Management Buyouts

Management Buyouts

Mercantile Mergers & Acquisitions Corporation works with senior managers who want to acquire private companies or corporate divisions available for sale by their owners or parent company.

Being an entrepreneur is not for the faint of heart. Among ten young managers or professionals, statistics show that only one has what it takes to be a business owner. Management must show some initiative and self-qualify themselves to put a transaction together.

What separates entrepreneurs from dreamers is their ability as individuals to invest somewhere in the vicinity of $250,000 into the companies they hope to own. This number can be as high as $1 million in significant deals. If you want to own something, you must risk your money and your job. If you cannot put your money on the table, stop dreaming.

Substantial financial investment and a show of commitment are critical for a serious management buyout for outside institutional or private investors. Investors who will personally support a management team or make a company investment are almost always required and strongly recommended. Institutional investors request private investors with some management background or special knowledge in the industry to co-invest with them. Institutions refer to these investors as “smart money.”

Some preferences presented by lenders when financing a buyout include:

  • companies that are not highly cyclical and have steady, predictable cash flows;
  • companies with low capital expenditure requirements and high free cash flow;
  • growth businesses, especially in high valued-added manufacturing; and
  • companies with committed, solid management teams and well-communicated, effective business plans.

Meeting these requirements can be a challenge for company executives interested in selling.

Management buyout opportunities present themselves often and for several different reasons.

One reason could be a private owner wanting to sell his business and not bother with the complicated selling process to an outside buyer. Usually, this seller has an excellent relationship with the management team and has confidence in their ability to manage the business.

Mercantile Mergers & Acquisitions Corporation helps set a platform for managers wishing to do a Management Buyout. Management must agree that they have an arrangement among themselves, as infighting is a significant reason deals fall apart.