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Financieel Management

Depending on the situation vendor financing is usually a matter of negotiation.

Vendor financing can be either in the form of deferred loans - as a rule payable on exit - or equity, generally in the same proportion of ordinary to preference shares as the investor. (so called ‘institutional terms’)

Vendor financing can be useful in bridging any price gap.

However, some vendors may particularly appreciate the opportunity of re-investing part of their proceeds into the new entity and hence providing them with an ongoing involvement and an upside potential.

Both maintaining the emotional ties and the possibility of higher proceeds over time can be strong advantages of a buyout over a trade sale.

Management should, however, consider that an offer including unexpected vendor financing might lead the vendor to feel that management is not able to finance the buyout, which may hurt credibility.

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