsor capital providers. Here are 6 guidelines to help you get the most out of the independent sponsor model:
Warrants are call options that give the holder the right to buy shares of common stock from a company at a fixed price for a set period of time. Warrants are often issued with bonds to make them more attractive to investors. They can be detachable, puttable if sold back to the company, or naked if issued on their own. Convertible bonds are similar to bonds with warrants but cannot be separated into different securities. Convertible bonds provide value from the straight bond, conversion option, and potential appreciation if converted to equity. They help align incentives of bondholders and stockholders.
Securitization is the process of converting future cash flows from assets into marketable securities that can be sold to investors. An originator transfers a pool of financial assets like loans or receivables to a special purpose vehicle (SPV). The SPV issues securities called pass-through certificates or pay-through certificates to investors to fund the purchase. Investors receive periodic payments from the cash flows generated by the underlying assets. This allows the originator to raise funds and transfer assets off its balance sheet.
Bonds are debt instruments issued by organizations and governments to borrow funds that have a fixed maturity period of over one year. Bond holders receive interest payments, called coupon rates, on the principal amount until the bond matures. There are different types of bonds including serial bonds that mature individually over time, sinking fund bonds where part of the proceeds go into a sinking fund for repayment, and convertible bonds that can be exchanged for shares of common stock. Governments and corporations issue various bond types to meet their long-term borrowing needs.
The document provides an overview of interest rate swaps, caps, and floors. It defines what an interest rate swap is, how swap terms are quoted in the market, and how the swap rate is calculated. It also explains how swaps can be used by institutional investors for asset/liability management and risk management. Additionally, it describes what swaption, rate caps, and floors are and how they can be used. The learning objectives are to understand these various derivative instruments and how they work.
Preference shares have characteristics of both equity shares and debentures. Like equity, there are no obligatory dividend payments but dividends are not tax deductible. Like debentures, dividends provide a fixed rate of return but preference shareholders have priority over equity shareholders for dividends and assets in liquidation. Preference shares can also be redeemed or perpetual, cumulative or non-cumulative, and convertible or non-convertible. Voting rights for preference shares are now restricted except if dividend arrears exceed two years.
Financing Acquisitions Using Debt CapitalGreg Tobben
SC Credit Advisors provides financing advisory services for middle market acquisitions. The document includes a case study comparing two capital structures for a $100 million acquisition - a more conservatively leveraged structure with $60 million total debt and an alternative with $75 million total debt. It also discusses considerations for evaluating debt capital and different capital solutions for acquisition types such as conventional, distressed, or those involving multiple acquisitions. SC Credit Advisors aims to develop tailored financing solutions to allow clients to focus on running their businesses.
Making the Most Out of the Independent Sponsor Model - Access Capital Partners Greg Tobben
For most independent sponsors, especially new ones, it’s helpful to get perspective on how different groups have implemented the independent sponsor model and learn what’s working for other groups and what’s not.
As advisors to this expanding group of investors, we speak regularly with both new and long-time sponsors, as well as independent sponsor capital providers. Here are 6 guidelines to help you get the most out of the independent sponsor model:
Warrants are call options that give the holder the right to buy shares of common stock from a company at a fixed price for a set period of time. Warrants are often issued with bonds to make them more attractive to investors. They can be detachable, puttable if sold back to the company, or naked if issued on their own. Convertible bonds are similar to bonds with warrants but cannot be separated into different securities. Convertible bonds provide value from the straight bond, conversion option, and potential appreciation if converted to equity. They help align incentives of bondholders and stockholders.
Securitization is the process of converting future cash flows from assets into marketable securities that can be sold to investors. An originator transfers a pool of financial assets like loans or receivables to a special purpose vehicle (SPV). The SPV issues securities called pass-through certificates or pay-through certificates to investors to fund the purchase. Investors receive periodic payments from the cash flows generated by the underlying assets. This allows the originator to raise funds and transfer assets off its balance sheet.
Bonds are debt instruments issued by organizations and governments to borrow funds that have a fixed maturity period of over one year. Bond holders receive interest payments, called coupon rates, on the principal amount until the bond matures. There are different types of bonds including serial bonds that mature individually over time, sinking fund bonds where part of the proceeds go into a sinking fund for repayment, and convertible bonds that can be exchanged for shares of common stock. Governments and corporations issue various bond types to meet their long-term borrowing needs.
The document provides an overview of interest rate swaps, caps, and floors. It defines what an interest rate swap is, how swap terms are quoted in the market, and how the swap rate is calculated. It also explains how swaps can be used by institutional investors for asset/liability management and risk management. Additionally, it describes what swaption, rate caps, and floors are and how they can be used. The learning objectives are to understand these various derivative instruments and how they work.
Preference shares have characteristics of both equity shares and debentures. Like equity, there are no obligatory dividend payments but dividends are not tax deductible. Like debentures, dividends provide a fixed rate of return but preference shareholders have priority over equity shareholders for dividends and assets in liquidation. Preference shares can also be redeemed or perpetual, cumulative or non-cumulative, and convertible or non-convertible. Voting rights for preference shares are now restricted except if dividend arrears exceed two years.
This document provides an overview of bonds, including their meaning, classifications, issuance procedures, and important terms. It discusses government bonds, corporate bonds, secured/unsecured bonds, and bond yields. It also covers international bonds such as Eurobonds, foreign bonds, and bond markets. Examples are given of debt crises in Pakistan and Sri Lanka related to rising external debt levels.
