What is private equity?
Private equity is an asset class consisting of equity securities in operating companies that are privately held and not quoted on a public exchange. Capital for private equity is raised from retail, institutional, and high-net-worth investors, and can be used to fund Investments in leveraged buyouts, growth capital financings, acquisition financings and for the expansion of working capital.
What is a leveraged buyout?
A leveraged buyout (“LBO”) refers to a strategy of making equity investments as part of a transaction in which a company, certain of its assets, or an entire business unit is acquired from the current shareholders with the use of financial leverage – senior and subordinated debt leverage.
What is a management buyout?
A management buyout (“MBO”) refers to a strategy of making equity investments as part of a transaction in which a company, certain of its assets, or an entire business unit is acquired from the current shareholders by the existing management team with the use of financial leverage – senior and subordinated debt leverage.
What is growth capital?
Growth capital refers to a capital investment (debt and/or equity) in a relatively mature company that is looking for capital to expand or restructure operations, enter new markets, or increase revenue generating opportunities through the enhancement of its sales and marketing presence.
What is an SBIC?
A Small Business Investment Company (“SBIC”) is a privately owned and operated company that makes long-term investments in American small businesses and that is licensed by the United States Small Business Administration (“SBA”).
What is mezzanine debt?
Mezzanine debt is a type of debt instrument that resides on the balance sheet subordinate to traditional senior debt and above common and preferred equity. Mezzanine capital is often a more expensive financing source for a company than traditional senior secured debt, but much less expensive than equity. The higher cost of capital associated with mezzanine debt is the result of its location as an unsecured, subordinated (or junior) obligation in a company's capital structure – a higher risk position on the balance sheet. Mezzanine debt has embedded equity instruments called warrants attached, which increase the value of the subordinated debt to compensate for the higher level of risk. Mezzanine finance shares characteristics of both debt and equity financing
How does mezzanine debt differ from traditional senior debt?
Traditional senior banks offer secured loans that require the underlying assets to serve as collateral for the loan. The amount of the senior debt is based on ratios such as a percentage of receivables, inventory, equipment and real estate. In general, banks will lend an amount that falls comfortably within the boundaries of the collateral. Unlike senior debt, mezzanine financing looks at cash flow as the determinant for how much debt the company's balance sheet can support instead of collateral coverage. Mezzanine financing is utilized when a company has good cash flow, but does not have sufficient collateral for a bank to lend any additional funds. Despite not having a first lien on the assets of a company, mezzanine debt is often collateralized by taking a second lien on the assets of the company. Therefore, mezzanine financing is based primarily on the ability of the company to service the debt and not on the asset value of the company.
Why is mezzanine debt an attractive financing solution?
Mezzanine debt is attractive given:
What is a Warrant?
Warrants are securities issued by a company which give their owners the right to purchase shares in the company at a specific price at a future date. The warrants are tradable in their own right, and their value will go up and down as the price of the shares to which they relate goes up and down
How do I submit a business plan to Plexus for consideration?
Please contact and/or email your business plan to either Robert Gefaell in our Charlotte, NC office or Mike Becker in our Raleigh, NC office. Contact information for both Robert and Mike can be found on the Contact Us page of the Plexus website, or you can send them an email by clicking on their name above.