Types of Divestitures

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Expertise in understanding where your company is in the business cycle with respect to valuation metrics such as EBITDA multiples, leverage ratios, working capital expectations and redundant assets which are keys to a successful transaction.

 

  • Strategic Buyers are either vertically or horizontally integrated firm that would experience synergistic value through the acquisition. Strategic purchases typically in the highest share price that can be attained when compared to other types of sales. The integration of two businesses may provide a value that may far outweigh the sum of the two companies valued individually.
  • Financial Buyers are comprised of bank sponsored and private equity funds (independent or institutional). A sale to a financial buyer may result in a 100% buyout or percentage of a current ownership. Financial sales often result in a growth or acquisition plan that can enhance shareholder equity via additional capital from the financial partner. Additional capital is often available to grow the business through acquisition or capital expenditures and working capital additions for growth initiatives. Financial buyers usually have a finite time period in which they invest (4-7 years) and typically plan for a liquidity event for some or all shareholders.
  • Management Buyouts - A succession plan that involves the existing management purchasing the shares from the owner. These types of transactions often have the involvement of some outside capital provider partnering to complete the transaction or the transaction happens slowly over a longer period of time without any outside financial assistance. Management teams have the knowledge but often lack the financial backing to complete the transaction on their own. Financial structuring is often required to get the transaction completed, and in many cases the management team will result in having majority ownership. Links has acted for both management teams and the sellers in these types of transactions.
  • Spinoffs – Many organizations often acquire businesses and after a period of time may change strategic direction. When this happens, businesses that were once a business fit with the organization are no longer a fit. These businesses are sold and this may provide an opportunity for the right strategic purchaser. In many instances, the businesses may be sold back to the previous owners.