SELLING THROUGH MANAGEMENT BUYOUT
by Kerry Southworth Solicitor, Harrison Drury
What is a management buyout?
A management buyout (MBO) involves the existing management team of a business purchasing it from its owners, who are looking to exit the business.
In most cases, an MBO involves the management team that has grown with the business who will then take full control and ownership.
Benefits of a management buyout
Management buyouts often provide a simpler transition of ownership as opposed to a third-party buyer.
Many of them are planned over long periods of time, enabling the ‘new’ owners to fully integrate with the business.
Employees, existing customers and suppliers are likely to feel reassured by an MBO option, as it will ensure business continuity.
What to consider before taking the plunge into a management buyout
In some cases, those undergoing a
management buyout underestimate the toil it can take on both parties.
The owner goes from boss to former chief, and the management team transition from employees to owners.
This shift in power can cause problems if not dealt with carefully.
How does a management buyout work?
Typically, a management buyout is seen as an in-house takeover, however the legal and tax situations do not allow for that.
Incoming and outgoing parties may not realise that it is an intricate process requiring the expertise of solicitors to advise on the best routes to take.
A management buyout can be a long time in the planning, therefore it is advisable to engage your team as soon as possible to ensure a smooth transition and a successful exit.
IS NOW THE RIGHT TIME TO SELL?
by David Gorton Partner, PM+M
This is probably the most common question I get asked as a business adviser.
Usually, the person asking, “is now the right time to sell my business?” would like the answer to be yes, as they are no longer having as much fun running it as they want to.
Sometimes I can help with that problem, but usually I just answer the question, which is more and more often, yes.
There are some things to prepare in your business to realise its true value.
Very briefly, these are:
• demonstrate resilience (for example, through Covid-19)
• show that it is in a position to drive change and benefit from the current volatile market conditions
• demonstrate a management team that can run the business without you.
I find that most people who are thinking of selling their business have ticks in these boxes.
The question then becomes – will the price be attractive to me? And again, the answer is mostly yes.
There is a lot of money around with different people looking for good businesses in the UK for various reasons.
These may be simple cash returns (allowing MBOs and EOTs), trading and market synergies, new market opportunities in volatile trading environments, consolidators looking to “buy and build” - all of which push up prices.
So, work out whether your business is bringing you fun and fulfilment, as well as money, and if not, seize the moment to make the sale at a good price and spend your time on something else.
Helping you achieve more through expert funding support and advice
Selling a business
Management buy-ins and buy-outs Raising finance
Get in touch today: 01254 679131
funding@pmm.co.uk www.pmm.co.uk
Buying a business Strategic business planning
Offices throughout Lancashire and Cumbria
01772 258321
www.harrison-drury.com
Together we can achieve a great deal.
Our specialist Mergers and Acquisitions team can advise you on all legal aspects of:
• Buying a business • Selling a business • Management buyouts
• Due diligence • Fundraising • Company reorganisations
LANCASHIREBUSINESSVIEW.CO.UK
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SELLING A BUSINESS
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