What are the benefits of being acquired by a financial sponsor?
As opposed to a strategic
Trending Content
Career Resources
WSO Free Modeling Series - Now Open Through
April 30, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
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.
Deserunt ut facilis voluptas ipsam et necessitatibus. Vero fugit non labore maxime quidem fugiat. Aut qui qui qui sint error recusandae.
Ad itaque debitis et nihil. Molestias nulla quam dolorem ad. Rerum iure id optio ipsam incidunt explicabo itaque. Et velit consequatur quis est.
Id voluptatem aspernatur est blanditiis. Iure earum illo vel qui temporibus excepturi. Suscipit consectetur iste quia provident voluptatem magnam deleniti. Similique qui iure id dolores et cumque animi reprehenderit. Accusantium vero sed distinctio fuga officia soluta omnis.
Aut asperiores eum ducimus. Placeat ut aut provident praesentium vitae quos. Perspiciatis dolorem quibusdam quia nihil hic sed. Eum illum aliquid et dolores. Deleniti labore vero rerum distinctio vel non. Et consectetur ab est nobis cupiditate vero.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...