The classic leveraged buyout is giving way to something far more bespoke. Faced with stubbornly high valuations and fierce competition for quality assets, private equity firms are turning to hybrid deal structures that mix rollover shareholders, co-investors and complex governance arrangements into transactions that look very different from the traditional sponsor-controlled LBO. This growing complexity is reshaping how deals get done across both the middle market and large-cap buyouts.
These hybrid buyouts with more complicated deal structures is also fueling demand for specialized legal teams like the one Gerald Brant has assembled at Akin Gump Strauss Hauer & Feld.
“The name of the game is that valuations are still fairly high,” said Brant, a partner at Akin. “Any way that you can kind of get your foot in the door including co-invest strategies, making the check size more manageable, and making the valuation more attractive – that’s the way to go.”
Instead of a traditional cash buyout where a sponsor and management members invest, hybrid capital structures often include significant shareholders with sophisticated governance rights and exit procedures. Each one of those agreements is highly customized and will govern the lifecycle of the investment.
The hybrid capital trend includes both larger buyouts and middle-market deals, Brant says.
“It’s less about check size and more about bridging value gaps between buyer and seller,” Brant told Mergers & Acquisitions. “Nothing looks like the cookie cutter LBO of full sponsor control subject to management interests.”
One of the latest examples of a hybrid deal is Apollo Global Management’s (NYSE: APO) acquisition of French fresh food retailer Prosol Group from Ardian, which closed on May 7.
While financial details of the deal were not fully disclosed, the purchase included capital from other minority stakeholders besides Apollo and Prosol’s existing management team.
“The complexity in the Prosol acquisition involved the rollover of existing shareholders and management – the shareholders agreement had a little of everything, and the negotiation involved multiple parties,” said Brant, who worked on the deal while at his previous firm, Sidley Austin.
See the chart below for other examples of this novel financing strategy:
Brant recently rejoined Akin after working at the firm from 2013 to 2021. Partners Brittany Harrison and Jeffrey Kochian left at that time as well.
The trio was at Paul Weiss from 2021 -2023, followed by Sidley Austin from 2023 to earlier this year before returning to Akin with a specialty in handling hybrid buyouts for larger private equity firms. Along with Brant, Kochian and Harrison, the Akin team includes Jonathon Hamill in London. The team works with Akin’s private credit, financial restructuring and capital solutions pillars, with an eye on growth through specialization for complex buyouts.
Reach Brant at [email protected]
