It’s a bit of a no loose situation for the investors as it doesn’t cost them any money as they will transfer the cost of buying the team to the team as debt
sort off. The buy-out will be financed in a large part by bank debt, but there will also be PE money from both a company level and individuals within that PE firm – there may also be money from HNWI’s. The money back will come in the form of 3-4 mechanisms’
Managament fee back to the PE’s -monthly – this can be fairly substantial
then you’ll have the loan notes of different types (C1-3 and likely some D notes with different values)
Debt payemtns to bank – i would have thought 6 monthly
Debt payments back to PE – (this will be at end of term normally, so say 5 years) – this will accrue monthly and compound over the course of the term at an interest rate say min 12% (Some HNWI’s will be in this)
Sweet equity – thos are loans at the lower end of the payback scale after debt and are realised post sale. These can be worth exponential amounts depending on the sale of the company, or worth nothing if it goes below the asking price. (Some HNWI’s will be in this)
Profit after all other debts, loans, equity is shared out.
For companies to asset strip, there has to be something worth asset stripping, generally in F1 there is sod all as it’s all owned by other people/rented, so they have to work on the assumption they are buying the brand, the people and the success of the company, so that they can sell it for either
a. multiple of what they bought it for
b. multiple of it’s EBITDA
c. multiple of it’s EBITDA potential
d. some chomp with more money than sense just gives over a random amount – (not unheard of).
this is unfrotunately why people like he that should not be named, never go away as they never put money, but are good a courting people into high profile deals that have a potential to go right!
