Crown Star Mergers & Acquisitions

Crown Star Mergers & AcquisitionsCrown Star Mergers & AcquisitionsCrown Star Mergers & Acquisitions
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Crown Star Mergers & Acquisitions

Crown Star Mergers & AcquisitionsCrown Star Mergers & AcquisitionsCrown Star Mergers & Acquisitions

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  • Home
  • Business Valuation
  • Industry Rollup & Exit
  • Business Owners
  • Sale Lease Back Funding
  • Private IPO
  • 7 Major Liquidity Events
  • Liquidity Without Selling

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Private IPO for Middle Market Companies

Massive Liquidity Without Losing Control of Your Business!

 

 

Major Liquidity events for business owners who don't want to sell or lose control of their business.

We Invest and collaborate with companies by helping them double or triple in size!



We offer middle market business owners checks of $10 - $40 Million per recap.


 This type of investment can be an attractive alternative to a majority or full sale of a company because it allows business owners to realize a similar levels of cash proceeds while retaining control of the business.  In some cases, if we use a straight debt recap - you will retain 100% ownership of your company and still have a nice liquidity event.


Minority Recapitalization Overview


What is a minority recapitalization?

A “RECAPITALIZATION” SHIFTS THE MIX OF DEBT, EQUITY, AND OWNERSHIP

A minority recapitalization (minority “recap”) is a type of investment in OUR CAPITAL PARTNERS provides debt and equity capital in exchange for a 20%-49% ownership stake in a company. Capital can be used for shareholder liquidity and/or growth initiatives. 


This type of investment can be an attractive alternative to a majority or full sale of a company because it allows business owners to realize a similar levels of cash proceeds while retaining control of the business.


It's perfect for business owners who want to take some chips off the table to gain liquidity to diversify their NetWorth. A lot of our clients use this to pull much needed capital out of their business to invest it into income producing assets like commercial real estate or better prepare for Retirment. In this day and age, it's not wise to keep the majority of your NetWorth tied to your single business.


A minority recap can provide business owners an attractive combination of cash proceeds, ongoing ownership, upside potential, and control as illustrated in the example below.  


Illustration below shows a side-by-side comparison of selling majority control to a minority control deal.    



The illustration below is an example of using both debt and equity to do a recap. We do allow straight debt to do a recap where the business owner doesn't give up any equity. However, the debt and equity recap are the most popular.















Investment Criteria

This opportunity is for businesses that do north of $4 Million EBITDA.

Additional Information

In each of these scenarios, our capital providers invest both debt and equity, which is used to provide cash to shareholders and to repay existing debt.


In a 49% minority recap, shareholders receive $17.4 million versus $22.0 million in the 80% sale scenario. In other words, shareholders receive only 25% less cash than they do in a 80% sale, but get to retain 51% ownership and control.




When does this deal structure make since?

Most of our clients need liquidity for various reasons, but are not ready to lose control.

Please Note: We have various ways to do a recapitalization for your business. We can do straight debt, via Mezzanine & Unitranche  debt or a few other debt solutions, we can also do straight equity or do a hybrid of both. No PG on the debt portion. With the straight debt portion, you retain even more equity ownership.  Unitranche debt is a type of debt financing. It has a hybrid loan structure, using senior debt and subordinated debt in a single loan.


Each individual deal is different, each founder has different needs at different times. 

 

USE OF FUNDS

  • Shareholder Liquidity
  • Recapitalizations / Refinancings
  • Management / Leveraged Buyouts
  • Growth Capital


Our innovative deal structure allows founders to gain significant liquidity while maintaining voting control and maximizing ongoing equity ownership. 








CASE STUDY

YOU GET THE 2ND BITE OF THE APPLE

With our recapitalization program as a business owner, you get to participate in 2 large exits.


How? See example below to see.


There was a manufacturing business that was exploring a sale and had an offer from a strategic buyer for $60 Million dollars, that offer was for 100% of the business.


When one of our capital provider/capital partners caught wind of this deal, they approached the seller to do a minor recapitalization. They acquired 20% of his business for $20 Million dollars and would scale the business and help position it for a major resell 3 - 5 years down the road, which would perfectly align with the founders retirement goals.


When they made this investment that company was doing $6 Million in EBITDA a year - once our capital partners got involved they helped scale that business to $18 Million in EBITDA a year in 36 months. Basically, they tripled that business in 36 months.


They then went to market to sell and ended up selling the business for $244 Million dollars. Remember the strategic buyer who offered $60 Million for 100% of that business 3 years prior?


That same strategic buyer made a $240 Million dollar offer to acquire the business, but the business sold to another strategic buyer for $244 Million dollars. The seller entered retirement with that 2nd exit!


He was very happy about the results as he should be. He participated in 2 exits.


Of that $244 Million dollar deal - his cut of that was 80% = $195,200,000.


Remember the $20 Million he received as part of the recapitalization 3 years prior to this 2nd exit? In total he received $215,200,000 for his business.


