Services services Management buy-outs and management buy-ins

Consider the following questions:

Would you prefer to be an owner manager benefiting from capital value rather than just a manager?

How would you like to buy the £10m business in which you work, for £100,000, then sell it 3-5 years later and in so doing become financially independent?

Since 1983, around £60bn of private equity funds have been invested in around 30,000 companies in the UK, and the current run rate is that around 1,600 companies receive such funding (Source: British Venture Capital Association). Although there are risks in a buy-out or buy-in transaction, the opportunity is huge.

We typically are involved in buy-outs and buy-ins where the target business is generating in excess of £1m operating profit. In order to unlock a buy-out or buy-in, Succession Corporate Finance will:

  • Meet with you (in confidence) to provide initial advice on the overall feasibility and likelihood of the buy-out. This assessment is based on the characteristics of a particular business combined with our knowledge of funders’ appetite for the type of business and market segment. After all, if there is little prospect of a possible transaction, there is no point in raising the topic - it could be career limiting.

Assuming the feasibility study is positive, we would then advise on:

  • How and when to approach the vendors and manage any potential conflict of interest;

  • Assist with the business planning process and financial model;

  • Select and approach a short list of private equity and debt providers with the business plan based on our experience and regular dealings with them;

  • Negotiate the purchase of the Business from the vendors;

  • Negotiate the best deal with the funders, including the highest possible stake for management;

  • Project manage the whole transaction to completion. Most deals need four different sets of lawyers (vendors, management, private equity provider and bank), two or three due diligence experts as well as the principals.

In short, our role is to make it happen on the best terms for management.

We are often asked by management, where a private equity provider is already involved, perhaps because the Vendor initiated the process by way of a Vendor Initiated Management Buy Out, to assist in negotiating the terms of Management’s investment as well as provide support in the business planning. If you are in this situation, please contact us in the strictest confidence.

 

Jargon buster

  • ‘MBO’ - is a Management Buy-Out, where the senior management team raise debt and/or equity to buy the business in which they work.

  • ‘MBI’ - is a Management Buy-In where a senior management team raise debt and/or equity to buy a business in which they do not work.

  • ‘BIMBO’ - is a Buy-In-Management Buy-Out - a combination of the two, some new and some existing management.

  • ‘VIMBO’ - is a vendor initiated Management Buy-Out, where the vendor takes the lead in arranging the transaction, often in parallel with a trade sale

buy out process