There is a good possibility for an exit strategy as business lines should be relatively easy to divest should the need arise, given that financial buyers are interested in business lines. All-in-all Yell Group has a well-established position in a growing market generating stable revenue streams that are reasonably recession proof, a well-established market position, good possibility for an exit, fulfilling at least two requirements for a good LBO candidate. Financial structure
In order to finance the Yell Group buy out a consortium of APAX/Hicks Muse and investment banks had to structure a finance proposal. The two investment banks Merrill Lynch and CIBC World Markets agreed to raise 1. 450 billion in debt. This debt consists of 950 million of syndicated senior term loans and 500 million through a bridge loan. This bridge loan where Yell Finance B. V. would be the beneficier had to be refinanced through a high yield offering on the UK and US markets. The 950 million is at different levels directly invested in the operating companies.
APAX and Hicks Muse arranged for an additional vendor loan of 100 million from British Telecom and a 100 million revolving credit facility to provide the Yell Group for additional working capital. Ownership structure The ownership of Yell Group limited is devided amongst APAX (46,3%) Hicks/Muse(46,3%) and the management (7,3 flow into Yell Group Limited and from there down to the operating companies as illustrated below. Figure 1: Yell Group Ownership Structure Potential cultural differences The BT Yellow Pages was market leader and according to the OFT held a monopoly of some sort.
The Term Paper on Bidding on the Yell Group
1. Introduction Yell Group consists of two businesses that are operating across countries. Yellow Page is a classified directory business in the UK, while Yellow Book is an independent directory business in the USA. These businesses are currently owned by British Telecom which is under pressure to reduce its heavy debt load and had been wavering for months about the future of these two Yellow ...
Typically people in these type of companies are not the most aggressive in mentality. On top of that margins are lowered by verdict of the OFT which will put pressure on prices and thus on salaries/ number of people management style(cost cutting) In the US however Yellow Book USA had to fight its way into the market most probably already dealing with lower margins. If all loans are equally distributed over the operating companies with revenue as index BT Yellow Pages would have an easier time absorbing interest costs. Valuation
