LIME CORPORATE

Independent advice ensuring a fair price, through MBO's.

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Management Buy Out  

When considering your business exit options, you will quickly learn that there are many avenues to go down. However, being such a big decision that will have a significant impact on you and your finances, it is essential that you arrive at the right decision for you, your family and the business.

In recent years, many business owners have opted to sell to management. This is more commonly referred to as a MBO (Management Buy Out).

What is a Management Buy Out (MBO)?

In plainEnglish, a management buy-out is when the management team of a business join forces to purchase either all or part of the company they manage.  In most examples of management buy-outs, the management team assumes full control and ownership of the company. By having hands-on experience and a deep-rooted understanding of the company, the team can continue to aid the business on the right path. With all parties knowing one another and all having the interest of the business’ future at heart, a management buy-out is generally a smooth transaction.  

Is a MBO right for me?  

While we will not tell you what you should do with your business, we can provide you with our opinion and the facts about management buy-outs. If you do decide that this is the right course of action, we can represent you to ensure you are getting a fair price and conducting the transaction in a way that makes sense to you and is in line with your exit plan.

So, what are the advantages of a MBO over a straightforward sale?

It is largely thought that agreeing on a value for a business with its management team is a lot easier than doing so with an outside investor given that the management team knows the business and the seller.  

Negotiating with and selling to a management team ensures all sensitive information regarding the company is kept within the business. If you are looking for a great deal of confidentiality, a MBO is preferable to a trade sale.  

The sale process can often be faster given that no outside investor needs to be located, pitched to or vetted.  

The vendor generally has more control over the sale and the sale timeline than when selling to a third party.

If you run a small or niche business that will not attract a huge amount of investor interest then a MBO is arguably the best option when selling your business.

When a MBO is not the right option

While there are many advantages to a MBO, there are still some risks to consider. Below are just a few:

Although you are looking to sell the business, you will want to ensure it is left in good hands. In some cases, members of a management team may not possess the right skills required to be a business owner/leader.  

The management team may face difficulty raising funds for the deal. Typically, existing business owners with a track record have better access to capital. This could prolong the sale process and even see the deal collapse. This is why having an accountant to conduct due diligence at the beginning of the process is essential.

It is important to remember that if a bid for a MBO is not successful, it can cause fractions to the vendor’s relationship with his/her management team. This can in turn impact the business.

How we can help execute your MBO

If you are considering a MBO, the Lime Advisory team would be more than happy to support you through this exciting yet complex process. The team can help prepare, plan and execute a successful and straightforward transaction. By working closely with you and your team, we can lead the transaction to ensure everything is in place leading up to completion and signed off in the correct time frames. From representing you as your lead advisor at the initial management and vendor meetings right through to handling the required paperwork for completion, the team will be with you every step of the way to ensure your exit from the business is both smooth and a positive experience for all.  

Throughout the buy out process, you’ll have our support with the following:

The creation of a feasibility plan

The organisation of the initial documentation required for a successful MBO

The management and negotiation of the finer purchase details, the process and the time frames  

The presentation of the deal structure and the preparation of heads of terms.

Offering advice on legal, accounting, tax and banking aspects of the MBO for all parties

Applying to the HMRC for the required clearances and authorities

Implementing and completing the process. This will include business transfers.  

To discuss the MBO process and the costs involved, contact our highly-experienced team of advisors today.  

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