Financial structuring
Financial structuring consists of modeling, organizing and optimizing the capital and financial structure of a complex transaction — whether it is an LBO (Leveraged Buy-Out), growth financing, a business takeover or a capital reorganization.
It aims to find a balance between investor expectations, debt capacity, return on equity and debt sustainability, while respecting fiscal and legal constraints.
What is financial structuring?
The objective of financial structuring is to translate a transaction strategy into a balanced and sustainable capital architecture. It makes it possible to optimize financial leverage, to align the interests between investors and managers, and to secure the long-term profitability of the operation.
This work makes it possible to anticipate future needs, to test several financing scenarios and to ensure compatibility between operational, banking and fiscal constraints.
STEP 1
Scope of the operation
Define economic, financial and shareholder goals.
STEP 2
Information Gathering
Gather and structure the data required for modeling.
STEP 3
Financial modeling
Build the project flow and profitability model.
STEP 4
Capital structuring
Determine the optimal mix between debt, equity and hybrid instruments.
STEP 5
Draft report
Formalize the conclusions and prepare for the validation of the assembly.
STEP 6
Final report
Present the findings and their implications for the transaction.
When and why to carry out Structuring & Due Diligence
During an LBO
Structuring is at the heart of any LBO transaction: it determines the distribution between senior debt, mezzanine, equity and management package, in order to optimize financial leverage without compromising the viability of the business plan.
External growth operation
When a group wishes to integrate several acquisitions, structuring makes it possible to define a financing scheme consistent with the combined flows, in order to ensure the sustainability of the lever and the control of the integration risk.
Preparing a fundraiser
Before an investor enters, structuring aims to organize the distribution of capital and associated rights (ordinary shares, ADP, BSA, OC, etc.), in order to align the interests between founders and investors while maintaining the balance of control
Bank refinancing
When a company renegotiates its credit lines or diversifies its financing sources, structuring makes it possible to adapt debt to the generation of cash flows, in order to optimize the cost of capital and increase financial flexibility.
Reorganization/Spin-off
When a group reorganizes its activities or isolates a subsidiary, structuring makes it possible to redefine the distribution of capital and intragroup flows, in order to secure the profitability of each entity and to improve financial transparency.
Business transfer
In a transfer transaction, structuring makes it possible to design a balanced arrangement between the interests of the transferor, the purchaser and the investors, in order to guarantee the economic feasibility and financial sustainability of the takeover.
Structuring solid and sustainable capital
Beyond financial modeling, structuring requires a thorough understanding of Funding mechanisms, of Legal Constraints And of the applicable taxation.
The objective is to design a robust structure that can withstand operational hazards while maximizing value creation for each category of investors.
The main Analysis Levers and Technical Vigilance Zones include in particular:
- Definition of the scope of financing:
Identification of the entities involved, the flows to be financed and the needs for capital in the short, medium and long term. - Calibration of financial leverage:
Determination of the optimal level of debt, based on available cash flows, coverage ratios and risk tolerance. - Optimization of the capital structure:
Arbitration between senior debt, mezzanine, convertible instruments and equity in order to balance return, risk and governance. - Integration of fiscal aspects:
Taking into account interest deductibilities, intragroup agreements and local constraints to minimize the overall cost of financing. - Management package design: alignment of managers on future performance through incentive instruments (BSPCE, BSA, ADP, ratchet, sweet equity).
- Analysis of the sustainability of the assembly: Stress test simulations on cash generation, debt coverage, and financial covenants.
Diverse range of clients advised
Family Offices
Executives/Management
Family shareholders
Private equity funds
Family businesses
SMES
operations analyzed
years of expertise
clients advised
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The transactions presented were carried out by, with the contribution of, or with the participation of members of the Hectelion team in the context of functions performed currently or previously.
Frequently Asked Questions
For:
- finance through an LBO;
- Centralize debt;
- Raise dividends;
- Optimize taxation.
With a mix of:
- own funds;
- Senior debt;
- This possible mezzanine.
The debt is repaid using the target's cash flows.
- Unfavorable taxation;
- Excessive debt;
- Blocking at the exit;
- Poor post-acquisition integration.
To simulate:
- The optimal recovery (shares, assets, LBO)
- The ability to repay;
- fiscal impacts;
- Reassure the funders.
An acquisition financed in part by debt, repaid thanks to the future flows of the target company.
It combines equity and debt in order to optimize the return of investors while maintaining solvency.
Leverage on performance, alignment of management/investor interests and increased financial discipline.
By projecting the available free cash flow and simulating the scenarios of repayment by debt instalments.
In a majority LBO, the investor has control; in a minority LBO, he supports growth.
By testing repayment capacity via leverage ratios (Debt/EBITDA) and coverage ratios (ICR).
Senior debt is priority and secured, the mezzanine is subordinated, and debt in fine is repaid at term.
To assess the sensitivity of leverage and cash flows in the face of various macroeconomic scenarios.
Through incentive mechanisms (BSPCE, ratchet, management package) integrated into the structure of the deal.
From the analysis phase of the project in order to assess the feasibility of the arrangement and the sustainability of the debt.