Creative Structures
December 09, 2022
by a searcher from Towson University in Portland, OR, USA
I'm fascinated with deal structures that may include a large seller note, vendor take-back, option agreements, or unique alignments of terms on non-bank financing.
I've seen this done by savvy real estate folks in my market but haven't much exposure to private equity or business acquirers using these structures.
One of the more recent episodes of ^redacted podcast was with Richard Reese, who acquired and grew the data storage company, Iron Mountain. I think he said that the original business was doing $3M in revenue but losing money, so he purchased the business via an option contract...I wish he had shared more about this structure.
Does anyone have any good resources they could share with case studies and terms for these kinds of deals?
in Chicago, IL, USA
For example, if you come across a business owner with $500K in machinery that has long-since been depreciated, but is still in operation, you could offer an X-year Note, that leases back the equipment. You have taken an idle asset and converted it into an income-generating asset for the Seller and a tax write off for you. Not only that, but if you don't pay the Note, they can pull the equipment and you can't operate the business. The longer the Note, the more $$$ they extract.
If you approach from the angle that a Seller Note "must sincerely benefit the Seller", the tides will turn and nearly every deal will present an opportunity for a Seller Note.
from Harvard University in Los Angeles, CA, USA