This presentation discusses hedging as a tool for offsetting exchange rate risk. It covers different types of hedging techniques including forward market hedges, money market hedges, and hedging with swaps. Forward market hedges use forward contracts to lock in exchange rates for expected foreign currency cash flows. Money market hedges involve borrowing and lending in different currencies to lock in home currency values. Swaps allow two companies with foreign currency receivables and payables to exchange them, effectively hedging each other's exchange rate risk. Examples are provided to illustrate how each hedging technique works.
The document summarizes the findings of a survey conducted to understand awareness and preferences around mutual funds among existing ICICI direct customers in Udaipur. Key findings include: 60% had awareness of mutual funds while 40% did not, with 99% preferring online investment. The top reasons for not investing in mutual funds were needing assistance (23%) and needing more knowledge (23%). Suggestions to increase mutual fund investment included customer education, providing regular market information, building relationships, and competitive broking charges schemes. The conclusion notes huge opportunities for mutual funds in Udaipur exist but competition is intense and wrong perceptions need addressing.
An investment is defined as committing funds with the expectation of earning a positive return in the future. It involves sacrificing present consumption for future benefits and always carries some degree of risk that the actual return may be lower than expected. The key elements of any investment are expected return, risk, safety, liquidity, and potential tax benefits. Common avenues of investment include bonds, gold, mutual funds, real assets, equities, insurance policies, and financial derivatives. Factors like current events, currency valuations, production costs, and economic/political uncertainty can influence fluctuations in gold prices over time.
The volatility in today’s financial markets is making it impossible to know where to invest and grow your money without the fear of losing your lifetime savings. Historic low interest rates are making is difficult to provide the income needed by investing in safer investments such as CDs and annuities. Investing a portion of your overall portfolio in fixed income investments should be considered as a solution to reducing volatility and providing needed income.
The document discusses how net asset value (NAV) of a mutual fund is determined. It states that NAV is calculated by dividing the total market value of all the securities in the mutual fund's portfolio by the total number of outstanding units. It also notes that short-term mispricing of the underlying securities can result in over- or undervaluation of the mutual fund's NAV, in direct proportion to the mispricing of the securities owned by the fund. The document emphasizes that the price of mutual fund shares is not determined by the forces of supply and demand, but solely by the value of the underlying securities in the fund's portfolio.
Mutual funds pool money from investors and invest it in securities like stocks and bonds. Professional fund managers invest the pooled funds to help investors achieve their financial goals. Mutual funds offer investors a way to invest in different asset classes like equities, bonds, and money market funds. Starting investments early and making regular investments over time allows investors to benefit from compound returns and dollar cost averaging.
Preference shares are shares that have preferential rights to dividends and repayment of capital compared to common shares. There are several types of preference shares: cumulative vs non-cumulative, participating vs non-participating, convertible vs non-convertible, and redeemable vs non-redeemable. Preference shares provide benefits like helping companies raise long-term capital and guaranteeing fixed returns, but also have drawbacks like lack of trading and lower returns.
Private equity consists of investors and funds that make direct investments in private companies or conduct buyouts of public companies. Capital is raised from retail and institutional investors to fund new technologies, expand working capital, make acquisitions, or strengthen balance sheets. Private equity firms partner with investment banks, investors, and management teams. Private equity investments are geared towards long-term strategies in illiquid assets, allowing more control over operations compared to hedge funds which focus on liquid securities. Exits can occur via IPOs, mergers and acquisitions, or recapitalizations. The global private equity industry manages over $2 trillion in assets and invests hundreds of billions annually.
The document discusses concepts related to loan syndication, including the roles and responsibilities of parties involved such as the lead arranger and agent bank. It provides details on the syndication process from pre-mandate activities like obtaining a mandate letter and issuing an information memorandum, to post-mandate tasks such as obtaining commitments from participating banks and finalizing loan documentation. Key stages include feasibility analysis, marketing the deal to potential participants, and closing the syndication transaction.
The document defines an insurance contract as a legal agreement between two parties where an insurer agrees to indemnify or reimburse an insured for financial losses from covered risks. It lists the key parties and requirements for a valid insurance contract, including insurable interest, offer/acceptance, consideration, and utmost good faith. The summary also outlines some common documents involved in the insurance process from proposal to policy and some standard clauses included in insurance contracts.
Need of new Financial Instruments, New Financial Instruments, Global Depository Receipts (GDRs), Advantages, ADR, Zero Coupon Debenture, Deep Discount Bonds, Infrastructure bonds, Floating rate bonds, Municipal bonds, Regular income bonds, Retirement bonds, Growth bonds etc.
नए वित्तीय साधनों, नए वित्तीय साधनों, वैश्विक डिपॉजिटरी प्राप्तियों (जीडीआर), लाभ, एडीआर, जीरो कूपन डिबेंचर, डीप डिस्काउंट बांड, इन्फ्रास्ट्रक्चर बॉन्ड, फ्लोटिंग रेट बॉन्ड, म्यूनिसिपल बॉन्ड, रेगुलर इनकम बॉन्ड, रिटायरमेंट बॉन्ड, ग्रोथ बॉन्ड आदि की जरूरत है।
Part-1 link: https://youtu.be/BnhujbYLwO4
Make sure to like and share the video. Your support and love is very important to me.
