Management Buyout Financing

An effective means for transitioning ownership.

partner story

MooreCo

Greg Moore, President and CEO of MooreCo, sought a financial partner to support the management buyout of his company from Webster Capital as well as a recapitalization.

Working closely with Greg and MooreCo’s management team, we structured a one-stop financing solution incorporating senior debt, subordinated debt, and structured equity.

The management team opted to partner with us based on our long-term, relationship-oriented investment strategy, and ability to craft a one-stop financing solution that met their needs.

The completion of the transaction will enable MooreCo to explore future growth opportunities as well as strengthen its position in existing markets.

A management buyout is a type of acquisition that enables a company’s management team to acquire a significant stake in, or the entirety of, the company from the parent or from private owners.

A management buyout can be attractive to managers because of the greater financial rewards when one is an owner of the company rather than solely an employee. Management buyouts are also an appealing liquidity option for owners who wish to transition out of a business and may not have a succession plan in place.

In this management buyout example, the owners are completely bought out. The management team increases their ownership stake from 15% to 60% and the sponsor obtains 40% of the company.

Typical size

Senior debt: $10 million - $300 million
Subordinated debt: $10 million - $100 million

Investment focus

Middle-market companies with attractive growth prospects and positive cashflow
Dedicated and cohesive management teams
Minimum EBITDA of $8 million
Generalist sector approach

Structural characteristics

Senior debt, alongside junior capital, for a seamless, one-stop solution with a single, relationship-oriented capital provider
Typical maturities: 3 – 25+ years
Flexible payment structures, including amortizing or bullet, and fixed- or floating-rate

Issuer benefits

Capacity to fund across your capital structure; a one-stop shop with senior debt, mezzanine or subordinated debt, and preferred equity
Supportive, patient, relationship-oriented partner
Deep pockets to provide follow-on capital to fund your future growth
Specialty in mezzanine, which is a less dilutive type of capital
Aptitude for understanding the complexities associated with your business

Benefits

When planning the next phase of your company’s growth strategy, management buyouts can be an appealing liquidity option for several reasons:

Owners can be assured that the company will have a dedicated management team
The due diligence process is likely to be shorter because the buyers have familiarity and working knowledge of the company
Owners are able to reward management with an equity stake
Owners can sell a controlling interest in the company without conceding confidential information to external purchasers

Alternatives

When you are determining how to transition the business to the next generation of ownership, and for family-owned businesses where transitioning ownership to a family member isn’t necessarily an option, there are two main alternatives: selling the company to an outside third-party (private equity firm, public market, strategic buyer) or selling the company to employees.

To learn more about an ESOP financing, hear from our partner, Hypertherm, on their journey to a 100% employee-owned company.

our people

Patience is in our DNA.

“One thing we know for sure is that growth will not be linear -- we know that it is going to come in stops and starts – and that is why patience is really key.”

julia buthman

managing director

“Prudential Private Capital is engaged, involved, and knows about the business to the degree that my family did. That approach so far is building a foundation that’s going to allow us to execute in the future, and it’s with a patience on short term versus long term.”

Greg Moore, CEO, MooreCo

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