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Management Buyout: a Case Study

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Management Buyout: a Case Study UNIVERSITEIT GENT GHENT UNIVERSITY FACULTEIT ECONOMIE EN BEDRIJFSKUNDE FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION ACADEMIC YEAR 2015 – 2016 Management buyout: A case study Masterproef voorgedragen tot het bekomen van de graad van Master’s Dissertation submitted to obtain the degree of Master of Science in Business Administration Jasper Dheedene Thomas Van Parys Under the guidance of Prof. Rudy Aernoudt UNIVERSITEIT GENT GHENT UNIVERSITY FACULTEIT ECONOMIE EN BEDRIJFSKUNDE FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION ACADEMIC YEAR 2015 – 2016 Management buyout: A case study Masterproef voorgedragen tot het bekomen van de graad van Master’s Dissertation submitted to obtain the degree of Master of Science in Business Administration Jasper Dheedene Thomas Van Parys Under the guidance of Prof. Rudy Aernoudt Undersigned declare that the content of this Master’s Dissertation may be consulted and/or reproduced on the condition of acknowledgement. Jasper Dheedene Thomas Van Parys NEDERLANDSTALIGE SAMENVATTING Een management buyout is een veelomvattend begrip in de ondernemingswereld. Heel wat belangrijke zaken en beslissingen gaan gepaard met een buyout. Het doel van onze thesis is het uitbreiden van de wetenschappelijke literatuur betreffende buyouts a.d.h.v. een gedetailleerde casestudie. Deze casestudie toont aan hoe het management van een welbepaalde onderneming te werk ging om de MBO te realizeren.. In het eerste onderdeel van de thesis wordt de literatuur besproken a.d.h.v. een literatuuroverzicht. De noodzakelijke begrippen, beweringen en weerleggingen worden gebruikt om de context van een buyout uitgebreid te beschrijven. Als tussenstuk tussen het literatuuroverzicht en de casestudie wordt de methodologie besproken. Hoe zijn we te werk gegaan? Waar hebben we onze informatie gehaald? Hoeveel bronnen zijn geraadpleegd? Etc. De casestudie, het belangrijkste deel, wordt als laatste weergeven. Deze gedetailleerde case onderzoekt een welbepaald bedrijf die een MBO tot voltooiing gebracht heeft. Ons onderzoek licht de verschillende facetten toe die sterk gerelateerd zijn aan een MBO operatie. In een eerste sectie wordt de algemene informatie van de onderneming weergegeven. Daarna worden de verschillende fases van de MBO besproken (pre MBO fase – MBO fase – post MBO fase). In de pre MBO fase wordt de aanloop naar de effectieve buyout besproken doormiddel van voorgestelde projecten. Tijdens de MBO fase worden de doelstellingen uitgebreid besproken. Waarom werd er gekozen voor een MBO? Hierbij wordt ook verwezen naar de waardering, structuur en financiering en welke impact deze beslissingen vertonen op de resultaten van de onderneming. In de post MBO fase wordt de toekomst van de onderneming toegelicht met als onderdeel de exit mogelijkheden. De conclusie zorgt voor het sluitstuk van onze thesis, waarin de meerwaarde van ons onderzoek wordt weergegeven alsook de gedetailleerde conclusies van de casestudie. PREFACE This thesis is written in order to obtain the Master's degree of Business Administration. We experienced the writing of our thesis as an additional complex and informative element in our business knowledge. In particular, this research could not have been accomplished without the professional assistance of Prof. R. Aernoudt. Additionally, we want to thank our family for the support during our education. May 2016 I TABLE OF CONTENTS PREFACE .............................................................................................................................................................. I TABLE OF CONTENTS .......................................................................................................................................... II LIST OF ABBREVIATIONS .................................................................................................................................... IV LIST OF FIGURES ................................................................................................................................................. V LIST OF TABLES .................................................................................................................................................. VI 1. INTRODUCTION ......................................................................................................................................... 1 2. LITERATURE STUDY ................................................................................................................................... 4 2.1 DEFINITIONS ............................................................................................................................................. 4 Buyout ......................................................................................................................................... 4 MBO ............................................................................................................................................ 4 SBO .............................................................................................................................................. 6 MBI .............................................................................................................................................. 7 LBO .............................................................................................................................................. 7 BIMBO ......................................................................................................................................... 8 IBO ............................................................................................................................................... 9 2.2 KEY PLAYERS ........................................................................................................................................... 10 Management team .................................................................................................................... 10 Management’s lawyers .............................................................................................................. 10 The private equity provider ........................................................................................................ 10 The private equity provider’s lawyers ......................................................................................... 11 The bank .................................................................................................................................... 11 The bank’s lawyers ..................................................................................................................... 11 Reporting accountants ............................................................................................................... 11 Environmental auditors .............................................................................................................. 12 Investment bankers .................................................................................................................... 12 2.3 DIFFERENT PHASES ................................................................................................................................... 13 The acquisition phase ................................................................................................................. 13 The holding period ..................................................................................................................... 13 The divestment phase ................................................................................................................ 14 2.4 REASONS TO EXERCISE A BUYOUT ................................................................................................................. 15 General reasons for the sale of the company.............................................................................. 15 Reasons of the seller .................................................................................................................. 17 Reasons of the management ...................................................................................................... 19 2.5 STRUCTURE OF BUYOUTS ........................................................................................................................... 22 II 2.6 FINANCING A BUYOUT ............................................................................................................................... 25 Debt financing ........................................................................................................................... 26 Equity financing ......................................................................................................................... 26 Mezzanine financing .................................................................................................................. 27 2.7 FAMILY FIRM........................................................................................................................................... 28 2.8 METHODS OF VALUATION .......................................................................................................................... 30 The DCF approach (Discounted Cash Flow) ................................................................................. 30 The Multiple approach ............................................................................................................... 31 The Asset-Based approach (NAV) ..............................................................................................
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