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 shareholders to seek liquidity for their investments prior to others. Similarly, it is not unusual for shareholders 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.
Mezzanine capital can play a valuable role in achieving all types of shareholder liquidity needs. Key benefits of using mezzanine debt to achieve shareholder liquidity include the following: