Management Buy Out/In

M&A and Strategic advice from business owners to business owners

What is a management buy-out/in?

Management buyouts (“MBO”) are when the management of a company buys the majority of its equity from the existing shareholders and typically funds this acquisition by a combination of external debt, an injection from management, and value deferred or rolled over by the current shareholders or in some cases private equity investment.

The main reason for a MBO is to enable the shareholders to pass over to the next generation of leaders and extract equity value as they transition away from the business. Although these transactions are mostly led by the shareholders, Management teams can be the ones to initially offer to buy the business from the shareholders.

A management buy-in involves an external individual or management team buying the majority of the company’s equity and assuming control. This type of transaction tends to attract more risk for the business and debt provider due to a new party controlling the business rather than an existing team.

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What are the benefits of an MBO?

There are several reasons why you may choose to exit your business via a management buyout.

by selling to the current management team, the new owners have the knowledge and expertise of working within the business. 

A MBO allows the exiting shareholders to extract the value they deserve, but also pass over control to key individuals that have helped to drive the business forward (for them to, in turn, extract their own equity value in the future) 

If your business’s success and brand beyond your exit is important, selling to a team that is invested in the existing values and ethos of the business may be important to you.

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How can we can support you with an MBO?

If you are thinking about a management buy out or having an external management team buy in, our team of strategic advisors can help support you through the process, from start to end.

Step 1

An initial assessment to see whether an MBO is the right option for your business and whether a deal can be completed.

Step 2

Deciding on the best way to approach a vendor – this is vital for making sure the management is taken seriously.

Step 3

Negotiating with the vendor on the value and structure of the deal.

Step 4

Prepare your business and financial plans. This will incorporate detailed financial projections.

Step 5

Secure funding that meets the requirements of the management team and meets the deal criteria.

Step 6

Project managing the deal until completion, coordinating due diligence and legal aspects.

What’s next?

Management buy outs/ins include several complexities to navigate such as: 

  • Deal value 
  • Deal structure 
  • Tax implications 
  • Raising new debt 
  • Forecasting and debt service/affordability 
  • Managing due diligence and banking requirements 
  • Strength of the management team, and 
  • Satisfying the collective group’s goals.  

We recommend seeking expert advice on the feasibility of an MBO and whether it is the right option for you.  

If you need advice with any of the above, get in touch with our corporate finance experts, they’re happy to advise you on any transaction choice and give you unbiased support on the best options for you.