One of the most common options to finance a management buyout is for the seller to provide financing (also known as deferred consideration).
Usually, the seller creates a note that is amortized over a period of time.
This option is an advantage for the management buyout team because sellers are usually more willing than banks to provide the funding.
Additionally, as a condition of financing the transaction, some lenders may insist that a portion of the sale be financed by the seller.
This condition provides a measure of confidence to the lenders because it shows that the seller believe that the business will remain a viable concern once the sale is completed.
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