Follow me on slideshare: https://www.slideshare.net/GitanjaliJindal
Disclaimer- Some contents are used for educational purpose under fair use. Copyrights Disclaimer under Section 107 of the Copyright Act 1976, allowance is made for: fair use" for purposes such as criticism, comment, news reporting, teaching, scholarship, and research. Fair use is a use permitted by copyright statute that might otherwise be infringing. All credit for copyright material used in video goes to respected owner.
This document discusses different types of company shares. It defines a share and notes there are two main classes: preference shares and equity shares. Preference shares offer a fixed dividend rate and right to capital repayment before equity shares. Equity shares have voting rights but no fixed dividend. The document outlines various types of preference shares, including cumulative, participating, redeemable, and convertible varieties. It also describes employee shares and compares key characteristics of preference versus equity shares.
The document introduces various types of debt financing available to small businesses, including loans, bonds, and convertible debentures. It explains how debt financing works, the differences between debt and equity financing, factors considered in debt financing eligibility like credit ratings and collateral, and tips for applying for debt financing like comparing interest rates and checking prepayment terms. The document is published by LoanXpress, a company that provides corporate financing services.
Indian Depository Receipts (IDRs) allow foreign companies to raise capital from Indian investors in their home market. IDRs are issued by a domestic depository and represent underlying shares of the foreign company held in custody by an overseas custodian. Key features include being listed and traded on Indian stock exchanges, providing exposure to foreign stocks for Indian investors within the Indian regulatory framework, and allowing investors rights equivalent to shareholders such as voting and dividends. However, currency risk and lack of attendance at shareholder meetings are limitations of IDRs. Strict eligibility criteria, approvals, and disclosure guidelines regulate the issuance of IDRs in India.
This document provides an overview of key concepts related to valuation of securities, including time value of money, simple vs compound interest, future and present value calculations for single amounts, annuities, and growing annuities. It also discusses bond valuation terminology, risks associated with bonds such as interest rate risk and default risk, and accrued interest calculations. The document uses examples throughout to illustrate various time value of money and bond valuation concepts.
The document discusses key factors that determine venture capital deal terms. It notes that deal terms are influenced by the type of investor, size of the investor's fund, and economics of the investment opportunity. Some major deal elements discussed include preferred returns for investors, protection of investor valuation and position for future funding rounds, management rights for investors, and exit strategies for investors such as IPOs, acquisitions, and stock redemption.
Meaning of corporate finance, meaning of fixed and working capital, factors affecting requirement of fixed capital, factors affecting requirement of working capital, what is capital structure, and componenets of capital structure.
Acquisition Financing for Fundless Sponsors: 6 Ways to Negotiate Better Indep...Greg Tobben
Independent sponsor economics are paramount for those operating under a fundless sponsor model. Key components such as deal fees, management fees and carried interests are the reason you're in business.
In this presentation, Acquisition Financing for Fundless Sponsors: 6 Ways to Negotiate Better Independent Sponsor Economics, we'll walk through several practices you can use to get more transactions across the finish line and put yourself in a better position when negotiating with capital providers.
About Access Capital Partners:
Access Capital Partners is a middle market investment bank focused exclusively on raising capital for fundless or independent sponsors, operating executives, management teams and family offices.
We've Leveraged Years of Experience in Raising Capital Across a Wide Variety of Situations to Develop a Focused Effort Tailored to the Unique Needs of Independent or Fundless Sponsors.
Jerry Chen, partner at Greylock and former VP of Cloud and Application Services at VMware, shares his Unit of Value framework for startups building a go-to-market strategy. He developed this strategy while managing product and marketing teams at VMware that shipped many “1.0” releases, including VMware VDI, Cloud Foundry, and vFabric, and continues to use the framework to evaluate companies as an investor.
This document provides an overview of bonds, including their meaning, classifications, issuance procedures, and important terms. It discusses government bonds, corporate bonds, secured/unsecured bonds, and bond yields. It also covers international bonds such as Eurobonds, foreign bonds, and bond markets. Examples are given of debt crises in Pakistan and Sri Lanka related to rising external debt levels.
This presentation discusses hedging as a tool for offsetting exchange rate risk. It covers different types of hedging techniques including forward market hedges, money market hedges, and hedging with swaps. Forward market hedges use forward contracts to lock in exchange rates for expected foreign currency cash flows. Money market hedges involve borrowing and lending in different currencies to lock in home currency values. Swaps allow two companies with foreign currency receivables and payables to exchange them, effectively hedging each other's exchange rate risk. Examples are provided to illustrate how each hedging technique works.
The document summarizes the findings of a survey conducted to understand awareness and preferences around mutual funds among existing ICICI direct customers in Udaipur. Key findings include: 60% had awareness of mutual funds while 40% did not, with 99% preferring online investment. The top reasons for not investing in mutual funds were needing assistance (23%) and needing more knowledge (23%). Suggestions to increase mutual fund investment included customer education, providing regular market information, building relationships, and competitive broking charges schemes. The conclusion notes huge opportunities for mutual funds in Udaipur exist but competition is intense and wrong perceptions need addressing.
An investment is defined as committing funds with the expectation of earning a positive return in the future. It involves sacrificing present consumption for future benefits and always carries some degree of risk that the actual return may be lower than expected. The key elements of any investment are expected return, risk, safety, liquidity, and potential tax benefits. Common avenues of investment include bonds, gold, mutual funds, real assets, equities, insurance policies, and financial derivatives. Factors like current events, currency valuations, production costs, and economic/political uncertainty can influence fluctuations in gold prices over time.
