Business Insights

In perspective


Bridge Fund, a new investment model

August 05, 2016

When a family thinks that selling its business is the best and most convenient choice, they deal with a last challenge: how not to lose their assets in the transaction.

In those cases, more than just advising, they need a comprehensive backup the one a bridge fund can provide.

Through a transactional model, the fund's institutional investors provide knowledge, experience, and if necessary, capital. The goal is to optimize the management of the company, add value, and be a link to expand the pool of prospective buyers.

Acting as owners, the bridge fund investors take the actions needed for the family business to be, in the short term, a more profitable and appealing company while providing certainty about the business to the potential buyers.


Phases of the process

 

The process of restructuring, optimizing and settling the sale of a family business goes through these three stages:

 

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1. Evaluation

 

A diagnosis is made by the fund to determine how much the business initially is worth in order to make a fair offer to the owners.

Then, the potential and the factors that need to be adjusted to increase its value are estimated, and a decision is made about how much will be invested to achieve that goal, either in human resourcesbuying shares.

Finally, the deadline for the habilitation of the company is set, ideally between 12 and 24 months, and a collaboration agreement is made with the owners.

 

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2. Transformation 

 

After the strategic planning, the next step is its implementation. During this period, there's a special focus on accountability and improving operations and management. Also, any unexpected situation is identified and fixed.

 

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3. Disinvestment

 

The business' sale process implies searching for opportunities and ing the most convenient choice. It also includes the making and signing of the closing documents, and the resulting exit of the bridge fund investors.


Access to the market

 

One of the main advantages of working with the bridge fund experts is their dealing experience with other investors, which provides them with a wide vision to search for the best opportunities and get favorable sale and merger deals.

With their intervention, they optimize the business model of the family companies and introduce accountability practices that represent a guarantee of security for the prospect buyers.

Besides, due to this certainty, prospect buyers can minimize the cost of opportunity they would fall into if they had looked for a traditional family business themselves.


Advantages for the buyers

 

The institutional investors of a bridge fund offer plenty of advantages to prospect buyers:

 

1. They have a big portfolio of already audited, ready-to-buy businesses, which makes the prospect buyer's search easier.

3. All the businesses' information is uploaded to a completely organized digital platform, which makes the auditing process more transparent.

 

2. They have control on the administrative and accounting management of the offered companies. That allows them to align them to the prospect buyer's interests. 

4. International tax and law firms take part in the optimization process of the companies, which gives certainty on the purchase. 


Win-Win formula

 

On average, the process from diagnosing, habilitating and giving added value to the company to reaching the sale agreement takes between 12 and 24 months.

The profit of the institutional investors is based on a percentage of the additional profit earned over the original value of the company, and it's received until the sale process is closed, which is very convenient for the original owners.

Selling the family business is a genuine desire and, once the decision is made, the next step is to get the most successful transaction possible.

With the adequate backup, the formula is very simple:


Successful
family business
+ Bridge investment + Management and advising=The greatest value