Who Owns The Company Here?Subscribe
Guys. A hypothetical situation is described below. Assume the capital structure of a company at T = 0 (right when the PE firm made its investment is the follows)
Senior Debt = $200
Sub Debt = $100
Pref Equity (all of which is bought by the PE sponsor) = 50
Common Stock = $50 (of which 40 is attributable to management, and 10 to PE sponsor)
Let's also assume that the Pref cannot be converted to common stock, and only has a 2.0x liquidation preference. In this situation, is the owner of the company the management (40 / 50) i.e. 80% or is it still the sponsor ( [50 + 10] / [50+50]) implying 60%? In other words, when calculating ownership %, are preferred equity and common equity lumped together?