Management Buy-Out

As an employee you wish to buy out the company you are working for in whole or in part, we refer to this as a management buy-out (MBO). Management buy-outs are occurring increasingly, in situations where the company is not taken over by a third party, but is passed on to its existing management.

Whatever your considerations may be, an MBO has advantages. You know the business, you have a good overview of the customer base and the suppliers, and you know the personnel and the owner, which means that the process can be relatively short. This is likely to be to your advantage if external parties are also showing interest. There are also advantages for the seller in selling the business to its existing management. Nevertheless this is an acquisition process with a number of unusual characteristics:

  • There is an existing (employer/employee) relationship between you and the seller.
  • The interests of the parties involved in an MBO process are frequently no longer in line with each other, but actually become opposed.
  • There is a transition to be undergone, from employee to business owner.
  • There is a need for finance, which frequently requires a bank, but also frequently involves risk capital, for instance from a venture capital company.

An MBO has the greatest chance of success if the management is a significant factor in the value of the business. In this situation the importance to both parties of making the deal succeed is at its greatest. It is important to note here that the employee must have the business acumen to make the transaction successful in the long term.

Because you are to start out as business owner(s), alongside the purchase process there are a large number of fiscal and legal steps that have to be taken. Furthermore it is almost always necessary to obtain suitable financing. We can help you to establish the most suitable form, and we can help you in your contact with your chosen financiers.

Free advice

Achieving a successful MBO is a major step that you will probably only take once, and the relationship between the seller and buyer is highly sensitive. We will be pleased to exchange ideas with you about the things you will need to consider in a takeover proposal, without commitment and free of charge.