FINANCE TO BUY OUT A BUSINESS PARTNER OR SHAREHOLDER
Buying into a business, purchasing a partner’s share or completing a management buyout may require a combination of buyer funds and external finance.
Fairlane Finance helps buyers understand how lenders may assess the transaction and how the funding could potentially be structured.
Funding The Acquisition
Buying an established business can create an opportunity to step into ownership, expand an existing operation or acquire an established customer base.
But finding the right business is only part of the process.
You also need to understand whether the acquisition can be financed, how much you may need to contribute and whether the proposed structure will leave the business with enough cash to operate after settlement.
Fairlane Finance is a Sydney-based commercial finance adviser helping Australian business buyers assess, structure and arrange finance for business acquisitions.
When might buyout finance be needed?
Buyout finance may be considered when:
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one partner wants to buy out another;
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an employee or existing shareholder wants to buy into the business;
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a management team wants to acquire the business;
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ownership is transferring between family members; or
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an outgoing owner will be paid partly at settlement and partly over time.
The appropriate structure will depend on what is being acquired, who will own the business and how the business will operate after completion.
How can a business buyout be funded?
A buy-in or buyout may involve:
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the buyer’s own contribution;
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a business or acquisition loan;
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property-backed finance;
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vendor finance or deferred payments; and
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equipment finance where eligible assets are involved.
Sometimes several funding sources are combined. Not every option will be available or appropriate for every transaction.
What will lenders consider?
Potential lenders may assess:
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the purchase price and how it was determined;
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the business’s historical and current financial performance;
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whether the business can service the proposed debt;
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the buyer’s contribution and available security;
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the experience of the incoming or continuing owners;
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the effect of the outgoing owner’s departure; and
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the working capital remaining after the buyout.
A profitable business is not automatically financeable. The purchase price, debt level, transaction structure and people operating the business all matter.
When should I investigate the finance?
It is generally helpful to investigate funding before entering an unconditional buyout agreement.
An early discussion may identify information gaps, funding constraints or structural issues while there is still time to reconsider the purchase terms.
How Fairlane Finance helps
Fairlane Finance can review the proposed transaction, identify information likely to be important to lenders and explore potential funding structures.
Where a transaction is suitable to progress, we can approach relevant lenders and work alongside your accountant and lawyer during the finance process.
Our role is focused on finance. Legal agreements, valuations, ownership structures and tax consequences should be considered with appropriately qualified advisers.