The volatility in today’s financial markets is making it impossible to know where to invest and grow your money without the fear of losing your lifetime savings. Historic low interest rates are making is difficult to provide the income needed by investing in safer investments such as CDs and annuities. Investing a portion of your overall portfolio in fixed income investments should be considered as a solution to reducing volatility and providing needed income.
The document discusses how net asset value (NAV) of a mutual fund is determined. It states that NAV is calculated by dividing the total market value of all the securities in the mutual fund's portfolio by the total number of outstanding units. It also notes that short-term mispricing of the underlying securities can result in over- or undervaluation of the mutual fund's NAV, in direct proportion to the mispricing of the securities owned by the fund. The document emphasizes that the price of mutual fund shares is not determined by the forces of supply and demand, but solely by the value of the underlying securities in the fund's portfolio.
Mutual funds pool money from investors and invest it in securities like stocks and bonds. Professional fund managers invest the pooled funds to help investors achieve their financial goals. Mutual funds offer investors a way to invest in different asset classes like equities, bonds, and money market funds. Starting investments early and making regular investments over time allows investors to benefit from compound returns and dollar cost averaging.
Preference shares are shares that have preferential rights to dividends and repayment of capital compared to common shares. There are several types of preference shares: cumulative vs non-cumulative, participating vs non-participating, convertible vs non-convertible, and redeemable vs non-redeemable. Preference shares provide benefits like helping companies raise long-term capital and guaranteeing fixed returns, but also have drawbacks like lack of trading and lower returns.
Private equity consists of investors and funds that make direct investments in private companies or conduct buyouts of public companies. Capital is raised from retail and institutional investors to fund new technologies, expand working capital, make acquisitions, or strengthen balance sheets. Private equity firms partner with investment banks, investors, and management teams. Private equity investments are geared towards long-term strategies in illiquid assets, allowing more control over operations compared to hedge funds which focus on liquid securities. Exits can occur via IPOs, mergers and acquisitions, or recapitalizations. The global private equity industry manages over $2 trillion in assets and invests hundreds of billions annually.
The document discusses concepts related to loan syndication, including the roles and responsibilities of parties involved such as the lead arranger and agent bank. It provides details on the syndication process from pre-mandate activities like obtaining a mandate letter and issuing an information memorandum, to post-mandate tasks such as obtaining commitments from participating banks and finalizing loan documentation. Key stages include feasibility analysis, marketing the deal to potential participants, and closing the syndication transaction.
The document defines an insurance contract as a legal agreement between two parties where an insurer agrees to indemnify or reimburse an insured for financial losses from covered risks. It lists the key parties and requirements for a valid insurance contract, including insurable interest, offer/acceptance, consideration, and utmost good faith. The summary also outlines some common documents involved in the insurance process from proposal to policy and some standard clauses included in insurance contracts.
Need of new Financial Instruments, New Financial Instruments, Global Depository Receipts (GDRs), Advantages, ADR, Zero Coupon Debenture, Deep Discount Bonds, Infrastructure bonds, Floating rate bonds, Municipal bonds, Regular income bonds, Retirement bonds, Growth bonds etc.
नए वित्तीय साधनों, नए वित्तीय साधनों, वैश्विक डिपॉजिटरी प्राप्तियों (जीडीआर), लाभ, एडीआर, जीरो कूपन डिबेंचर, डीप डिस्काउंट बांड, इन्फ्रास्ट्रक्चर बॉन्ड, फ्लोटिंग रेट बॉन्ड, म्यूनिसिपल बॉन्ड, रेगुलर इनकम बॉन्ड, रिटायरमेंट बॉन्ड, ग्रोथ बॉन्ड आदि की जरूरत है।
Part-1 link: https://youtu.be/BnhujbYLwO4
Make sure to like and share the video. Your support and love is very important to me.
Follow me on slideshare: https://www.slideshare.net/GitanjaliJindal
Disclaimer- Some contents are used for educational purpose under fair use. Copyrights Disclaimer under Section 107 of the Copyright Act 1976, allowance is made for: fair use" for purposes such as criticism, comment, news reporting, teaching, scholarship, and research. Fair use is a use permitted by copyright statute that might otherwise be infringing. All credit for copyright material used in video goes to respected owner.
This document discusses different types of company shares. It defines a share and notes there are two main classes: preference shares and equity shares. Preference shares offer a fixed dividend rate and right to capital repayment before equity shares. Equity shares have voting rights but no fixed dividend. The document outlines various types of preference shares, including cumulative, participating, redeemable, and convertible varieties. It also describes employee shares and compares key characteristics of preference versus equity shares.
The document introduces various types of debt financing available to small businesses, including loans, bonds, and convertible debentures. It explains how debt financing works, the differences between debt and equity financing, factors considered in debt financing eligibility like credit ratings and collateral, and tips for applying for debt financing like comparing interest rates and checking prepayment terms. The document is published by LoanXpress, a company that provides corporate financing services.
Indian Depository Receipts (IDRs) allow foreign companies to raise capital from Indian investors in their home market. IDRs are issued by a domestic depository and represent underlying shares of the foreign company held in custody by an overseas custodian. Key features include being listed and traded on Indian stock exchanges, providing exposure to foreign stocks for Indian investors within the Indian regulatory framework, and allowing investors rights equivalent to shareholders such as voting and dividends. However, currency risk and lack of attendance at shareholder meetings are limitations of IDRs. Strict eligibility criteria, approvals, and disclosure guidelines regulate the issuance of IDRs in India.
