What are the benefits of being acquired by a financial sponsor?
As opposed to a strategic
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if you're just a shareholder, you just really care who makes a higher bid usually the strategic buyer although they might offer scrip. financial will always give you cash
but, then again, what if you want something to do with the acquired company (e.g. be a manager, and earn a salary)? it depends further on what the arrangements will be between bidder and target
in both situations, they could want you out for strategic, because they want to integrate their assets with the targets and put them under the management of the acquirer for financial, they might see you as a good manager and want you to stay. but they might want it because you are a lousy manager who doesnt make the best out of the assets, and they want to kick you out
Really depends on the situation (i.e. public vs. private, sector, strategy, etc) but one benefit of being acquired by a financial sponsor is that the fund will generally consist of economic animals who are interested in driving the most value whether that be through significant cost cutting, management/strategy change, etc. To the extent that the group values your services you will generally be rewarded with significant carry or share in the company. The downside of course is that you may be replaced by a new management team that is loyal to the fin sponsor.
Downside is also that the sponsor is focused on one thing: getting a good return on its investment as fast as possible. Even if this is in direct opposition to the company's long-term interests, it will be the #1 priority of the sponsor. An example of this is when a PE fund buys a company by loading it up with debt, then issues more debt to pay itself a cash dividend. Now the company is completely over-levered, but if the PE firm has made a nice return, that's all they care about.
Upside: the network the sponsor can make available to the company, intros to other companies and new customers, and possibly operating improvements (if they have operating partners who came over from years of industry experience because PE guys don't know dick about running companies compared to guys who have actually been in the trenches IMO). They can also help the company with new financings and ideas for acquisitions.
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