Definitions

There is a lot of lingo specific to the M&A industry. Check out the definitions below to learn about various types of transactions or give us a call. We're glad to talk you through the options.

Management Buyout

A transaction in which the management team acquires all (or a significant piece) of the equity from the existing owner(s). Often the owner elects to sell the company and wants to give management the opportunity to participate in ownership going forward. Two common misconceptions: (1) that the management team must bring a large amount of capital to the table and (2) the owner must seller finance a significant portion of the transaction. This is not true. A capital partner is a great way to allow the owner to cash out and give their management team the opportunity to own a stake in their company. A quality M&A firm can support a scenario that results in a win-win-win for the owner, management team and capital partner.

Growth Capital

When a company wants to capitalize on growth opportunities but lacks the capital resources to do so, raising debt or equity is a common strategy. Growth capital can be used to execute acquisitions; reinvest in human capital, technology or CAPEX; or support working capital requirements among other growth needs. As a business owner, aligning your company with a true value-add partner who can bring their own relationships and resources to bear is a strong formula for success.

Family Succession

A generational change of ownership whereby the owner and the succeeding generation wish to make a clean transfer of a percentage or all of the equity in the company. Achieving a liquidity event for the existing owner and ensuring the next generation can affect a financially secure transaction is important to the preservation of the company's legacy and continued success going forward. This scenario can often be supported by an outside capital partner.

Recapitalization

When a business owner elects to bring in an equity partner through monetizing a significant percentage of the ownership in the company. This can be a minority or a majority sale of equity. A recapitalization is an attractive option when the owner has led the company to a certain point and needs help to grow the business, wishes to diversify some of the financial responsibility, or looks to achieve some liquidity but stay involved in the business.

Buy-Side Engagement

Hiring an outside party to run a formal search process targeting companies that fit a specific acquisition profile. Business owners and investors who want to grow through acquisition often do not have the time nor the manpower to allocate to a devoted search. Working with a third party allows an owner to concentrate on running the day-to-day business while a trusted resource brings multiple opportunities to the table.

Corporate Divestiture

Selling an asset or division of a company. This typically occurs when a specific asset is either underperforming or is not essential to the future direction or growth strategy of the larger organization.

Strategic Sale

When a business is acquired by another operating company - often by a larger entity in the same industry - whereby certain synergies can be realized and costs absorbed. Companies elect to grow through acquisition to increase geographical footprint, acquire additional customers, expand product lines, eliminate competition and achieve multiple expansion.