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Private Equity Finance Key Terms Notes

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M&A Workshop 8

Private Equity Finance KEY TERMS WORD/TER M




MBI (mixture of old and new management)

BIMBO (current management buys co)


= combination of a management buy-in and a management buyout.Team that buy out Co are a combination of existing managers, who retain a stake in the Co, & individuals from outside Co who will join management team following buy-out

When debt finance is being used, Mezzanine debt stands behind senior debt. It is unsecured by assets & does not require a personal guarantee. This layer carries significantly more risk than senior debt, therefore lender can get a higher reward Used to prioritise new owners ahead of existing owners in case of bankruptcy A subordinated loan provided by equity/institutional investors. Its terms are similar to mezzanine debt (e.g. no margin ratchet, while there is a single bullet repayment& a similar term).


Acquisition that is funded through a combination of equity Finance &
debt finance. Cash flows or assets of the target are used to secure & repay the debt. Their purpose is to allow Co.'s to make large acquisitions without having to commit a lot of capital When an institutional investor acquires a controlling interest in a separate Co. The Provider will be managing the funds created by institutional investors such as pension funds, banks & insurance Cos. Institutional buyouts are opposite of MBOs, in which a business's current management acquires a large part of the Co. Thus, in IBOs new managers are sent to manage the Co. Typically, investor in an IBO looks to dispose of its stake in Co within a certain time frame.
= Management buy-in Occurs when a manager or a management team from outside the Co raises necessary finance, buys it, & becomes Co's new management.
 Management buy-in team often competes with other purchasers in search for a suitable business. Usually, team will be led by a manager with significant experience at managing director level The difference to a MBO = the position of purchaser: o MBO = they are already working for the Co. o MBI = manager or management team is from another source.
= Buy-in management buyout

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