This document provides an overview of key concepts related to valuation of securities, including time value of money, simple vs compound interest, future and present value calculations for single amounts, annuities, and growing annuities. It also discusses bond valuation terminology, risks associated with bonds such as interest rate risk and default risk, and accrued interest calculations. The document uses examples throughout to illustrate various time value of money and bond valuation concepts.
The document discusses key factors that determine venture capital deal terms. It notes that deal terms are influenced by the type of investor, size of the investor's fund, and economics of the investment opportunity. Some major deal elements discussed include preferred returns for investors, protection of investor valuation and position for future funding rounds, management rights for investors, and exit strategies for investors such as IPOs, acquisitions, and stock redemption.
Meaning of corporate finance, meaning of fixed and working capital, factors affecting requirement of fixed capital, factors affecting requirement of working capital, what is capital structure, and componenets of capital structure.
Acquisition Financing for Fundless Sponsors: 6 Ways to Negotiate Better Indep...Greg Tobben
Independent sponsor economics are paramount for those operating under a fundless sponsor model. Key components such as deal fees, management fees and carried interests are the reason you're in business.
In this presentation, Acquisition Financing for Fundless Sponsors: 6 Ways to Negotiate Better Independent Sponsor Economics, we'll walk through several practices you can use to get more transactions across the finish line and put yourself in a better position when negotiating with capital providers.
About Access Capital Partners:
Access Capital Partners is a middle market investment bank focused exclusively on raising capital for fundless or independent sponsors, operating executives, management teams and family offices.
We've Leveraged Years of Experience in Raising Capital Across a Wide Variety of Situations to Develop a Focused Effort Tailored to the Unique Needs of Independent or Fundless Sponsors.
Jerry Chen, partner at Greylock and former VP of Cloud and Application Services at VMware, shares his Unit of Value framework for startups building a go-to-market strategy. He developed this strategy while managing product and marketing teams at VMware that shipped many “1.0” releases, including VMware VDI, Cloud Foundry, and vFabric, and continues to use the framework to evaluate companies as an investor.
SC Credit Advisors published its first quarterly Middle Market Capital Edge report, which provides observations and insights on debt and equity capital markets for private middle market companies. The report discusses statistics on senior cash flow and asset-based loans, financing from business development companies, private equity buyout valuations and capitalization, as well as pricing trends, leverage, and capital options. Despite economic uncertainty, the financing environment for middle market private companies is currently favorable due to competition among traditional and non-traditional lenders, low borrowing costs, flexible financing from business development companies, and high purchase multiples from private equity firms seeking to deploy capital.
As gender roles and responsibilities evolve, we set out to understand the collaborative effect of couples on household shopping. This report reveals our findings on team shopping and the importance of being a team-friendly brand.
Breaking through the clutter: Using content, analytics and paid to achieve RO...22squared
The competition for consumer attention between brands is at an all-time high, and social media platforms get more complicated everyday, making it a daunting task for brands and small businesses to understand what it takes to drive awareness, engagement and sales. To achieve true ROI via platforms like Facebook, Twitter, Instagram and Pinterest, you need art and science. 22squared's Chris Tuff will simplify the newest platform technologies and offerings, discuss the nuances of the new marketing analytics, and provide 10 strategies for brands to create compelling content that spans multiple platforms and leverages paid to reach the right audiences, move product and drive true ROI.
- Chris Tuff, SVP, Director of Earned & Emerging Media, 22squared
- @christuff
- @22squared
- #socialfresh
- http://socialfreshconference.com
This document provides strategies for using Twitter for various business purposes, including customer relations, crisis management, corporate reputation management, event activation, product promotion and sales, issue advocacy, and internal communication. Specific examples are given for how companies like Comcast, JetBlue, Zappos, Dell, and the Red Cross have effectively used Twitter for customer service, crisis response, thought leadership, event coverage, deals/sales, and advocacy. The strategies recommend following others on Twitter to listen, regularly creating useful content, and engaging with your followers through responses and questions.
High Road Capital Partners Keynote @ Deal Sourcing ConferenceDavid Teten
How to Win:
The Five S’s of Deal Sourcing
Robert J. Fitzsimmons
Managing Partner, High Road Capital Partners
The Capital Roundtable Dealsourcing Conference
May 26, 2011
The latest in Mindshare's 'Future Of...' series focuses on connected TV.
Our view is that the connectivity that viewers enjoy on the sofa via the second screen will prove of more significance to media and marketing than the connected TV itself.
Facebook APIs: There's More Under the Hood than Anyone Knows22squared
June 28, 2011, AllFacebook Expo presentation by Chris Tuff, VP/Social Media Director at 22squared (http://www.mediabistro.com/afexpo/program.asp).
