Often referred to by its abbreviation, MBO, a Management Buy-out is a leveraged purchase of a business by the current CEO or management team in conjunction with a leveraged buyout firm or other sources of debt financing.
With the assistance of external capital the buy-out team strike a deal to acquire the company they work for from its existing owners who are either private individuals, public shareholders or a parent company.
If you are a business owner at a cross-roads point in your life it may be time to decide what will happen next.
If you are considering retiring or a sale of the business then a management buy-out is an option worth pursuing. If you are keen to embrace some form of life change then it’s very much worth thinking about this sooner rather than later, so that all interest parties have as much time as possible to put a favourable solution in place.
Certainly, an employee buyout can be a good way of ensuring the future of the business, by allying it with a highly-motivated workforce of stakeholders.
At the same time, and EBO or MBO can also be an effective way of realising a good price for the value you have created in your business – with the additional peace of mind that your legacy is in sympathetic hands.
Either a management or an employee buyout can be a very effective way of organising your exit on your own terms.
MBO’s offer can offer a smoother transition as dealing with employees who have similar objectives can circumvent the uncertainty associated with other kinds of sale. Crucially, a buyout can also be completed in-house, without disclosing sensitive commercial information to your rivals. This may also be attractive to you.
In the right hands, the right fund-raising can smooth the way for the business to be sold for a fair price – even where the employees could not normally afford to buy it solely under their own steam.
Indeed, some business owners purposefully choose to sell their business to the employees for less than the full market value. There can also be tax advantages if the buyout is structured in the right way and this is one of the many buy-out related questions that BBM will be happy to answer.
Our corporate team can call on key experience with Management and Employee Buyouts. If this is an option you would like to explore with your business then BBM can help.
As part of this process of exploring your options it is essential to involve employees in the process of moving towards a resolution. You should also make sure you consult employees on key issues, particularly where this is a legal requirement relating to their terms of service or statutory employment rights.
Basically the earlier you start to plan the easier it will be to create an ownership culture you can be proud of. Time will also allow all parties to explore funding options for the way the buyout is to be structured and paid for. In some models, for example, employees are incrementally awarded shares en route to assuming control. Equally, a trust can be formed to assist the buyout.
Typically, full planning of an employee or management buyout takes anything from two to 18 months. Changing the way your business operates can be the most important – and challenging – part of the process. However, it can also be an intensely positive way to mark your timely withdrawal from a particular phase of your work career as you head off to pastures new.
Management Buy-out Solicitors in Edinburgh, Wick and Aberdeen
If you need help turning round your company’s fortunes or bringing your business to an end, call us. We help clients in Edinburgh, Wick, Caithness, the Highlands, Inverness and throughout Scotland rescue their business. To get in touch with us, click here or call us: Edinburgh 0131 526 3280 Wick 01955 604188