Possible business opportunity

pauliexjr

The company I work for (who are based in France) are proposing a management buy-out and I have been asked if I would like to invest. The capital they require to raise is 1m Euro and they have guaranteed funding for another 17m Euro from two major French investors. The directors are providing approx 500k from personal funds and offering the employees a chance to invest as well.
The company is profitable and my gut feeling is the investors would not be offering such a large sum if they were not sure the business plan was sound.
The directors calcualte that at our present turnover and profitability the loan will be repaid in full in 7 years, after which the ROI for investors would be 6 times the original stake. Bear in mind that is if we remain static, the company has actually grown by an average of 18% over the past 4 years and the plan says if we continue this growth the ROI would be in the region of 12-15 times.
I think it's a good opportunity, certainly offering a better return than my current pension plans. I am over 50 and believe I can take cash sums from my existing pensions which would amount to maybe 7-10k. I'd like to invest more, but is there a better way of raising cash for this without suffering huge monthly bills which I frankly cannot afford?

CLAPTON

if you are 55 or over you can in principle take 25% from your pension funds subject to their T&Cs

are you investing in the company or simply providing a loan? what are the terms of the deal? does it pay any interest or dividend?

Emmzi

any investment = gamble, albeit a low risk one.

What would happen if you had taken out part of your pension and then you lost it? How would that affect your retirement plans?

In terms of the business performance, I might have a chat with a business banking manager, taking him the details of the buyout. He can give a view on the company performance, if they are overgeared for example, and also advise on funding a MBO.

jonjamie1970

Personally I would be wary of investing unless you have surplus cash or equity. Taking a loan to invest in a start up business is stacked towards PROBLEMS

pauliexjr

Thanks, I should explain I already work for the company which I have been with for 3 years and has been running for over 20, the MBO is from a cash-strapped holding company and we currently turn over well in excess of 30m Euro with a nett of 5m after taxes.
The deal is I retain equity in the company so effectivly I will have tradeable shares, and once the initial loan is paid off we can then pay annual pro-rata bonuses/dividends according to the net annual profits.
It's this factor, coupled with the fact I will retain my job regardless of if I buy in or not which makes me think it's a good opportunity.
I thought it was after 50 I could take cash from my pension, I'm only 53 so if the threshold is 55 I'm not going to be able to do anything anyway

CLAPTON

55 since april 6th 2010

jonjamie1970

pauliexjr wrote: »

Thanks, I should explain I already work for the company which I have been with for 3 years and has been running for over 20, the MBO is from a cash-strapped holding company and we currently turn over well in excess of 30m Euro with a nett of 5m after taxes.
The deal is I retain equity in the company so effectivly I will have tradeable shares, and once the initial loan is paid off we can then pay annual pro-rata bonuses/dividends according to the net annual profits.
It's this factor, coupled with the fact I will retain my job regardless of if I buy in or not which makes me think it's a good opportunity.
I thought it was after 50 I could take cash from my pension, I'm only 53 so if the threshold is 55 I'm not going to be able to do anything anyway

Bummer

Its a long haul though and not risk free, perhaps you can negotiate a deferrment for 5 years on a buy in at that point ?

inmypocketnottheirs

As advised above, utilise cash not debt if you are going to invest. And ultimately, cash that you can afford to risk.