When developing your business exit and succession strategy, you must consider all possible avenues, including those which might not seem so obvious.
A Management Buyout (MBO) is one such approach that has gained traction for its flexibility and the ability to leave your business knowing that an experienced team is in place to run it.
With support from professionals, MBOs could be a smart planning move that leaves your business in a strong position for continued growth and success.
Is an MBO right for your business?
An MBO involves the existing management team of your business, whether that be a single director/manager, the entire team or anything in between, buying the business from you and continuing to run it. It is dependant on having the right calibre of people in the management team with the appetite and skillset to drive the business forward as part of a MBO.
The process will be a negotiation whereby you will value your business and decide the terms on which you would like to sell it which includes things like earn-out periods, the MBO team will make their own assessment and a discussion will then be needed to agree terms. This may need to be facilitated by an external professional adviser.
This form of buyout provides a smooth transition with minimal disruption to business operations but may also allow the new owners to apply their vision to the business.
MBOs may be particularly suitable for companies with:
- A cohesive existing leadership team
- A long-term goal of growth or sale to a group
- No family interest in taking over the business
- Strong market potential but poor performance
The funding for this purchase usually involves a combination of personal investment from the managers buying in, together with external financing. These deals can also be structured to utilise existing funds within the company.
MBOs as an exit strategy
MBOs provide a seamless leadership transition, preserving the existing corporate culture and operational continuity.
This offers assurance to the owner that the business will continue in safe hands and that a growth plan is in place.
Having a MBO as an option is also a good way to incentivise and retain key senior staff within the business.
When the time comes for you to retire or move on, consider approaching your management team to discuss the possibility of an MBO, including any questions or concerns from your staff.
In all, MBOs are a compelling exit strategy for founders and business owners wanting to leave their businesses in safe hands.
For advice on MBOs and how to proceed with an exit strategy, please contact our team today.
