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LENDER BULLETINSHAREHOLDER BUYOUTS · SPECIAL ISSUESEPTEMBER 2026

The clean credit file
that fails.

A closely held services business is trading well. The shareholders fall out. One leaves, the others borrow to pay them out, and the credit assessment, forecast and stress test all pass with room to spare.

In the files we see, the business is in workout within two years, and nothing in the accounts at settlement predicted it. This bulletin explains why the transaction breaks, how a declined deal can arrive at the next lender as a new-to-bank opportunity, and the questions worth asking before the money changes hands.

The central test: do the earnings belong to the company, or to the person who is leaving it? A forecast can be complete, internally consistent and still inherit the wrong answer to that question.
SubjectBank debt funding a shareholder's exit
Prepared forCredit, workout and relationship teams
AuthorsBrendan Richards and Claire Gaffney
DateSeptember 2026

AT A GLANCE · FROM OUR OWN FILES, NOT MARKET STATISTICS

18-24
months from settlement to workout
The recurring gap in the matters Rebound has worked on. The business was not distressed when the money moved. The transaction created the risk.
Clean
account conduct at settlement
No dishonours, creditor stretch, ATO arrears or covenant history. The usual warning signals were not there to find.
Nil
new capital entering the company
Nothing is acquired and no capacity is added. An equity holder is replaced by a liability and leverage steps up in one transaction.
Up to half
of reported EBITDA can be personal
Underpaid labour, relationships, pricing judgement and daily intervention can all be recorded as company earnings.
-1
guarantor and their security leaving
The lender has less support behind more debt, often in a services business with limited recoverable assets.
+300bps
rate stress worth running
Run it with post-exit earnings, not instead of them. Each stress can pass alone while the combined scenario fails.
DISPUTE›BUYOUT›BANK DEBT›CLEAN FILE›PERSON LEAVES›EARNINGS FALL›WORKOUT

SECTION ONE

Why this file breaks the way it does

The files are not short of forward-looking work. There is a forecast and a stress test. Both can inherit one assumption from the historical accounts: that the earnings belong to the company. The question that decides the outcome is whether they are transferable once this particular person has left.

01

The earnings were a blend, not a number

Reported EBITDA in a closely held business can mix enterprise earnings with underpaid owner labour, revenue attached to personal relationships, margin created by one person's pricing judgement and the cost saved by daily informal intervention. The larger the departing shareholder's operational role, the larger the personal share can be.

02

The add-back can point the wrong way

Reported EBITDA is usually normalised by adding owner salaries back. For this transaction, add back what the departing shareholder was paid, deduct the market cost of the role they actually did, then assess lost revenue or margin separately.

03

The dispute removes the handover

A planned retirement can convert personal earnings into company earnings through a handover, customer introductions and a restraint the departing person wants to honour. A disputed exit can undermine every one of them.

04

The price is a settlement, not a valuation

A disputed buyout is not arm's length. The remaining party may pay a premium to make a problem go away, with the figure set by lawyers rather than by what the cash flows will carry. The debt is then sized to the settlement, not the business.

05

No new money, one fewer guarantor, thin security

Unlike a private equity recap, there is no fresh equity, sponsor or board. In a services business, recoverable security can narrow quickly as the goodwill is tied to the person leaving and a guarantor departs the structure.

06

Rates finished the job

Future rate rises belong in a stress scenario. The critical discipline is to run that scenario on post-exit earnings. A rate stress on historic earnings and an earnings stress at the original rate can both pass while the combination fails.

WORKED EXAMPLE · ILLUSTRATIVE ROUND NUMBERS, NOT A CLIENT

Each stress on its own passes. Together they do not.

EARNINGS BRIDGE · $000
Reported EBITDA, after owner salaries as paid1,200
Add back departing shareholder's salary as paid120
Less market cost of the role they actually did(280)
Less contribution from personal customer relationships(220)
Less year-one transition disruption(80)
Post-exit EBITDA, base case740
Post-exit EBITDA, downside560
DEBT SERVICE COVER · $3.0M BUYOUT DEBT
At origination: reported EBITDA, interest at 5%2.1x
Rate stress alone: reported EBITDA, interest at 8%1.8x
Earnings stress alone: post-exit base, interest at 5%1.3x
Both together: post-exit base, interest at 8%1.1x
Both together: post-exit downside, interest at 8%0.8x

Cover is EBITDA divided by principal and interest, with interest on opening debt. Tax, capital expenditure and working capital are excluded, so the example overstates cover in every row.

The point: A forecast and stress test can both be on file while both still assume the earnings belong to the company. The bridge is the work that tests that assumption.

SECTION TWO

The decline that leaves no trace

An incumbent bank can decline a disputed exit because it sees both shareholders, the conflict developing across its accounts, leverage stepping up for a non-productive purpose and a guarantor leaving. The borrower may take the transaction to a broker, where it becomes a fundable new-to-bank story with the same financial statements and none of the history.

Seat one

The incumbent bank

WHAT IT SEES

Both shareholders for years. The dispute. A leveraged exit. One fewer guarantor. It can form a view of what the business looks like without the person who helped build it.

WHAT IT DOES

Declines not on account conduct, but on context.

Seat two

The broker

WHAT IT SEES

A profitable established business with clean conduct, a simplified ownership structure and a shareholder conflict about to be removed.

WHAT IT DOES

Assembles a coherent submission using the remaining shareholder's sincere, but necessarily partial, account.

Seat three

The incoming bank

WHAT IT SEES

Clean financials, a plausible narrative, a competitive process and a chance to win the whole relationship.

