- Is now the right time for a Management Buyout of your business?
Is now the right time for a Management Buyout of your business?
Is now the right time for a Management Buyout of your business?6th January 2021 - Published by Kuits Corporate team
It is a time of uncertainty for us all. Many business-owners may be thinking to the future and considering how best to exit the business that they’ve spent years building.
As there are far fewer trade acquirers during the present climate, a Management Buyout (MBO) could be the perfect exit strategy for a business owner at the current time.
MBO: what is it?
An MBO is where the management team of a business join together, usually pooling their resources and taking external finance from a funder or via private equity, to buy the business from the owner.
Why is an MBO a good idea in a COVID-19 world?
Some benefits of an MBO include:-
- an opportunity for the management team who have often supported and grown the business over many years;
- facilitates a seamless handover of ownership to those who already know the business well and take a leading role in running the business with minimal business disruption; This is especially useful to give comfort to employees, customers and suppliers;
- the transaction process can be more straightforward, particularly because due diligence is often a quick and straight-forward process as the buyers already know a lot, if not more than the owner, about the business;
- the management team can hit the ground running using their experience in the business to drive growth and expansion;
- the wider pool of employees are less likely to be worried about the effect of the owner leaving;
- existing customers and trading partners will likely also feel at ease with the new arrangements as they will already be familiar with the management team; and
- the owner knows that the business is being left in safe hands and is securing the long term future of the business.
The market for a third party purchase in COVID-19 times may be uncertain; buyers may be looking for cheap deals or asset purchases which may leave the owner with a worse deal than if they had considered an MBO, and may not protect the interests of the employees which could make it an ideal time to consider it.
Planning an exit
Any exit strategy requires careful planning. There is a lot to consider and you will need advisers who can steer you through the process.
Get in touch with a corporate solicitor in Manchester
If you would like to discuss your exit and succession strategy, or whether an MBO could be a suitable structure for your business sale, please contact Sheridan Broude in the Kuits Corporate team to talk about your options on 0161 838 8175 or email email@example.com.