This is an extract of our Private Equity Finance Key Terms document, which we sell as part of our Private Acquisitions Notes collection written by the top tier of Cambridge And Oxilp And College Of Law students.
The following is a more accessble plain text extract of the PDF sample above, taken from our Private Acquisitions Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
M&A Workshop 8
Private Equity Finance KEY TERMS WORD/TER M
INSTITUTIO NAL BUYOUT??
MBI (mixture of old and new management)?BIMBO (current management buys co)
MEZZANINE DEBT= 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-outWhen 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).?EQUITY INVESTOR LOAN
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?
Buy the full version of these notes or essay plans and more in our Private Acquisitions Notes.