Bailing out your firm
Currently a hypothetical situation.
What would you guys do if your firms came to you and asked if you would give the company a bailout?
I feel that this situation might come up for me in the near future. My firm is looking to acquire a complementary firm and I think they will have to put up money if the deal goes south and falls apart. The thing I am worried about is that the amount will exceed the total easily liquid assets of the firm and they come to me and ask for money to keep the company afloat.
Would you? If so what would you ask for?
Heister Capital Management
Deal signed with gun on desk.
Good luck. (kidding about the gun, BTW)
I would have to be sure about the future of the firm. IF they pull this shit now, what's gonna stop them from making the same mistakes in the future? I would want a large, voting share in the company so I could tell them to make better decisions in the future.
Just curious... How long have you been at this firm, or working with them?
Im not too worried about my firms future, its the company they are looking at. They have had another buyer that had a similar situation and were made to put up promissary money and that deal fell apart. Not sure why, but it makes me wonder.
Im totally confused. What is your position within the firm (founder/partner?)? Are you referring to a capital call for all of the partners or your shop is coming to you personally to ask for capital? Doesnt make any sense. Why would your shop ask you to post an LC or a PN? Dont they have capital to post?
We are buying a firm to add to our operations. If the deal falls through I dont think they will have enough cash on hand to pay the negotaion posting. We can get the money if the deal goes through via financing however I don't think the bank will be willing to hand out 25 mil just because the deal fell apart. So I am thinking they will ask me to front the money for this in the form of a loan or equity purchase. Im just an analyst at the firm, I dont have operating control.
Im wondering if you guys would do this and if so what would you ask for in return for the money.
I'd absolutely need an equity stake and, for me at least, it would need to be a business that I believed in. For example, if I worked at a cutting edge start-up that was pursuing an idea I believed in, I'd be much more likely to "bail them out" than if it was some run of the mill financial services firm.
Under what circumstances would the deal have to fall apart for your group to lose the promissory note? Financing contingency? Why are you working at this half ass firm if you have enough money as an analyst to bail them out?
Continuing with this ridiculous hypo...what is the proposed purchase price of the acquisition target? What is the amount of the requested LC or Promissory Note? Would you be on the hook for the entire Note? The answers to those questions obviously dictate your answer but despite the analysis I would not invest. A company that is being acquired by a fund that can barely afford to acquire it would not be one that i would want participate in because guess what comes next...another capital call and you ponying up more money when things sour.
It's not a matter of being under capitalized upon purchase. The firm has in the neighboorhood of 850mm aum. I honestly have no idea how much the promissory note would be. We just have a lot of operating cap tied up in pending ib deals. The partners want to eventually acquire a consulting firm and a PE firm. To create a full service shop. I'm not really worried that the deal will fail, it is just that happened to the target firm before and they pocketed the promissory funds.
Stop being such a pussy dude just do it. Ask for a partnership in the firm while youre at it. Use that to leverage getting undergraduate chicks when you go for your msf.
A good rule is a P/E of 10 for an asset management firm. Given the partners' foolish behavior, a substantial discount is probably in order.
You'll pay 5x last year's earnings. You also want the authority to veto any new business purchase schemes involving more than X% of the firm's capital. And, if it's a general partnership, the partnership is getting restructured as an LLP to protect EVERYONE, and you are not assuming joint liability for any existing debt.
If they don't want it, they can BK. If it's a general partnership, they can have their homes repossessed too.
1.) You don't owe them anything. 2.) They shot themselves in the foot. You are choosing to bail them out ON YOUR TERMS. 3.) Any other potential buyer would be a lot more skeptical 4.) If they take it, your gain. If they don't, not your loss. (Maybe somebody else's gain, maybe their loss if they can't find anyone else.)
Im not saying the deal is even a go yet. There has been rumblings around the office that they are targeting a firm for a possible take over. I personally see the chance of the deal falling apart at less then 10% just want to have a plan of action in place if they dont have the cash on hand to cover the promissory note.
can someone please link me to the full-size image of this post? awesome caption from the magazine cover
http://www.wallstreetoasis.com/files/images/dog.png
Youre lazy.
