Transaction Types


Leveraged buyouts have long been utilized as a means to acquire businesses. A leveraged buyout, or LBO, involves the use of borrowed money, in conjunction with equity capital, to finance a change in a company’s ownership. A management buyout is a type of LBO in which the acquiring group is led by the target company’s existing management. Through these transactions, operating management can acquire an ownership stake in the business it runs.

Management teams often turn to equity sponsors for financial backing when they have opportunities to acquire their companies; however, there are many benefits of using mezzanine financing in a management buyout including the following:

  • Management retains a larger ownership interest in its business by using mezzanine rather than equity.
  • While equity funds typically require significant majority ownership positions, mezzanine investors are often comfortable with smaller, even minority, ownership stakes.
  • Mezzanine is typically non-amortizing debt, reducing demands on cash flow and providing management teams with increased flexibility to operate their businesses post-transaction.
  • Interest payments on subordinated debt are tax deductible reducing the acquired company’s tax burden going forward.


Middle-market companies frequently reach a point in their existence when their owners have differing investment objectives and liquidity needs. Regardless of whether the company is owned by institutional investors, other third-party outsiders, families, or operating managers, it is not unusual for some stakeholders to seek partial or complete liquidity for their investments. Similarly, it is not unusual for stakeholders whose value has meaningfully increased to seek a significant distribution for lifestyle, estate planning, or other purposes, while continuing to own and operate a business going forward.

  • Selling shareholders have the opportunity to cash out of their previously illiquid equity holding while the continuing shareholders are provided an opportunity to increase their ownership in the company.
  • Achieving shareholder liquidity by way of a recapitalization rather than the outright sale of the company will avoid subjecting management and other employees to a lengthy, time-intensive sale process where proprietary company information may find its way to competitors.
  • Shareholders staying with the company will have the opportunity to benefit from additional liquidity events over time through future recapitalizations, or the eventual outright sale of the company.
  • Interest payments on subordinated debt are tax deductible, reducing the acquired company’s tax burden going forward.


Corporations regularly find themselves holding entities, which are considered “non-core.”  While these businesses are sound operating entities they receive little attention due to their lack of strategic fit.  These entities create unique opportunities for BlueWater.

We utilize our same core competencies to partner with management to establish successful stand-alone operations.  Where necessary we will enhance these operations with management and competencies which they formally received from the parent organization.  Once these operations are jettisoned from their parent owners we can harness the entrepreneurial spirit of the mangers to create robust stand-alone portfolio companies.