Opportunities and risks of co-investing
When selling a company to an investment company (private equity), management is often expected to co-invest. This can form an attractive investment opportunity for management, but success cannot be taken for granted. This kind of transaction is generally complex with numerous aspects to be taken into account, including financial, legal and fiscal matters. Furthermore, the position of management is delicate. The management team must, on one hand, protect the interests of the vendor and the company and, on the other hand, as a co-investor, invest on attractive terms and conditions. Personal exposure and financial commitment of managers are considerable. If the process is successful, however, this will be rewarded with a prospect of attractive proceeds, if and only if the transaction has been structured correctly.
PhiDelphi has extensive experience in guiding management teams in this type of transaction, especially in optimising the terms and conditions for management. With our own financial models, we simulate the intended transaction structure in order to become an equally informed negotiation partner as the investment company. In this way we effectively create a level playing field for management in negotiations with the buying investment company. This approach results in carefully balanced agreements with the investment company, from a financial, a legal and a fiscal perspective.
Over the past few years, PhiDelphi has assisted a large number of management teams in numerous sectors and in very diverse transaction structures. We have developed an eye for the differences in approach between investment companies, both national and international. We not only protect the financial and other interests of management, but are also able to support management in an intense and often difficult process.
PhiDelphi has vast experience in assisting management teams. We have assisted, among others, the management teams of Exact, Fit for Free, CED and Group of Butchers in a transaction co-investing with investment firms.