Other
PA SGS 9 Consolidation
- Module
- Private Acquisitions
Comprehensive exam notes on SGS 9 private acquisitions based on the learning outcomes and small group session activities at BPP.
[Show more]
2 reviews
By: serdilkaya • 1 year ago
By: lucybrowett • 2 year ago
Content preview
SGS 9: Management (of Target) Buy-outs (share + asset sale)1. MBO/MBI Structure
o Before completion
§ Here there is a ‘2’ NewCo structure:
-NewCo 1 = investment vehicle
-> Management and PE will subscribe to its shares
-> NewCo1 subscribes to shares in NewCo 2
- NewCo 2 = acquisition vehicle
-> this Co actually buys shares in Target by way of cash injected into it by NewCo1
-> Cash injection = inter-co loan from NewCo 1 or
-> NewCo1 can subscribe to further shares in NewCo2
-> Bank also funds purchase price to NewCo 2 (secured loan)
o After completion:
NB: Bank takes security from NewCo1, NewCo2 and Target
This security will usually be a GUARANTEE
2. Features of MBOs
(1) Internal Rate of Return (‘IRR’)
measure by which ‘PEF’ assesses the return the investors in the fund will make on its investment
represents the growth rate of the investment (initial investment vs. total return on investment on exit)
consists income receipts (dividends and interest) and capital receipts (gain on exit)
NB: income receipts alone will never be enough for the fund -> right from the start = inbuilt driver to achieve an exit
(2) What is an ‘exit’?
Means by which a PE fund achieves a return on the investment (ca.3-7 years)
Capital returns (by way of exit) either by:
Floatation: Target is floated on stock exchange or
Sale: sold to 3rd party purchases or
Secondary buy-out: sold to a secondary buyer
Liquidations – if the venture goes wrong
Management Team buys out the shares
o NB: sellers benefit from ‘flow-through structure’
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller daryalevchenko. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £3.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
84866 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now