Would you like to own a significant stake in the business that you are running? If the answer is yes, the following information about management buyouts may help.
What is a management buyout (often called an MBO)?
- A management team buys the business that they work in from the current shareholders.
- Either party can initiate this.
- A new incoming managing director can also invest in the business alongside an existing management team (this is known as a buy-in management buyout or BIMBO).
- MBOS are funded by a mix of private equity investment, bank funding and deferred consideration from the vendor (a departing shareholder is paid over time).
Is there a right time for a management buyout?
This might be when:
- An existing majority shareholder is looking to exit the business (e.g. to retire).
- A large corporate is looking to sell a subsidiary.
- A management team is creating the value in the business and would like to be rewarded via equity upside.
I’m interested – what more do I need to think about?
- As part of the management team, you will be required to personally invest in the transaction.
- As an owner of the business (rather than an employee) you will face different challenges.
- A management buyout usually involves external investors who will support your growth with capital and experience. They will also challenge you to achieve your goals.
Are you ready for this?
If you have ambition, desire, drive and tenacity, you should consider buying your business. Please contact us to talk about how we can help you.
What makes for a successful management buyout?
- A management team that is willing to take the responsibility of business ownership.
- A management team that is sufficiently open-minded to accept investment from an external equity investor, together with bank debt.
- A private equity investor that ‘fits’ with the business and management.
For examples of management buyouts that we have successfully backed, see our portfolio.