Facebook APIs: There's More Under the Hood than Anyone Knows
What’s available through Facebook’s APIs? No one really knows. Many think that the only available statistics lie in Facebook Insights, but since Facebook opened up their Insights API, a treasure trove of data is available to agencies and brands. API dashboards from companies like AllFacebook, Socialbakers and PageLever serve as the new focus groups and using their tools, agencies are able to identify a brands’ active and engaged fanbase and parallel those segments to determine if they’re reaching brands’ target consumer, if they’re targeting these consumers with paid Facebook ads and if not, what adjustments need to be made to their engagement strategy and idea of that brands’ target consumer. This session will also examine the role of social media as it relates to brands as a whole, and explain why there is so much value for brands on Facebook. We’ll go on to discuss confusion around ad APIs and Facebook Connect APIs (what brands can access within consumer profiles), and share what else Facebook tools and insights can bring to both social media marketing and brand positioning.
This document outlines an agenda and presentation on writing effective creative briefs. It discusses why creative briefs are important, the current state of briefs, and five key elements that make a brief successful. These elements include providing the big picture context, clear business and creative objectives, insights about the target audience, and details on the competitive landscape. The presentation also provides five ways to ensure a brief is effective, such as being written concisely in a compelling manner that allows creative freedom. Exercises are included to help attendees practice writing briefs.
How to Develop Creative Advertising StrategyJul Ahn
The document discusses effective advertising strategies. It notes that effective advertising must extend from a sound marketing strategy and be compatible with other elements of integrated marketing communications. It must also take the consumer's view and focus on product benefits rather than attributes. Additionally, effective advertising needs to find a unique way to break through clutter, be persuasive by highlighting benefits for consumers, and never promise more than can be delivered. The creative idea also should not overwhelm the underlying strategy.
The Evolution of Advertising: How Consumers Won the War for Their AttentionHubSpot
You're more likely to survive a plane crash than click a banner ad. Crazy, right? Consumers have learned to tune out advertising, but believe it or not, there was a time when products weren't branded, ad agencies didn't exist, and advertising as a profession was unheard of.
In this epic, must-see presentation, we explore the ENTIRE history and evolution of advertising to unveil how a comprehensive (yet digestible) timeline of advertising milestones led to an epidemic of consumer indifference, as well as what marketers can do about it to reach consumers in the years ahead.
Don't be discouraged by the 472 slides -- 29.39% of those are dedicated to awesome pictures and animations that make this a breeze to get through.
Download a free copy of this presentation + a printable advertising timeline right here: http://hub.am/16F877d
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Structuring and Financing a Partner Buyout
1. CAPITAL RAISING | MERGERS & ACQUISITIONS | STRATEGIC ADVISORY
Structuring and Financing a
Partner Buyout
A Resource for Middle Market Business Owners
and Their Advisors
2. Structuring and Financing a Partner Buyout | 2
Buying Out a Business Partner or Shareholder
• When an entrepreneur starts a new business, planning for a buyout of a business partner
years in the future is rarely a top priority- but maybe it should be.
• As businesses grow and evolve, so too do ownership or shareholder groups. The same
partners or investors who took a company from startup to $20 million in revenues aren’t
necessarily the right people to grow the company from $20 to $50 million, or $50 to $150
million, and so on.
• Layer in retirements, partnership disputes and absentee or non-strategic owners receiving
generous compensation, and making changes in ownership becomes increasingly more
important (and costly) as the business grows.
On the next few pages, we’ll discuss:
1. When a Partner Buyout is a Solution
2. Valuing the Business
3. Structuring a Partner Buyout
4. Financing a Partner Buyout
5. Questions a Business Owner Should Consider When Raising Capital
6. Using an Investment Banker to Raise Capital for the Buyout
Strategic Advisory | Capital Raising | Mergers & Acquisitions
3. Structuring and Financing a Partner Buyout | 3
1. When a Partner Buyout is a Solution
Shareholder retirement
Provides liquidity for a shareholder who is ready to step away from the
business to focus on family, friends or health issues.
Perceived disparity
between contribution
and reward
Limits future upside for non-contributing equity partners such as: absentee
owners, family members who aren’t involved in the business and non-strategic
financial partners.
Partner disputes
Allows buying shareholders the opportunity to move beyond competing visions
for the company, personal differences or misaligned interests, to focus on the
future
Disability or illness of
partner
Provides liquidity for a partner who is no longer able to run the business
Ownership Structure
Cleanup
Removing non-essential minority owners can streamline the process for making
major decisions or clear the way for new strategic financial partners.
Shareholder in need of
partial or total liquidity
Provides liquidity for retirement, other business ventures, major personal
purchases, divorce settlements or other large expenses
Strategic Advisory | Capital Raising | Mergers & Acquisitions
4. Structuring and Financing a Partner Buyout | 4
2. Valuing the Business
• If you’ve incorporated a buy-sell agreement into your business’
partnership documents, there may already be a fairly straight-
forward formula or process that divides business assets or values
the business.
• If not, the process can become fairly complex and the use of a
business valuation expert or investment banker is recommended
to help you determine what your company is worth.
To learn more about valuing a business or to discuss the value of your business, please contact
Access Capital Partners directly or visit www.accesscappartners.com.
