Insights of a Maverick Investment Banker_Sample

INSIGHTS OF A MAVERICK INVESTMENT BANKER
acquire a majority or a large minority stake. (The better known
MBO’s are actually rarer, as exits are more often catalyzed by the
lack of inside succession management and the burnout of the
founder.)
Equity release or Recap. Often called: Dividend
Recapitalization or “Recap”, an equity release allows the
founders to take money out of the business in exchange for a
large minority or small majority equity stake, financed by a
combination of equity investments, bank debt, or mezzanine
equity. Recaps are often followed by a subsequent transaction
after three to five years when the investor would exit, giving the
founder a “second bite of the apple”.
Gradual Sale. These are last-ditch solutions for companies
which are often not, or only marginally profitable, have no
management to take them over, or promise low growth. In such
situations, the main value is the market presence of the company
and its offering. In order to create material equity value which
can eventually be sold, an appropriately connected and
competent management team is needed.
In return for their efforts, and occasionally monetary equity,
the incoming managers will get to ride a “horse”, i.e. will have the
opportunity to take over the leadership of a mature company,
which is often easier then to start a new one up.
A gradual sale will only work if the parties trust each other.
The seller will have to allow the investor to assume the reigns,
and the buyer will have to rely on the seller’s assurances that he
would not abuse his majority rights to deny the buyer’s share of
the eventual profits, and to later allow the transfor of control at a
pre-agreed price.
Gradual sale works best in the case of intra-family, intracompany
successions, or with reliable business partners.
Winding Up. The final alternative to a sale is a winding up,
where the sellers harvest the value of their company by selling
assets and liberating working capital.
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