What is a New Shareholder Buy-In?
As the term suggests, a new shareholder buy-in is when those that are not currently shareholders in a company wish to purchase shares (usually in a significant enough proportion to warrant a shift in control or a shift in the majority ownership of the company).
A new shareholder buy-in is similar to a management buy-out (MBO) if the purchase of shares is being made by current employees of the company being targeted for purchase.
Whereas, a new shareholder buy-in behaves differently if those making the purchase are not currently employees of the company being targeted for purchase. In this case, the new shareholder buy-in is analogous to a leveraged buy-out (LBO).
Most commonly the difference between a new shareholder buy-in and an MBO or LBO is that a partial or minority share transaction is occurring for less than 100% of the outstanding shares. This is the case when an owner or owners have agreed to either issue new shares from treasury or to transfer shares that are currently held by existing owners. If issued from treasury the consideration (often money) paid for the shares would go to the company. In the case of a sale from an existing shareholder to a shareholder buying-in the money would go to the existing shareholder.
Regardless of the employment status of those making the purchase or the details of the share transaction, mezzanine debt is a common source of capital for those wishing to make a new shareholder buy-in.