So, you’ve decided it’s time to exit your business. You’re ready to hand the reins over, but with so many exit strategies at your disposal, it can be difficult choosing the right one for you.

Business owners can choose to exit their business for several reasons – it may form part of a long-term exit strategy, a way to dispose of shareholdings, or to release value from their business.

One of the most common ways to exit a business is via a management buyout (MBO), so to understand the MBO process better, we took 5 minutes with Corporate Finance Partner Dan Bowtell who explains it in more depth.

To put it simply, an MBO is the process of selling your company to the existing management team and is a way of transferring ownership and securing the future leadership of your firm.

Why do a management buyout?

From a seller’s perspective, an MBO can be a favoured exit strategy for many reasons – it can be an excellent way for business owners to transfer ownership confidentially without exposing commercially sensitive information to an external team, and additionally  retaining the skills and knowledge already present in the business.

From the management team’s perspective, an MBO may be the optimal opportunity to gain financial reward with minimal risk and can form a good investment opportunity for the team and financiers. The existing management team will already be familiar with the business and the marketplace in which it operates, meaning they are potentially better equipped to secure its future.

What happens in a management buyout?

There are many processes involved in a buyout, which are often complex and require extensive planning. Agreeing a deal between the current shareholders and the MBO team is just the beginning. The steps involved in an MBO include:

  • Conducting a feasibility assessment, which includes financial modelling and structuring to assess the viability of the deal
  • Preparing a business plan that includes financial forecasts
  • Initiating and leading negotiations with finance partners to establish a deal structure
  • Securing funding (often in the form of equity and/or debt)
  • Conducting commercial due diligence processes
  • Project managing the deal to conclusion

Experienced experts

Our highly accredited team of Corporate Finance advisors can help you create, structure and finance an MBO deal and ensures the smooth transition of ownership, all whilst securing the optimum outcome for all parties.

If you are considering an exit from your business or would like to know more about the MBO process, we are here to help you develop your plan and realise your options. Please contact a dedicated member of our team today by clicking here.

We act for both management teams and buy-in candidates, guiding them through what can be a complex, yet life changing experience.