Virtual CFO Operations – Business Buyouts

When you have a small business and an in-house CFO is not in your budget a Virtual CFO might be the perfect fit for what you need.

By working remotely, you will get the same expertise and financial planning service, but on an as-needed basis and at a fraction of the cost. Your financial department will always stay on track with the guidance and advice of a virtual CFO. Business buyouts is an area in which a virtual CFO can help you understand your options so you can do what is best for your company.

Business Buyouts:

There are two types of buyouts – management if bought by a firm’s management and leveraged if high levels of debt are used to fund a buyout.

Larger businesses have the advantage of larger assets and brand recognition leading to more numerous amounts of cash revenue with which to use as funds. Smaller companies have comparatively fewer options in terms of financing the buyout. The ability of this venture to succeed basically boils down to the willingness of the management team to use alternative financing means.

Some of these revenue options include:

1. Equity from new management team – The managers making the purchase are arguably the most important to the transaction. Personal investments are usually contributed to the purchase of the target company. This shows commitment and loyalty to the brand and can lead to funding companies feeling more comfortable supporting the venture.
2. Bank loan –This avenue is cheaper than other acquisition loans and are very effective, however, they are often hard to get.
3. Seller Financing – This deferred consideration style can be taken advantage of by the management buyout team because in these cases, sellers are more willing to provide funding than banks. Reduced prices and a possible portion of the sale being financed by the seller are also advantages of this financial avenue.
4. Assumption of debt – Part of the acquisition cost can be paid by assuming some or all of the liabilities of the target company.
5. Private equity – Often preferring larger transactions, their investments usually consist of buying shares or providing loans and asset-based financing. These firms usually want to realize gains in the short term, so make sure your future opportunities aren’t hampered by disputes in management idea differences.

It’s always smart to evaluate different options and consider the advantages and disadvantages of each. The experienced team at MSM Advisors can help you choose which plan is right for you. Call today at 678-804-5530 to schedule a consultation or visit us online for more information.