Blog - Thinking of selling? Don’t rule out a Management Buy-Out (MBO)

Blog - Thinking of selling? Don’t rule out a Management Buy-Out (MBO)

Tuesday, 27 June 2017

When business owners are reviewing their exit options, the route of an MBO is often overlooked. However, having a strong management team in place not only provides short-term benefits of reducing reliance on business owners and allowing them more free time, it also provides them with perhaps the most practical exit solution in the long-term when they decide to sell their business. So why choose an MBO?

Keeping it “in-house” – Confidentiality is maintained easily, and an MBO rewards the management team after years of loyal service.

Familiarity breeds confidence – Staff and customers will notice little impact on the day to day, ensuring a smooth transition.

Reduced transaction costs – There are no marketing costs, and the due diligence is a much lighter approach, reducing transactional costs significantly.

Leaving your business in safe hands – An additional benefit of an MBO process for the vendor is the added comfort of leaving the business to a team that you have faith in.

Funders perceptive to lending – Banks and Private Equity Houses like to support this type of transaction, especially if the management team is motivated and tick all the boxes for future success.

But can they afford it? – That’s the million pound question. Each case is different. What can the management team offer financially? What is the vendor prepared to do? Can a deal be structured to appease everyone, including the funders?

 In summary, a management buy-out can be an extremely attractive, quick and effective exit strategy for a business owner and should not be ruled out without due care and consideration. By bedding in a strong management team as early as possible, it will give a business owner more options for an eventual exit strategy as well as increasing the overall attractiveness of the business whatever the eventual exit strategy.

We can help you buy, sell, value or fund a transaction. Contact us to find out more on 01603 624181 or email jack.minns@larking-gowen.co.uk.

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