Management Buyout Questions & Answers
What is the profile of a successful management buyout executive?
• Has a proven track record in a large company or major division as chief executive officer, president, or general manager, with bottom line responsibility.
• Knows the target company is available for acquisition.
• Has in-depth knowledge of the industry in which the acquisition is to be made.
• Can assemble a top management team to operate the acquired company.
• Has a burning desire to build a successful, world-class enterprise.
What are the characteristics of a qualified acquisition target?
The criteria include:
• Revenues in the $20 million range or above.
• History of profitability and growth.
• Target companies can be private, public, or a division of a major corporation.
• Manufacturing, technology, distribution and service are favored industries.
• We tend to avoid turnarounds, real estate & land investments, oil & gas, and commodity companies.
What is Emory & Co.'s relationship with the investors?
Emory has long-standing relationships with more than one thousand highly respected investment companies. These are firms with significant capital. They are actively seeking to partner with qualified executives in a buyout transaction.
Is the executive expected to invest in the acquired business?
The executive invests personal capital to demonstrate his commitment and to keep his interests aligned with the investors.
How much equity in the acquired business will the executive receive?
Typically, a portion of the new company equity is reserved for the executive and his management team. The actual percentage, terms and conditions are negotiated by Emory for the executive. The equity is in the form of shares and/or options. Management is represented on the board of directors.
What about management salaries and incentives?
These are negotiated with the investors and are generous.
What are the ultimate objectives of the investors?
The investors consider themselves long-term holders of the companies they acquire. Theirs is a philosophy of growth rather than breakup or near-term sale. They have no specific exit requirements.
Only when management and the investors believe the growth of the company will be facilitated by an initial public offering or merger with a major corporation are steps taken in this direction.
What role do the investors play following closing of the acquisition?
As members of the board of directors, the investors work to develop appropriate capital structure for growth. They locate, analyze and negotiate add-on acquisitions. The investors assist in raising additional capital and help formulate operating strategy.
Are the investors interested in consolidating more than one company in the same industry under leadership of a qualified executive CEO?
The investors have great interest in the consolidation of a group of companies in fragmented and growing industries.
Are the investors interested in acquiring companies already represented by an intermediary or investment banker?
Usually not. Such companies are likely to be sold at auction to the highest bidder. The investors prefer one-on-one negotiations with the sellers.
How is Emory compensated?
Emory compensation is outlined in an agreement with the executive and the company.
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