314.783.9550
info@accesscappartners.com
Strategic Advisory | Capital Raising | Mergers & Acquisitions
5. Structuring and Financing a Partner Buyout | 5
3. Structuring the Partner Buyout
While each situation is unique and there are many ways to structure the buyout of
a business partner, here are the most common structures:
Common Partnership
Buyout Structures Typically Used When
Pros for Remaining
Shareholder(s)
Cons for Remaining
Shareholder(s)
§ Seller note only § Limited options exist for
raising external debt or equity
§ Partner doesn’t need total
liquidity at once
§ Business can’t afford a large
lump-sum cash outflow
+ Avoids taking on external
debt or equity
+ Minimizes cash coming
out of the company to pay
former partner
- Payments are fixed and often
not tied to performance of
the company
- Seller becomes a creditor of
the company and receives
preference in a liquidation to
equity holders
§ Cash payment,
plus
§ Seller Note
§ Seller requires some liquidity
now, but will agree to take
some value over time
§ Business can’t afford a large
lump-sum cash outflow
+ Avoids making one large
lump sum payment
+ Seller Note reduces the
amount of external capital
that needs to be raised
- Requires some cash upfront
- Seller becomes a creditor of
the company and receives
preference in a liquidation to
equity holders
(continued on next page)
Strategic Advisory | Capital Raising | Mergers & Acquisitions
6. Structuring and Financing a Partner Buyout | 6
3. Structuring the Partner Buyout (continued)
Common Partnership
Buyout Structures Typically Used When
Pros for Remaining
Shareholder(s)
Cons for Remaining
Shareholder(s)
§ Cash payment,
plus
§ Earnout1
§ Seller requires some liquidity
now, but will agree to take
some value over time
§ Differences in valuation based
on expected future
performance exist between
buyer and seller
+ Avoids making one large
lump sum payment
+ Can tie payment of the
earnout to future company
performance
+ Aligns company and
seller’s interests
- Requires some cash upfront
- Must be prepared to make
contingent earnout payments
§ Cash payment,
plus
§ Seller note, plus
§ Earnout1
§ Seller requires some liquidity
now, but will agree to take
some value over time and
some value based on future
company performance
§ Differences in valuation exist
between buyer and seller
+ Reduces the amount of
external capital needed
+ Can tie payment of the
earnout to future company
performance
+ Aligns buyer and seller
interests
- Requires some cash upfront
- Seller becomes a creditor of
the company and receives
preference in a liquidation to
equity holders
- Must be prepared to make
contingent earnout payments
§ Lump sum cash
payment
§ Severing ties with the selling
shareholder is important for
personal or operational
reasons
§ There is no strategic risk to
removing the shareholder in
the near term
+ Selling shareholder is
removed entirely
+ No future obligation to
shareholder for value
created after the sale
- Requires access to largest
amount of capital
- Depending on the situation,
large cash outlay can strain
the business
1) An Earnout is a future payment or series of payments made to the former shareholder, usually tied to business performance metrics, such
as revenue, EBITDA, customer retention or earnings.
Strategic Advisory | Capital Raising | Mergers & Acquisitions
7. Structuring and Financing a Partner Buyout | 7
4. Financing the Partner Buyout
Financing options for a partner buyout are based on the
profile of the business itself, namely:
• The size of the company (revenue and EBITDA);
• Historic and expected future performance;
• Cash flow profile;
• Asset composition;
• Customer dynamics; and
• Industry segment.
Strategic Advisory | Capital Raising | Mergers & Acquisitions
8. Business Profile
Revenues $5 to $10 million $10 to $30 million $30 to $200 million
EBITDA $0 to $2 million $2 to $7 million $7 to 20+ million
Growth Trajectory Stable to growing Stable to growing Stable to growing
Funding Options
Asset Based
Debt Financing
Options
§ Banks
§ SBA lenders
§ Non-bank, asset based
lenders
§ Many bank and non-bank
financing options
§ Many bank and non-bank
financing options
Cash Flow Debt
Financing Options
§ Limited bank options
§ Some SBA lenders
§ Some revenue or royalty
financing options
§ Some bank options for
senior debt without tangible
collateral
§ Many non-bank alternatives
for senior term loans,
mezzanine loans, unitranche
facilities
§ Many bank options for
senior loans
§ Abundant non-bank
alternatives for senior cash
flow loans, 2nd lien loans,
mezzanine loans,
unitranche facilities
Equity Financing
Options
§ Friends and family
§ VC funds (industry and
growth profile specific)
§ Limited institutional private
equity options
§ Later stage VC firms
(industry and growth profile
specific)
§ Growth equity investors
§ Family offices
§ SBICs and traditional private
equity firms
§ Growth equity firms
§ Family offices
§ SBICs and traditional
private equity firms
Structuring and Financing a Partner Buyout | 8
4. Financing the Partner Buyout (continued)
Strategic Advisory | Capital Raising | Mergers & Acquisitions
9. Structuring and Financing a Partner Buyout | 9
4. Financing the Partner Buyout (continued)
• To discuss a particular financing need, partner buyout or restructuring situation,
or just to gather information about the current state of the funding market,
including, pricing, structure and availability of middle market debt and equity
financing, please contact Access Capital Partners.
• You do not need an imminent or market ready deal to call us. We strive to be a
resource.
314.783.9550
info@accesscappartners.com
Strategic Advisory | Capital Raising | Mergers & Acquisitions
10. Structuring and Financing a Partner Buyout | 10
5. Questions a Business Owner Should Think About
• Capital options for well performing companies have
become diverse, more complex and are growing each year
• The next couple pages cover a range of questions that a
business owner should think about related to raising capital
for a partner buyout
Strategic Advisory | Capital Raising | Mergers & Acquisitions
11. Structuring and Financing a Partner Buyout | 11
5. Questions a Business Owner Should Think About
If Raising Debt
• Is debt available for my company?
• Am I comfortable taking on debt to finance a partner buyout?
• How much debt can my business comfortably support? Is that enough
for the whole buyout?
