Sample Structures

Unlike most buyout firms, who typically buy and sell companies for quick profits, HCG has a nearly 30 year history of maintaining long-term relationships with its portfolio companies, their managers and sellers – sellers who often retain significant equity in their businesses and enjoy a second or third opportunity for increased liquidity. In short, a seller can realize considerable cash at closing and can share in the potential upside of his business.

HCG also structures transactions to give effect to sellers’ divestiture plans and estate planning issues, allowing management and/or second or third generation family members to take equity positions in their companies.

That said, HCG believes no one structure is best for all transactions. Our hallmark can be characterized in one word – flexibility – and is best exemplified in the over 200 transactions we have completed.

Some examples:

Liquidity events. In 1975 we acquired with the selling family a service business. The Sellers received mid-seven figures and retained 50%. In 1983 the business was sold to the management and the existing owners. The original selling family received about 1.4 times their original sale price proceeds for their 50% and retained 40%. In 1989 it was sold again to third parties for about nine times the original sale proceds, another huge payday for the family.
Management buy-out. When one of two 50/50 partners wished to retire from a profitable international company for health reasons, we arranged a transaction in which the two owners were bought out; one of the two and the son of the retiring partner each acquired 30%, key management acquired 10% and HCG the remaining 30%.
Succession planning. A father and son owned a financial services firm but the father was no longer active. We arranged a purchase of the business from both and the son remained as president and owned 20% of a much larger company which we helped him expand.
Estate planning. Two families each owned 50% of a very successful 40+ year old specialty apparel company. In order to provide for estate planning and current liquidity, we arranged a transaction that provided cash and deferred payments to all of the sellers. Each family retained 30% of the new company with the active second generation increasing their ownership percentage, key management employees acquired 10% and HCG the balance.
Management buy-out. The sole owner of a manufacturing company no longer wished to remain active full time due to family needs. We arranged a transaction to acquire the company. The owner remained as Chairman and he and his children owned 20% of the business.
Management buy-out. Two owners of a specialty company manufacturing in the U.S. with sales domestically and abroad desired to sell, as one was not active in the business due to health issues. We acquired the business, the active partner remained as the CEO and President, owned 15% with additional options.
Management buy-out. A sole owner of a service business no longer wanted to remain active in the company. Management acquired 15%, the owner maintained a minority interest and remained as a consultant. HCG owned the balance.
Recapitalization and growth capital. The sole owner of a food and beverage firm envisioned a value-building opportunity to expand his business by broadening its geographic and operational scope. We recapitalized the business and provided growth capital, receiving warrants for a minority interest in the company. Management performance is incentivized through the inclusion of “clawback” rights on our warrants if certain milestones are achieved.