Selling your business to your management team

Agreeing a deal with a management team as part of an MBO is fraught with complexity particularly as if often financed by a number of third parties including debt providers, private equity and indeed you offering vendor loans and equity to get the deal over the line whilst ensuring you are paid a market price. Our team are senior level deal doers who have managed hundreds of sale processes and know how to expertly guide business owners through the most important transaction of their lives. We will sit down with you and plan how best to maximise your business' value and be fully prepared before kicking off the sales process to your management team identifying any potential hurdles than will need to be overcome. We will be available to you the whole way throughout the transaction whether that is late at night or at the weekend whatever it takes to get the deal across the line.

A Management Buyout (MBO) is where a company’s management team purchases the assets and operations of the business they manage.

Sometimes, a management team may purchase the assets and operations of a business they do not currently manage, in which case this is called a management buy-in (MBI). This sometimes may happen when a management team sees no prospect of their own company's owner selling to them.

Other forms of buyouts include:

• BIMBO which stands for Buy-In Management Buyout. This is where a management buyout takes place and new management are added and buy shares at the time of the transaction.

• VIMBO stands for Vendor Initiated Management Buyout. This is where the sale of the company to its management is initiated by the owner looking for a successor.

• FAMBO stands for a family management buyout. This is typically used to help family businesses put together a succession plan allowing older generation family members to extract some value and determine the family members who can to take the business forward into the future.

As the owner, you are securing the future of the business with continuity of management, whilst rewarding your most loyal employees. The process can also remain confidential, and any challenges can be foreseen and dealt with, before the sale process begins, meaning there is a higher chance of ongoing success and growth.

If your management team do not have the right skills needed to take over the ownership of the company, this can quickly become apparent as opportunities are missed and issues begin to arise. Secondly, there is a risk that the management team can become too distracted by the MBO process itself, impacting the day-to-day running of the business. Negotiating with your own management team can also be tricky as there are multiple parties and personalities involved who all have a significant vested interest in the transaction. Therefore, it is important to onboard an external trusted advisor to assist with these different factors.

Yes, it is very common for the management team to need to use the business to raise capital, in order to buy it. This is an element of the MBO process that we can guide you through and help your management team secure the finance needed for the sale to happen.

This is all part of the negotiations and something we can help you manage when approaching the management team in the first place to ensure you receive market price. You may be expected to receive your money over a longer period of time, or to retain some equity in the business, if your management team are unable to raise all the capital needed. This can be offset with an opportunity to participate in future growth upsides.

The process of selling a company to its management team can take around six months on average. However, if your team are not prepared enough and are unable to prioritise the completion, this process can take years. The most time-consuming element is raising the finance as a third-party financer needs to be identified and onboarded, and then due diligence needs to be undertaken, which is similar to the process of a trade sale.

Corporate finance transactions require specialist, up-to-date knowledge, so we provide the expert advice you need to plan and execute your MBO. This includes sourcing and guiding your management team through the process of securing finance, if required.

We typically work with businesses that have a value of more than £5 million but can work with smaller high growth businesses.

No, we are not brokers. We are professional advisors. We support our clients throughout the entire process, from developing your business case and advising on how to create more value, to finding potential buyers and managing the negotiations.

Whilst we have specific sector knowledge as a result of the different deals we’ve made happen, we work with many different sectors, so our experience remains very diverse. This naturally means we bring unique insights to our clients, helping them to create and deliver robust business exit plans.

Our fees vary depending on the scope of the engagement. Our corporate finance related fees tend to have a large component which is based on the success of a transaction completing. Our strategy advice fees are normally charged as monthly retainer fees or charged on an ad hoc time basis. Our fees are always tailored to your specific needs, ensuring we are completely aligned.