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Financieel Management

The investor will put up most of the equity needed, in the form of ordinary shares and preference shares.

The maximum amount of equity the investor is willing to make available depends on the expected return on exit. Because most investors are not interested in dividends but in realising a capital gain, it is at this stage that investors hope to make most of their return.

The company’s profits should be used to pay down the debt or to invest in the business. The preference shares will usually be redeemed on exit, together with any rolled-up dividends. The dividend yield on preference shares is a negotiation point and may vary widely between as low as 5% and as high as 15%.

Investors in conjunction with the management adviser will run their calculation models using different assumptions with regard to price, leverage, growth, margins, investments and exit proceeds to map expected returns and business and deal-structuring sensitivities, to put together the appropriate funding structure and to set a maximum bid price.

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