Using Mezzanine Financing to Buy a Small Business | How to Buy a Small Business
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- เผยแพร่เมื่อ 28 ก.ค. 2024
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What the heck is mezzanine financing and how can you use it to buy a business?
This week Joe asked me about mezzanine financing.
I’ll take you through a sample balance sheet, bore you with details about debt to equity ratios then excite you with the fun details of how these deals work.
Mezzanine financing is the quirky joke-telling offspring of debt and equity that people like to have around because he’s often confused for equity.
The problem is he can be quite the joker and often has a nasty temper.
Confused yet? That’s the point. Let me show you how this financial sleight of hand is used to help make other lenders make loans.
Watch and see: • Using Mezzanine Financ...
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Thank you David for this video
Thanks for watching. Be sure to go to www.DavidCBarnett.com to sign up for my email list.
excellent.
Thanks Nicholas. Please like and share so others can find the video more easily.
Hi David. Are the rate of returns for lenders, better than unitranche financing?
I don't know about unitranche. sorry.
David just got another acquisition idea. Would it be possible to acquire a business solely based on sweat equity?. Let's say u work out a deal with an owner, were you manage the business for him/her and your compensation is solely stock options for like 3 years. At then end of those 3 years you have acquired 100% control. Would this be a way of buying a business no money down?
Potentially, I did a call on Clarity a few weeks ago with a guy who was given 50% of a business in exchange for revamping it's online marketing functions. The issue with these deals is creating the deal, plan and pricing before you invest 3 years of your life.
David Barnett do you have expertise is structuring these deals?
Yes, I've advised buyers and sellers on many of these. It's basically a variation of a management buy out and there are many different models. Arrange a call if you'd like to discuss your case at www.Clarity.fm/davidbarnett
Something I don't catch is why would i enter the ownership of the company if you can't pay me. If it is so maybe it's because the company doesn't go well so why i'd like to become a shareholder ?
Hmm, I don't quite get your question Abdel.
@@DavidCBarnett I think he's saying, why does convertability have risk mitigation value to the investor if it only happens when the business is distressed and not generating enough profit. I'm guessing the answer is decision rights to turn around the business and also equity value being generated by cash flow paying off the primary?
Hi David how can one use DIP financing to buy a business?
Great question. I'll add it to my list. I know a business person who is involved with a DIP right now and so I may be able to share a story if it unfolds in the next few weeks.
This will be great i'm looking at using this strategy to acquire a distressed manufacturing company that makes mango and banana puree for export to Europe and Asian markets
Which country are you in?
Cliff Nyaberi how do you find these deals?
Too fat, fat you must cut lean.
You got to take the elevator to the mezzanine,
Chump, change, and it's on, super bon bon
Super bon bon, Super bon bon
Super bon bon, Super bon bon
Chilly outside, get your long johns on
You gotta look your best make sure you shave clean
There ain't no fire pole down from the mezzanine