SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Technology Stocks : Aahh...iNEXTV (AXC) The NEXT Thing!
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: WAI who wrote (3825)5/30/2001 8:53:02 PM
From: killybegs  Read Replies (1) of 4169
 
First caveat; LBO of technology companies not that common because of the risk: however, in this case, maybe with the right amount of equity and debt. First, it would not be an LBO of Ampex Corp, the parent co. Ampex the parent is a holding company that owns a portfolio of companies: iNextv and Ampex Data Systems; Holdings also owns the patents that generate the royalty income. What I think is possible at least in theory is an employee buyout of Ampex DATA SYSTEMS. Here's how it could work: 1. Sale and lease back of Colorado Springs property generates cash to pay off the Ampex DATA Systems Bridge Loan from DDJ Capital Management(Greenwich, CT).

If we assume an LBO could be done at say, 40 million dollar sale price;

Then 200 Ampex Data Systems employees could ante up say 12500 dollars average equity investment or 2.5 million equity contribution.

An LBO firm kicks in 7.5 million to bring it to a total 10 million dollar equity investment or 25% of the Sales price.

The balance of 30 million is borrowed in a combination of financing from banks and the high yield market. Let's say they have to pay a blended rate of 15%.

Ampex Holdings then receives the 40 million. Presumably they pay down the 12% notes in part and fund iNextv with the balance.

Could it work? Does it make sense as an investment for the LBO?

Well, lets see. The 30 million in debt would require at 15%, 4.5 million in annual interest payments. If the LBO team thought they could generate 6 million in earnings before interest, then 1.5 million net income would be a 15% return on the 10 million dollar equity investment. Not bad. If they thought over 5 years they could grow revenue and earnings, it could work very well. Of course, the exit strategy is to sell it again. Lets say they could get 60 million in 5 years. Pay off 30 million in debt, leaves 30 million of equity or 3 times their money.

Among the questions that would have to be answered are;

1. would a 25% equity contribution be a realistic deal. Would the debt folks want 30 or 40%. Would the numbers work at that level?

2. How much R and D is required to fund technology to keep ADS competive? That is part of the operating expenses. Would it have to increase? or not?
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News