Taking your business to the next stage

So what is a Management Buyout (MBO)?

This is when a company’s management team make the decision to raise the required finance to purchase the assets and operations of the business they work within and take ownership.

An MBO can be the chosen exit strategy for a number of reasons; if the owner wishes to retire, if a larger corporation wishes to sell divisions of their business, or perhaps it’s preferred over selling to ‘outsiders’ who don’t know the business.

A MBO is a positive step forward to securing the future of the business, but there are considerations, for example it can be expensive and you need to ensure you have the right funding in place, and this is where we can help.

There are different options for funding a MBO including:

 

Management Equity

This is the personal investment by the management buyout team. There should be careful consideration here as each individual needs to take into account their own financial position and personal circumstances, but also recognise that a lender is unlikely to fund 100% of the cost.

 

 Bank/lender funding

Banks and lenders will assess the position of the business (in detail) and any lending provided will be on the provision of the ability of the business to service the future capital and interest repayments following the full completion of the buyout.

 

Private Equity

Funding could also come from a private equity or venture capital investor, but this will generally be on the condition of them taking an equity stake in the business, usually as a minority, but significant, shareholder.

Private equity investors make the majority of their money on the sale of their shareholding when a business is later sold. Consequently this type of finance is typically only available in support of those buyouts where substantial capital growth and a relatively fast exit is anticipated.

 

Going through a Management Buyout can be a lengthy and sometimes daunting process. But at IBP we have helped a number of clients get their business through the process and come out the other side and in a place where they can forge ahead with developing the business.

We support you through every stage, just call us on 01949 837368 or email info@independentbankingprofessionals.com