TROLL
That's good. I just wonder why you are wasting your time as an analyst? I was an analyst nearly a dozen years ago. The money is terrible and you've already far exceeded the net worth of all senior MD's I know.
What golf course do you belong to? Are you in YPO? Do you live in an expensive house? Joining a prestigious club signals to everyone that you are legitimately wealthy since you need to have sponsors, audited statements, detailed background checks, etc... unlike, say, a Wharton degree where you just need a few good grades and test scores and you can be is serious debt. Even buying a multi-million dollar house indicates that you have good credit, had a down-payment and the income to support underwriting. People join those clubs because they know that their "network" will screened appropriately rather than someone who can just talk a good game or spends 20% of their salary on a nice car, which too many people do.
I would recommend that approach to someone who is young but exceptionally wealthy and wants others to know so, because many people will ask "where's the evidence" and probably write you off unless you can point to something like the above. As for me, the fact that I do not live in the areas most exclusive neighborhood and do not belong to the area's most exclusive golf club delimits me at just where I'm at financially, which is not in the upper echelons. I'm sorta "second-tier" in that respect, but things are verifiable.
Otherwise, people will probably just assume that you're lying. Simply re-hashing the WSJ or investment ideas without having the evidence might prove counter-productive for you in many circles, even if you are speaking in earnest. In other words, if you came to a BBQ at the house, talked a big game but lived in a small house and had no social memberships, my friends would probably think you are lying.
I honestly could not give a fuck less what you or your friends think. Why am I an analyst? Because I actually like my job, it opens my knowledge to new and different investment possibilites. I don't have a huge multi million dollar mcmasion. I prefer to live in a 1100 sqft condo and drive my 1st car. The difference between me and your friends is that I get more enjoyment out of finding new ways to increase my weath rather then just spend my money on the next shiny thing to try and impress the people around me. I don't need a 500k car to tell show everyone that I have a big dick. I laugh at my parents generation and their obsessive need to constantly impress each other with how much debt they can rack up. I would rather pay 300k for a house and invest the other million or two you would spend on a house to start a company that employs people. I am the new generation.
srs tho, this post=boss.
^^^ Heister owns a private jet. For some folks, that might be proof enough. For a wise person, it doesn't really matter how much money somebody has, anyways, does it?
Regardless, OP has been confirmed to work in industry given the star next to his name.
Back to my PBR and rusty honda.
jesus illini it's not even noon yet...
Ok, back to my rusty honda and 75c generic-brand 2L bottle of seltzer water.
It's never too early for a pounder of PBR
fuckin hipsters...
I'm an engineer. 4.7 PBRs and I'm done for the night.
Hence why my rule is no drinking before 6.
PM. Until then, it's this 2L bottle of seltzer water that I bought for 75 cents.
http://www.youtube.com/embed/snhiofL2Rh4
Heister, if you don't mind, how did you get all of your money?
http://www.wallstreetoasis.com/blog/non-traditional-investments-q-and-a
Read that.
do you really want to be with a firm that has no liquidity cushion? i know you are independently wealthy and all, but it sound like management's eyes are bigger than their bellies.
AM equity is about the softest asset you can buy, far away from land or mineral rights. take personalities into account if you don't have total operating control.
if you are looking to learn. don't "pay for it." unless you want partnership for prestige, which seems unlikely.
Most of you guys seem to have gotten the wrong impression. The firm has the ability to get the money and liquidity. This is just a "what if" senario, its not a they need the money now. The buyout has not even been formally presented. There is just rumor going around now. If the deal gets presented and goes to the execution phase I am overwhelmingly conifident that it will get done and this situation wont even come up. I was just wondering what you guys thought if it did come up.
Given the low probability of the event, it would seem that this thread has done nothing but present you with an opportunity for you to discuss how much family money you have. Nicely done.
Was going to say the exact same thing. Pathetic...
Lol were you really under the impression that it was meant for anything else?
Join the chat sometime, it makes the boards much more enjoyable.
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