A management buy-out (MBO) offers a strategic exit option that may suit the requirements of the business owner, management team and the business itself.

What is an MBO?

When looking to exit, a business owner has several potential options. An MBO, put simply, involves the management team of a company bringing together resources to acquire the entirety or a share of the company.

Why choose an MBO?

Perhaps the biggest advantage of an MBO over other forms of acquisition is the opportunity for a smoother transition of ownership. The new owners will obviously know the company, yielding a reduced risk of future failure. Furthermore, it fosters a reassurance with employees, existing clients and trading partners that disruption to the business will be minimised.

The key steps of an MBO process include:

  • A sale price being agreed between the buyer and seller;
  • The management team assessing the amount they are able to invest;
  • In-depth financial analysis being conducted – including building a forecast financial model to show the serviceability of debt and returns to potential investors;
  • Approaching the funders –  a small buyout may involve only one funder, while larger transactions could include several funders to handle the financing of the transaction

Get in touch

If you’re considering your options, an MBO may facilitate a smoother transition of ownership and offer a vendor an attractive alternative to sale to trade. If you would like further information and to see how we could assist, contact Mark Tuckwell, Will Lodder or Shaf Bheda on 01788 539000 or 0116 261 0061.

 

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