WHAT IT DOES

Assesses a change of control on one party's account of the business, where the hard-to-quantify risks are easier to discount.

Read an incumbent decline as credit information. It is not proof that a transaction is unsound. Banks decline for sector limits, concentration, policy and appetite every day. In a clean file, though, it may be the most useful contradictory evidence available.

SECTION THREE

The questions worth asking

When a disputed exit, cash payout, departing owner-manager and an incumbent decline arrive in one application, these are the questions that deserve to sit in the file before the deal is written.

CREDIT & FRONT LINE · BEFORE THE DEAL IS WRITTEN
  1. 1. Was the incumbent asked to fund this, and why did it decline?
    Is the explanation coming from the incumbent, the borrower or an intermediary?
  2. 2. Has anything changed since the incumbent saw it, other than the lender?
    Test leverage, price, structure and security.
  3. 3. Has anyone independently assessed the departing shareholder's operational contribution?
    The remaining shareholder's account is the one most shaped by the dispute, and it is usually the only one in the submission.
  4. 4. What is EBITDA after a market salary for the work the departing shareholder did?
  5. 5. What does cover look like with post-exit earnings and a 200 to 300 basis point rate stress in the same scenario?
    Each stress on its own can pass. The combined case may not.
  6. 6. Would we write this loan as an increase to an existing facility rather than a new relationship?
STRUCTURING · IF THE DEAL IS TO BE WRITTEN

Orderly succession and matrimonial settlements are legitimate borrowing causes. A dispute-driven exit is a different transaction and should be structured as one.

  1. 1. Leverage sized to transferable earnings, not reported ones.
  2. 2. Part of the consideration deferred or vendor financed, ranking behind the bank so the departing shareholder carries some of the risk attached to the earnings they take with them.
  3. 3. Amortisation set against post-exit cash flow, with a cash sweep if earnings hold rather than a schedule historic earnings would have carried.
  4. 4. Covenants set against the post-exit scenario, not the historic one.
  5. 5. Independent operational support in year one, where the transition the business needs is not one the shareholders can deliver themselves.

EARLY WARNING · WHAT WE SEE AFTER SETTLEMENT, BEFORE THE NUMBERS MOVE

•A key customer's day-to-day contact changes and volumes drift over the following two quarters.
•A long-standing supplier tightens terms or asks for the departing shareholder by name.
•Quoted margin drifts down job by job, with no single explanation.
•A general manager is hired at a market salary within six months of settlement.
•The departing shareholder trades nearby and staff or customers start to follow.
•Credit notes and rework rise, each described as a one-off.
•Management accounts arrive late for the first time in the relationship.
•The remaining shareholder is working every hour there is and the bank hears less from them, not more.

WHERE REBOUND COMES IN

A pre-settlement review on the shareholder buyout

Neither shareholder can tell you what the other is worth to the business. One has spent a year proving their partner is the problem. The other has spent a year proving the opposite. The two answers bracket the truth, and the gap between them is a measure of how much nobody knows.

This short, fixed-fee review is built for the incumbent before it decides, an incoming bank as a condition of settlement, or the remaining shareholders before they sign. It attributes the business's earnings to the people who generate them, using records rather than either shareholder's recollection, and estimates post-exit earnings under explicit assumptions.

01

Attribution

Which person generates, protects or controls each material component of earnings: by customer, supplier, pricing decision and daily intervention.

02

Transferability

Whether relationships, knowledge and authority sit in the company or the departing individual, and what restraint or handover exists in practice.

03

Replacement cost

What it costs to replace the departing shareholder's actual contribution at market rates, rather than their title.

04

Transition

Whether an orderly handover is possible given the state of the relationship, and what independent support is needed if it is not.

EVIDENCE BASE

  • •CRM records and email traffic showing customer contacts.
  • •Quoting and job costing showing who priced the work and the margin it made.
  • •Supplier account contacts and the supplier's view of who they deal with.
  • •Trading during each shareholder's leave, the nearest thing to a controlled experiment a small business runs.
  • •Short interviews with staff, key customers and suppliers who have no stake in the price.
  • •The dispute record, including each party's written account of their contribution.

OUTPUT · ABOUT FIVE WORKING DAYS FROM RECORDS AND ACCESS

  • •Two or three post-exit earnings scenarios, base and downside, rather than a single subtracted figure.
  • •A cover assessment that stresses post-exit earnings and a 200 to 300 basis point rate rise together.
  • •A structuring recommendation covering leverage, deferred consideration, amortisation, covenants and first-year operational support.
  • •A fixed fee agreed before the review begins.
  • •An independent view, because the attribution has to be done by someone with no stake in the price.

THE OFFER

Size the debt to the business that will exist after settlement.

These transactions will keep being funded, and many should be. If you have a buyout refinance in the pipeline, a decline on your desk you would rather not lose the customer over, or a file that settled eighteen months ago and has started to move, we will walk through it with your team in twenty minutes, without an engagement letter.

Brendan Richards
Founder and Senior Advisor
brendan@reboundadvisory.com.au0408 565 433
Claire Gaffney
Senior Advisor
claire@reboundadvisory.com.au0418 126 595
Download the full bulletin
PDF · 4 pages · September 2026 · Shareholder Buyouts Special Issue

The pattern described in this bulletin is drawn from Rebound Advisory's own engagements and is presented as the authors' experience, not as a market statistic. The worked example uses round, illustrative figures and is not drawn from any client. General information only, current at September 2026. It is not legal, financial or insolvency advice and does not take account of any particular borrower's circumstances.