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LPC Law Notes Private Acquisitions Notes

Private Equity Finance Key Terms Notes

Updated Private Equity Finance Key Terms Notes

Private Acquisitions Notes

Private Acquisitions

Approximately 339 pages

A collection of the best Mergers and Acquisitions* notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor".

In short, these are what we believe to be the strongest set of Mergers and Acquisitions notes available in the UK this year. This collection is f...

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The following is a more accessible 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:

WORD/TERM EXPLANATION
Leveraged buyout

  • 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
Institutional buyout

  • 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.

MBI

(mixture of old and new management)

  • = 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:

    • MBO = they are already working for the Co.

    • MBI = manager or management team is from another source.

BIMBO

(current management buys co)

  • = Buy-in management buyout

  • = 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
Mezzanine debt

  • 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
Equity investor loan

Sweet equity

(shares issued to managers of co)

  • The equity share capital in Newco, issued to the managers in a private equity transaction.

  • This can be sold by management team when target is sold, therefore used as a financial incentive in order to achieve a successful exit from target Co.
Equity kicker

  • A warrant or an option to buy equity, attached to certain debt, usually found in leveraged acquisitions or MBOs. i.e. a mezzanine shareholder lends money (gives equity) to the company

Good leaver

+

Bad leaver

P.188

  • Jargon commonly used in the context of the treatment of shares held by managers on a private equity transaction. They describe the circumstances in which a D ceases to be an employee of Co which in turn condition the value of the Ds’ shares when D’s leave the Co.

  • Good leaverwill usually mean leaving employment on grounds...

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