Financial due diligence and business acquisitions
7 mins
Management buyouts, or ‘MBOs’, can offer an excellent exit option for the existing shareholders as well as a brilliant opportunity for the senior management teams to benefit from owning the business in which they work.
What is a management buyout (MBO)?
A management buyout involves members of the senior management team of a business acquiring some or all of the shares in the company they manage. Our Corporate Finance team has significant experience advising owners looking to sell a business.
The key elements of a successful MBO are:
- A strong management team
- A company with a track record of profitability
- A willing vendor with realistic price expectations
To find out more about MBOs, how they work, what makes an MBO successful, see our management buyout FAQs.
What are the benefits of MBOs?
For the owners:
- It is a controlled process for the vendor – including timing, conditions, and post-completion involvement
- Once the price and deal structure are agreed, they very rarely fail to complete
- Business sensitive information is kept confidential i.e. not selling to a competitor
- It is low risk
- It secures the future for the business
For management:
- They can take ownership of the business they help run
- There is the potential for high returns
- There is limited risk
How we can help businesses through the MBO process
Completing an MBO successfully involves several stages, each requiring careful planning and expertise. Our team can guide you through the process, from evaluating whether an MBO is the right option, all the way through to legal completion.
With experience in advising both vendors and management teams on MBOs since 2008, our Deal Advisory team is well-placed to guide you through the intricacies of your transaction.
If you’re a business owner considering a management buyout as an exit option, or if you are member of a management team looking to explore your options, get in touch via the form above or contact Kevin Paget for a no-obligation exploratory discussion.
Frequently asked questions
- Which parties typically fund an MBO?
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Funding often comes from a combination of private equity, banks or other debt funders, vendor financing, and management team investment.
- How can we help with MBO funding?
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Our team can guide you through the entire process which can often include:
- Advising and reaching an agreement on a fair and reasonable valuation
- Drafting a business plan, including integrated financial forecasts, on behalf of the management team to raise the required funding
- Securing the best and most cost-effective debt and equity funding
- Coordinating other advisors, including legal and tax
- Overseeing any due diligence required by the funders
- Overseeing the legal process from a commercial perspective
- Minimising the impact and disruption to the business
- What are the risks of an MBO?
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So long as the transaction is structured correctly, the only risk may be the management team’s ability to run the business without the presence of the exiting shareholder/owner.
- How is the business valued in an MBO?
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The business is generally valued on a fair and reasonable basis, typically using a multiple of maintainable profitability.
- Can an MBO happen in stages?
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Yes, an MBO can be phased with the shares acquired over time, but most often all the shares are sold, and any deferred consideration is converted into a loan note.
- How long does an MBO take?
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Typically six to 12 months, depending on the funding requirements and complexity.
- What happens if the MBO fails?
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If the deal is structured properly from a valuation and funding perspective, then it is quite rare for an MBO not to complete or be successful post completion.
Get in touch
Please complete the form below, a member team will get back to you as soon as possible.
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Our Corporate Finance Specialists
Kevin Paget >
Director, Head of Deal Advisory
Tania Phillips >
Director, Head of Transaction Services
Jacqui Lawman >
Tax Partner
Mark Baxter >
Tax Partner
Why work with us?
We provide practical, business focused advice to help you achieve your business objectives. Our team of experts are available at any one of our four office locations and have an extensive knowledge and experience across a wide range of sectors.
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Cross-Team ExpertiseJoined-up advice across all services, including Restructuring and Corporate and Business Tax
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Industry RecognitionShortlisted as Corporate Finance Advisory Firm of the Year, Dealmakers Awards
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