If he would have sold 100% of his business, he would have only received $60 Million dollars for it. In M&A terms we call this the 2nd bite of the apple. By doing a recap and partnering with the right capital provider he got $200+ Million to walk into retirement with.


The above deal illustrates it's better to have 2 exits instead of one. It's equally important to partner with the right capital partner when doing a recap. 


That's where Crown Star Mergers & Acquisitions comes into play. We are experts in the above strategies for middle market companies. This deal structure above is one of the most popular deal structures in our current economy. Business owners in the middle market love it.


The above rock star scenario is what we offer business owners in the middle market.


Reach out today to do a free consult to see if your business is a good fit for this type of deal structure.

Find out more

It gets even better!

For our clients that own their real estate - we can add even more liquidity options


Get 100% of the market value for your corporate owned real estate + do a recap all at once!


You can actually do a recap and do a sell and leaseback on your corporate owned real estate to maximize your liquidity event. With a sale leaseback transaction, you get 100% of the market value for your real estate instead of 65 - 70% from a bank. This combo strategy just adds extra capital to your liquidity event.


We find that most of our recap clients own significant amount of real estate.



What's the catch?


No catch, just enter into a NNN Lease with one of our institutional investors at market rates. 


For most businesses they have significant equity tied up in their real estate - it would be a more efficient to take the equity and convert it to cash and re-invest into your business or other income producing assets.


See our Sale Lease Back Funding page for more details. 


When you combine a recapitalization and a Real estate Sale Lease back we are talking massive liquidity events for business owners - while at the same time retaining majority control of their businesses.


When you add both together in such a synergetic way it could equal out to a majority sale - in better words you might get a cash equivalent of selling majority of your business and still retain control. It's the best of both worlds.








Summary of top benefits of a minor recap

 

Here are the top 10 benefits of a minority recapitalization:

  1. You do not need to rely on existing financing sources—A minority recapitalization broadens your financing options and will provide more capital than simply relying on existing cash/liquidity and senior debt capacity.  
  2. It is customizable—The reasons a shareholder or business might need additional liquidity are as varied as the owners and businesses themselves. A minority recapitalization can be tailored to fit unique requirements and to meet a range of liquidity objectives.  
  3. Keep both hands on the wheel—Because liquidity does not come at the price of majority ownership, funding for shareholder consolidation or capital spending does not come at the expense of operational or cultural control.
  4. Fund future growth—Growth, achieved organically or through acquisitions, requires capital; and fast growing companies can often outpace their ability to borrow through their usual channels.  A minority recapitalization can help extend a company’s borrowing ability for sustained growth.
  5. Less expensive than issuing common equity—The junior capital used to finance a minority recapitalization sits between senior debt and common equity in the form of mezzanine or subordinated debt and/or preferred equity, and can provide a less dilutive, more cost effective and tax efficient structure, as opposed to issuing new common equity.
  6. Participate more fully—Remaining, active shareholders can consolidate and maximize their ownership as well as benefit from future value created by the business down the road.    
  7. Second bite at the apple—Owners looking to diversify their personal net worth can achieve partial liquidity today, while allowing the remaining equity value to grow prior to a future liquidity event, retirement or sale.
  8. Facilitate the transition—When owners decide to step back from the business to transition to a new generation, management or ESOP, a prudent and patient capital structure that works for a diverse set of interests is required. A well-structured recapitalization can enable a smoother handover.
  9. Prelude to outright sale—Liquidity can be used to better position a company for an outright sale in the future—financing current growth initiatives or in some cases to pay down older, higher cost debt.
  10. Gain a long-term partner—Typically, minority recapitalizations are facilitated by buy-and-hold investors who are able to partner with a company for the long term.


A well-structured minority recapitalization can provide the much-needed infusion of capital where and when companies need it most. Finding the right capital provider who understands your liquidity objectives and can tailor the right structure for you takes time and research. When working with a partner like Crown Star Mergers & Acquisitions, business owners receive a more streamlined due diligence and execution process. In turn, owners can receive the liquidity they need in short order. We are about relationships, not transactions, and would welcome the opportunity to talk to you about how we can help you reach your capital goals.

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WE ALSO OFFER MINORITY GROWTH EQUITY DEALS

Why these deals are awesome for middle market companies!

This type of deal structure is another very popular minority-controlled deal - whereas a founder retains majority control of his business, but he gets equity growth capital injected into his business to help achieve massive growth.


Founders can also get some liquidity from growth equity, but within reason. This type of funding is to help grow the business. 


The great thing about this is the capital provider will take around 15% - 30% ownership stake in your company and invest tons of equity capital into your business usually $10 - $50 Million. They will also work with you on strategic growth initiatives to help you grow. They will usually have a plan to triple your business in the next 3 - 5 years.


Minority controlled growth equity & minority-controlled recapitalization deals is one of the most popular funding strategies in our current market.


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