Buy-out (company acquisition)
The buy-out ( English Buyout ) is in the business administration an anglicism for a company purchase by business entities that are already in business relationship or legal relationship to be selling companies are.
General
Buyouts are often used by small to medium-sized enterprises ( SMEs ). The company succession has usually not been clarified or the succession is not sought by own family members. The previous owner prefers a sale or a merger in order to continue the company. If the company is bought by a group of people close to the company, it is referred to as a buy-out . There are certain advantages and disadvantages here. The group of people already has the necessary know-how about company processes and structures. Above all, this group of people is familiar with the customer and supplier base, which means that existing contacts can continue to be used. Financing a buyout has a disadvantageous effect. The group of people taking over can rarely raise the necessary financial resources themselves or through outside capital . Therefore, a non-company financial investor is usually required for the buyout.
In a buyout, the buyers of the company are economic subjects who have previously had a business or legal relationship with the company. In contrast to the acquisition of a company , in which every economic subject can be the buyer of a company, the buyout is to be viewed as a special form of company acquisition. The buyer base in a buyout is a subset of the total number of investors in a company acquisition.
Types of buyouts
Buyouts are divided into different subgroups. The decisive factor in this distinction is the group of people who buy up the company. There are a total of four buy-out forms.
Management buyout
In a management buy-out (MBO), the previous management of the company acquires the shares from the previous owner. A restructuring MBO is used if the previous owners do not want to provide any further financial means or if the company is already economically struggling.
Another form is management buy-in . Here the company is not bought up by internal management, but taken over by external management. This intention can also be promoted by an external investor.
Institutional buy-out
The institutional buyout is the counterpart to the management buyout. The takeover is not carried out by the company's internal management, but by an external investment company such as a private equity or venture capital company . The old management is usually retained in the new society.
Employee buy-out
In the case of an employee buy-out (EBO), the shares of the previous owners are taken over by the workforce. In addition to the workforce, management can also take over parts of the company. Since the workforce and management are rarely able to provide the necessary financial resources, a financial investor outside the company is required for the takeover.
This type of buyout is rarely found in practice. Most financial investors rarely support the confusing structure of the society.
Spin-off
A spin-off is the outsourcing of a subsidiary or company division. In this spin-off, the previous management or a financial investor takes over the shares of the specific part of the company.
A spin-off is used for parts of the company that are not part of the company's actual core business. The company part can be a high-turnover or profitable business of the group. The previously economically (and in some areas also legally) dependent part is continued by the management or the investor as a legally independent company.
Leveraged buyout
A leveraged buyout (LBO) is a special form of buyout. This form is not differentiated according to the group of people, but according to the type of financing. The term as well as the implementation are not precisely defined. Nevertheless, the LBO describes the takeover of the company by means of high levels of debt financed funds (including debt capital). The share of the total financing volume should be at least 50%.
The goal of an LBO is to improve return on equity . Since the LBO increases the outside capital in the company, the equity portion decreases at the same time. The so-called leverage effect (“leverage effect”) can thus improve (“leveraged”) the return on equity accordingly.
Secondary buy-out
After a successful buy-out, the new company will continue to run under the leadership of the management and the financial resources of the investor. The investor, or in the case of an institutional buy-out also the private equity company, strive to "exit" from the company after a certain holding period. This means that the shares should be resold as profitably as possible. If the company shares are sold to an investor or private equity company after the buyout, this is called a secondary buyout . A tertiary buy-out is the resale of this stake to a third investor.
Financing the buyout
Since the takeover through a buy-out is rarely financed by the acting authorities themselves, the financing must take place by means of a financing concept. As with project finance, this is fundamentally characterized by cash flow orientation, risk sharing and off-balance sheet financing.
The cash flow orientation is crucial for the relationship with the bank . The interest and repayment amounts are based on the company's cash flow. The final purchase price and the valuation of the new company also depend on the cash flow. In risk sharing, the consideration is made that each actor in a buyout has certain know-how with which he can best cope with certain risks. Therefore, risks are assigned to those departments that are best equipped to cope with them.
The financial investor endeavors to hold as few risks as possible in the new company. Since he has a significant stake in this company with capital, he can separate himself from risks by hedging. These steps are analyzed in the area of off-balance sheet financing, a product of cash flow orientation and risk sharing. The investor can, for example, set up a special purpose vehicle and equip it with capital in order to finance the participation via this company without having to be fully liable.
See also
literature
- Gerrit Raupach, Michael Weiss: Part IV Financing Issues . In: Wolfgang Hölters (Hrsg.): Handbuch des Unternehmens- und Beteiligungskaufs . 6th edition. Otto Schmidt, Cologne 2005, ISBN 3-504-45555-1 , p. 306-389 .
- Joachim Prätsch, Uwe Schikorra, Eberhard Ludwig: Financial management: text and practical book for investment, financing and financial controlling . Springer Gabler, Berlin / Heidelberg 2012, ISBN 978-3-642-25390-4 .
- Birgit Wolf, Michael Pfaue, Mark Hill: Structured Financing - Basics of Corporate Finance, Technology of Project and Buy-Out Financing, Asset-Backed Structures . Schäffer-Pöschel, Stuttgart 2011, ISBN 978-3-7910-3048-7 , pp. 157-196 .
Individual evidence
- ↑ Birgit Wolf, Mark Hill, Michael Pfaue: Structured Financing - Basics of Corporate Finance, Technology of Project and Buy-Out Financing, Asset-Backed Structures . Schäffer-Pöschel, Stuttgart 2011, ISBN 978-3-7910-3048-7 , pp. 157-158 .
- ↑ Birgit Wolf, Mark Hill, Michael Pfaue: Structured Financing - Basics of Corporate Finance, Technology of Project and Buy-Out Financing, Asset-Backed Structures . Schäffer-Pöschel, Stuttgart 2011, ISBN 978-3-7910-3048-7 , pp. 159 .
- ↑ root: Institutional Buyout - IBO . In: Investopedia . June 24, 2010 ( investopedia.com [accessed December 12, 2016]).
- ↑ a b Birgit Wolf, Mark Hill, Michael Pfaue: Structured Financing - Basics of Corporate Finance, Technology of Project and Buy-Out Financing, Asset-Backed Structures . Schäffer-Pöschel, Stuttgart 2011, ISBN 978-3-7910-3048-7 , pp. 160 .
- ↑ Rico Baumann: Leveraged Buyouts: An Empirical Study of Financial Characteristics, Wealth Effects, and Industry-Internal Effects . Springer-Verlag, 2011, ISBN 978-3-8349-6711-4 , pp. 9–13 ( limited preview in Google Book search).
- ↑ Andreas Rötheli: Secondary Buy-outs - Selected Aspects. (PDF) Retrieved December 12, 2016 .