Why you should consider an MBO

Most of the Management Buyouts (MBO) we work on DON’T START with the management team saying to us, “we’d like to do an MBO”.

Most of the MBOs we work on START WITH the owner saying to us, “I want to sell my business”.

Selling a business is a straightforward process, right? We prepare a business for sale, we market it, we get the best buyers to the table at the same time, we receive offers, we negotiate them, we structure them to de-risk our vendors as much as possible, we agree heads of terms, we manage the many DD processes, we assist with legal documentation, we re-negotiate continuously, and we drive the deal to completion. Simple.

Only it’s not simple.  It’s a minefield that includes many uncontrollable aspects like:

• timing – for buyer and seller;
• brinkmanship – because we all want the best deal; and
• high levels of emotion – it is a once in a lifetime deal for the vendors…. and the buyer isn’t your long-term friend, they are your exit route.

An MBO can mitigate these issues, so what are the common misconceptions around why an MBO is considered unsuitable by the vendor or their advisors:

1. The MBO team can’t afford it
2. The MBO team can’t run the business like I do
3. Trade buyers will pay me more
4. There isn’t an MBO team in place!

These concerns can be overcome quickly:

1. THE MBO TEAM CAN buy the business… debt and equity providers love MBOs for consistency and risk mitigation; there is lots of funding available for an MBO.
2. THE MBO TEAM DO know how to run the business. They know your customers, suppliers, staff and processes. They don’t make the strategic decisions because the vendor owns it, but they could if they had the chance.
3. Trade buyers are RISK AVERSE, so will balance their risk in deal structuring, whereas management know what they are getting into and understand much more about the business than a trade buyer ever will, so the deal is less risky to the MBO team.
4. The MBO team may not be PERFECT… but I bet there are two or three people in your business that you can’t do without. That is YOUR MBO team.

With our MBOs, we always start by showing vendors what is possible. We can guarantee our proposal is deliverable, within a timeframe you control and a deal structure that suits everyone – and what we outline up front is what happens. Only when an acceptable deal structure is agreed with the vendors do we meet the MBO team.

Ask the vendors and management teams of Glasswell & Last, Trimline, MHP Industries, Maycast Nokes, MDS Civil Engineering, GT Engine Services and Platinum Facilities.  They all achieved the deals we outlined up front.

If you want to sell your business, we want to talk to you. If you want to keep the staff, keep the culture, keep your customers and suppliers happy, keep existing processes in place and keep the business going, while achieving the deal you want in the timeframe you want…. consider an MBO. We’ll show you how it is possible, before even talking to the management team.