• How much debt will new lenders provide?
• How much will the debt cost?
• What’s the best way to structure the new debt to minimize cost and
maximize flexibility?
• Who are the best debt providers for a business of my size, in my
industry, in my situation?
Strategic Advisory | Capital Raising | Mergers & Acquisitions
12. Structuring and Financing a Partner Buyout | 12
5. Questions a Business Owner Should Think About
If Raising Equity
• Is raising equity a viable funding option?
• Am I comfortable bringing on an equity partner to finance a partner
buyout?
• How much ownership dilution is acceptable?
• What’s my business worth to a new equity investor?
• Am I looking for an active or passive investor?
• What rights or requirements will the new investor have?
• When will this investor require its money back?
• Who are the best equity investors for my business?
• Which investors have invested in companies like mine?
• Does the equity investor add any strategic value beyond capital
(customers, strategic guidance, other partners, etc.)?
Strategic Advisory | Capital Raising | Mergers & Acquisitions
13. Structuring and Financing a Partner Buyout | 13
6. Using an Investment Banker to Raise Capital
• Raising capital often inadvertently becomes a second job for many
executives, particularly for those who haven’t been through an
ownership-change related financing or a financing involving a capital
provider other than a bank lender.
• When time is at a premium, or a business owner wants an expert to
manage the process, they can hire an investment banker who
specializes in raising capital.
Strategic Advisory | Capital Raising | Mergers & Acquisitions
14. Structuring and Financing a Partner Buyout | 14
6. Using an Investment Banker to Raise Capital
How Investment Bankers Charge for Their Services
• Investment bankers focused on raising capital usually work on a
contingency basis, charging a percentage of the capital raised, although
small retainers may also be charged.
• The contingent fee or “success” fee is usually paid at closing and
funded out of the proceeds of the new capital raise.
• This fee structure aligns everyone’s interest, so the company is only
paying the fee upon a successful capital raise.
Strategic Advisory | Capital Raising | Mergers & Acquisitions
15. Structuring and Financing a Partner Buyout | 15
6. Using an Investment Banker to Raise Capital
How a Good Investment Banker Adds Value for a Business Owner Raising Capital
FEATURE BENEFIT
• Minimizes management distractions, allowing the
executive team to focus on running the business
• More time for management to focus on running the
business and avoid getting distracted
• Evaluates multiple capital alternatives to help you
choose the financing structure that works best for
the business and remaining shareholders
• Ensures capital is structured in a way that
minimizes borrowing costs (or dilution) and allows
for adequate operating flexibility
• Positions the company and funding opportunity in
a way the is the most compelling to the likely
funding sources
• Results in broader interest from capital providers,
often at lower costs and better terms; usually
results in a faster close
• Have access to many, many financing sources
that go beyond relationships with local bank
lenders
• Ensures availability of capital when a bank can’t
provide enough capital or doesn’t provide enough
flexibility
• Creates a competitive environment for the
financing, forcing funding sources to compete
and put their best foot forward
• Forces funding sources to get more aggressive
pricing and structure, reducing borrowing costs
• Solicit multiple financing proposals, including
backup financing offers
• Improves the probability of a successful funding
Strategic Advisory | Capital Raising | Mergers & Acquisitions
16. Structuring and Financing a Partner Buyout | 16
Save Time. As an executive, the most important resource you have is time. We’re a turnkey solution to
help you evaluate every option, then we structure, source, negotiate and help close the deal. We minimize
the distraction of raising capital so you can focus on driving your business to the next level.
Leverage Our Expertise. We specialize in raising capital for middle market companies and financial
sponsors and have access to literally thousands of funding sources across the planet. Whether you're
replacing an existing lender, financing an acquisition, buying out a partner or recapitalizing the company,
we know which funding sources will provide the best terms, with the most flexibility and be the best fit for
the situation.
Get the Best Possible Pricing, Terms and Structure. We run a competitive financing process for each
of our clients. That process forces funding sources to put their best foot forward and meet critical
deadlines.
Certainty of Closing. Access Capital Partners is acutely focused on putting its clients in the best position
to achieve a successful outcome. With years of experience in raising capital in all types situations and
across many industries, we're constantly focused on identifying and preemptively addressing potential
obstacles that may make it difficult to raise the capital your company needs, so you can close on schedule.
WORKING WITH ACCESS CAPITAL PARTNERS
Strategic Advisory | Capital Raising | Mergers & Acquisitions
17. $8.0B+ 100+ 35+ 1000+
In total transaction
experience
Completed transactions Years of middle market
experience
Relationships with capital
providers and strategic
buyers across the globe
Access Capital Partners is an Investment Bank Focused on Helping Middle Market
Business Owners Create and Preserve Wealth By Providing Unmatched Strategy,
Capital, and Merger and Acquisition Advisory Services.
ABOUT ACCESS CAPITAL PARTNERS
Access Capital Partners
7733 Forsyth Blvd., Suite 1168
St. Louis, MO 63105
314.783.9550
www.accesscappartners.com
Securities offered through StillPoint Capital LLC, Member FINRA and SIPC Tampa, FL 33626. StillPoint Capital is not affiliated with Access Capital Partners.
Greg Porto
312.339.2857
gporto@accesscappartners.com
Greg Tobben
314.458.8186
gtobben@accesscappartners.com
Strategic Advisory | Capital Raising | Mergers & Acquisitions