Financial glossaryBuy & Build-strategy
Strategic acquisitions of one or more businesses to be stronger in a specific sector or to consolidate a sector.
Sale of a non-strategic part of the company.
Leveraged Buy-Out (LBO)
An investor takes over a business with his own means and borrowed money. That capital must be paid back later by the business taken over. Private equity-firms especially use LBOs to take over businesses, to apply a Buy & Build-strategy and to sell it again later.
Management Buy-In (MBI)
The management of a business takes over another business (or one or more departments thereof) with their own means. If they do that with an external financier, this is called a Leveraged Management Buy-In.
Management Buy-Out (MBO)
The management of a business buys one or more departments or the entire business and continues the activities.
A type of financing used mainly with Leveraged Buy-Outs: capital that fills the gap between the amount borrowed from the bank and the risk-bearing equity. Mezzanine capital is risk bearing because it is used at a time when the banks do not want to lend any more or if using capital by issuing new shares is not desirable or not possible.
Mezzanine capital is only repaid after the loans have been paid back to the bank. Mezzanine financing is generally realised at a high interest rate. Mezzanine investors usually do not have a say in the daily management of the business in which they have invested. In the case of success they are usually paid an extra bonus in addition to the interest.
Owner’s Buy-Out (OBO)
A technique in which the owner takes over his own business together with an external investor (usually private equity) via a new company to be formed or a holding company. The owner can secure a significant part of the value of their business via such a transaction. Such a transaction is almost always structured via a Leveraged Buy-Out (LBO).
EBO (Equity Buyout)
EBO is the new buzzword in the world's leading financial centres.
Due to the credit crunch more deals are done without using any borrowed money.
As a consequence LBO's are no longer leveraged and become all-equity deals or EBO's.
Participation fund (Participatiefonds)
The Participation fund (Participatiefonds) is a federal credit organisation for the self-employed, the liberal professions, small companies, starters, including jobseekers, who want to set-up their own business. The Fund co-finances young self-employed people and small companies via Starteo and Optimeo. In addition the Participation fund co-finances various forms of venture capital. Through micro-financing the fund targets jobseekers who want to take the first steps towards becoming self-employed.
Participation company Flanders (Participatiemaatschappij Vlaanderen - PMV)
PMV gives vitamins to the Flemish economy. It is an independent investment company and is the principal tool for the realisation of economic government initiatives. PMV thereby strives for economic growth but also attaches a lot of importance to the social return on its initiatives. PMV is active in various fields: it promotes private loans to entrepreneurs, offers additional guarantees for bank loans for small and medium sized enterprises, invests in young, innovative companies and makes venture capital available to realise a leverage effect on the Flemish economy. The Flemish-International Fund (Vlaams-Internationaal Fonds) helps Flemish SME’s by transferring funds across borders. The NRC-Fund prefinances costs connected to major high-tech projects. Finally Cultuurinvest, gives cultural companies access to risk-bearing capital and in that way gives oxygen to the cultural entrepreneur.
Private Equity players manage one or more investor funds (private investors, banks, insurance companies) and use those funds to acquire companies (usually via a Leveraged Buy-Out (LBO)).
Type of financing that is very similar to a mezzanine financing. The vendor of the company grants this loan.
Private equity fund specialised in high risk financing of young businesses in technological or other growth sectors.
VLAO (Vlaams Agentschap Ondernemen/Flemish Enterprise Agency)
The Flemish Enterprise Agency (VLAO) provides a number of support measures that can help you in developing your business. You can find a number of leaflets on the VLAO-website which give themed information on the support available for different types of projects: growth premium, BEA (Budget economic advice), ecology premium, IBO (individual professional training), etc. VLAO can also give you free guidance in your search for the right support. Often an enterprise in the start-up or expansion phase needs additional financial funds but the entrepreneur is not always aware of the options available. VLAO can help you free of charge. www.vlao.be