Posted by: admin | October 20, 2008

Sample PE Deal: Sources & Uses

Above we have a sources & uses table for a sample PE deal that my firm was looking into.  Note the figures are in $ millions of dollars.  We looked at purchasing this company for $82.8 million, of which $41.3 million was common equity, $10m preferred, and the remainder split into senior debt ($12.5m), and subordinated debt ($19m).  The sub & preferred have warrants attached, and current management would get a 7.5% option pool (in the model they are labeled as warrants, same thing).

The senior notes pay interest at a rate of 7.0% per annum, payable quarterly.

The preferred stocks pays dividends at a rate of 8.0% per annum, payable quarterly as well.  It is also redeemable, meaning the company, at any time at their discretion after the 5 year non-callable period, has the right to redeem the stock at a certain price and retire it.

The seller of this business (and only shareholder), will be getting $68.0m in cash at close, and will rollover $8.3m into a 20% ownership interest in the new company.

I’d like to reflect my thoughts on this:

This guy just hit a $68m cash pay day.  I never would have believed it so much if I didn’t see it with my own eyes working on the deal.  I myself am now in the process of starting my own business because I am now an absolute firm believer that the only way to the “promised-land” is through running your own business.  You control your own destiny, go for it.


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