situations

There are a number of situations when growing businesses can benefit from private equity investment and there are a range of different ways of structuring the deal. Ultimately, private equity investment is an enabler to release value and to support a growth strategy. It could help if you are in one of the following situations:

• You’re looking to sell your business so that you can either retire or start a new venture: ISIS/Enotria
• You’re looking to realise some value from your business but still wish to develop it further: ISIS/Fat Face
• You need additional investment to fund an acceleration of growth either organically or through acquisition: ISIS/Paragon
• You’re considering encouraging people below you to take over the business: ISIS/Quantix
• You are looking to lead a buy-out of the business currently work in: ISIS/Equiom
• You’re considering leading a team to buy into a business: ISIS/Thomas Sanderson

Whilst every deal is unique, there are five main ways to structure a deal to suit these situations:

Replacement capital
Management buy-out
Secondary buy-out
Management buy-in
Development capital

Replacement capital

This enables owner-mangers to realise value from their business, selling part of their shareholding to a private equity investor. This suits owner-managers that want to continue to grow their business rather than selling outright. Good examples of this within the ISIS portfolio include Fat Face and SLR

This process of raising capital may help to faciltate a wider restructuring of the current shareholding e.g it may enable departing managers to sell their shareholding in full, as if the business was being sold.

This transaction type can also be referred to as an Equity Release transaction, or a Recapitalisation.

Management buy-out

This enables current operating management and investors to acquire or to purchase a significant shareholding in the business they manage. The amounts concerned tend to be larger than other types of financing, as they involve the acquisition of an entire business. Recent examples include Equiom and Cablecom.

Secondary buy-out

A Secondary Buyout is where a private equity firm acquires existing shares in a company from another private equity firm or from another shareholder or shareholders. Langauge Line was a Secondary Buyout transaction, and we exited our investments in Americana and Fat Face through this exit route.

Management buy-in

This enables a manager or group of managers from outside a company to buy into it.

A similar transaction is a BIMBO (Buy-In Management Buy-Out) which is structured to enable a company's management to acquire the business they manage with the assistance of some incoming management, such as Staffline.

Development capital

A structure which helps finance the growth and expansion of an established company. For example, to finance increased production capacity, product development, acquisitions as well as to provide additional working capital. Also known as Expansion or Growth Capital.

You can find further examples of each of these deal types in the our investments section.

If you’d like to discuss which would be most appropriate for you, please contact Tim Richardson

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