Discussion
Just wondering if anyone has experience of going through an MBO without using PE money.
I'm thinking, leverage the debtor book via a CID facility, bank finance, but that probably won't be enough.
Are there mezzanine lenders that may help top up?
Need to raise £9m off of £1.3m EBITDA, zero debt in the business currently.
I'm thinking, leverage the debtor book via a CID facility, bank finance, but that probably won't be enough.
Are there mezzanine lenders that may help top up?
Need to raise £9m off of £1.3m EBITDA, zero debt in the business currently.
Yes, plenty - albeit in better economic times...
Will depend on the underlying asset base - you're obviously leveraging off those - you're tending to look at tertiary lenders who will advance at a much higher gearing on the whole asset base rather than getting a core bank to do the easy stuff and then mezz financing on top with no assets to pledge.
Then get rid of them as soon as you can to reduce the cost (ie retain the cash from profits in the business to get the required debt down to a sensible level and then refi with a primary lender).
Vendor won't incorporate a deferred consideration element to get the funding need down to an easier level?
Will depend on the underlying asset base - you're obviously leveraging off those - you're tending to look at tertiary lenders who will advance at a much higher gearing on the whole asset base rather than getting a core bank to do the easy stuff and then mezz financing on top with no assets to pledge.
Then get rid of them as soon as you can to reduce the cost (ie retain the cash from profits in the business to get the required debt down to a sensible level and then refi with a primary lender).
Vendor won't incorporate a deferred consideration element to get the funding need down to an easier level?
sleepezy said:
Yes, plenty - albeit in better economic times...
Will depend on the underlying asset base - you're obviously leveraging off those - you're tending to look at tertiary lenders who will advance at a much higher gearing on the whole asset base rather than getting a core bank to do the easy stuff and then mezz financing on top with no assets to pledge.
Then get rid of them as soon as you can to reduce the cost (ie retain the cash from profits in the business to get the required debt down to a sensible level and then refi with a primary lender).
Vendor won't incorporate a deferred consideration element to get the funding need down to an easier level?
Thanks, loan notes maybe an option but not preferred.Will depend on the underlying asset base - you're obviously leveraging off those - you're tending to look at tertiary lenders who will advance at a much higher gearing on the whole asset base rather than getting a core bank to do the easy stuff and then mezz financing on top with no assets to pledge.
Then get rid of them as soon as you can to reduce the cost (ie retain the cash from profits in the business to get the required debt down to a sensible level and then refi with a primary lender).
Vendor won't incorporate a deferred consideration element to get the funding need down to an easier level?
Can you recommend any tertiary lenders / mezz providers?
Thanks
foliedouce said:
Just wondering if anyone has experience of going through an MBO without using PE money.
I'm thinking, leverage the debtor book via a CID facility, bank finance, but that probably won't be enough.
Are there mezzanine lenders that may help top up?
Need to raise £9m off of £1.3m EBITDA, zero debt in the business currently.
Currently helping 2 clients do debt backed MBOsI'm thinking, leverage the debtor book via a CID facility, bank finance, but that probably won't be enough.
Are there mezzanine lenders that may help top up?
Need to raise £9m off of £1.3m EBITDA, zero debt in the business currently.
Happy to help if I can...I'm an M&A advisor by profession, not a finance bod mind.
There are too many variables - not least type of business, experience, funding ask and your own (financial) commitment - to try to recommend a lender 'cold'.
You really need to speak with an M&A . CF boutique - I may be able to suggest some if you'd like - they'd seem expensive but by running a proper process I'd expect them to at least make their fees back in savings. There are plenty out there though - normally I'd recommend someone relatively local, or London/Birmingham/Manchester as suits - but don't go for a small brokerage bod who happens to have an office in the local village, they'd likely just punt it out as debt.
For fee context I've been put into a project to sort out some of the operational side of a business by a brokerage that's raising in the order of £20m secured (relatively) debt for a plc - they're charging about £250k for the privilege (contingent but with a retainer) - but they'll be able to deliver. The work I am doing means that the financial ask is less and the robustness of the business plan is better (hence the facility should be cheaper). That's the theory at least!
You'll be selling yourself to the devil though - if it doesn't go to plan you do risk losing it all.
Pugwash may be a good shout by the looks of things - although I am heavily involved in deals I am not the M&A advisor - I tend to sit on the sidelines and keep everyone sensible - so am not as close to the market as he is.
You really need to speak with an M&A . CF boutique - I may be able to suggest some if you'd like - they'd seem expensive but by running a proper process I'd expect them to at least make their fees back in savings. There are plenty out there though - normally I'd recommend someone relatively local, or London/Birmingham/Manchester as suits - but don't go for a small brokerage bod who happens to have an office in the local village, they'd likely just punt it out as debt.
For fee context I've been put into a project to sort out some of the operational side of a business by a brokerage that's raising in the order of £20m secured (relatively) debt for a plc - they're charging about £250k for the privilege (contingent but with a retainer) - but they'll be able to deliver. The work I am doing means that the financial ask is less and the robustness of the business plan is better (hence the facility should be cheaper). That's the theory at least!
You'll be selling yourself to the devil though - if it doesn't go to plan you do risk losing it all.
Pugwash may be a good shout by the looks of things - although I am heavily involved in deals I am not the M&A advisor - I tend to sit on the sidelines and keep everyone sensible - so am not as close to the market as he is.
Thanks for the input, I'm not inexperienced in these matters, I've led an MBO (self funded with bank debt), gone through a trade sale, got an offer from PE, but decided against it for the reasons mentioned above.
However I've never done an MBO that needed more than bank debt, I don't really know much about Mezz & tertiary lending - what multiple of EBITDA they will lend etc
I'll speak to a CF house
Thanks
However I've never done an MBO that needed more than bank debt, I don't really know much about Mezz & tertiary lending - what multiple of EBITDA they will lend etc
I'll speak to a CF house
Thanks
Maybe not exactly what you're looking for but could be worth looking at the Jeremy Harbour Club. His Schtick is obtaining distressed/retirement acquisitions with no money down, but there's some excellent info on the many variations of deal structures, finance etc which I found useful.
Sound exciting - Good luck with it!
Sound exciting - Good luck with it!
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