We specialise in advising on MBOs and MBIs for transactions ranging from £200k to £5m. Utilsiing a mix of practical experience and technology, our relationship led approach can help can guide you through the process.
A management buy-out (MBO) occurs when a business’s management team buys the company from its existing owners. An MBO is often funded by borrowing from the existing business (or a new company), which is called a leveraged buy-out.
Many SME MBOs aim to facilitate the exit of shareholders seeking to retire or move on to new projects.
At the same time, management is often in a great position in that they are eager to put their stamp on things and often have fresh ideas for moving the company forward.
SME MBOs are generally emotive deals in that the MBO team must begin to accept the risks faced by owning a business, while the outgoing shareholders still feel tied to a business they have generally built for many years.
The role of an advisor in an SME MBO is a challenging one as they often need to find the elusive “win-win,” which generally gives a greater chance of a successful transition between current owners and the management team.
Succession planning for SME’s can be a challenge. MBO’s can be a viable option for some business owners and management teams.
It is a great succession planning tool in that current owners can realise what they have built. It's a much lower risk than going to market.
The process can be kept confidential.
The business will generally continue in a similar form with a management team. The outgoing owners will have to spend time developing and building professional and personal relationships. When acquired by a competitor, the brand, etc., may be merged with the competitor's business.
The management team have an understanding of the business, the team, customers, etc, which reduces the risk of its success moving forward.
It is time-consuming. Generally, the MBO team spends much of their time running or working in the business, so they find little time to progress an MBO. The role of an advisor can help speed things up.
Generally, MBOs are completed with an element of bank debt, loan notes or deferred consideration, which, if not stress tested and modelled, financially, can cause the business to fail in the years post-MBO
As the owners are often emotionally attached the business and have spent many years in an employer/employee relationship, they can find themselves dragged back in to the business by the MBO team. It's also a risk that outgoing shareholders struggle to accept they are no longer making critical decision in the business post MBO.
I’ve worked with The Advisory Group on several transactions and I’m always impressed by their professionalism and strategic insight. Their expertise consistently adds value and clarity to complex financial matters
We’re here to help our clients get in the best place financially. If you would like to chat things through further or want to get started, click below to get in touch.
Take a look at our in-depth MBO series and other acquisition blogs, which cover the entire process of MBO and examine common issues that can arise.