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Management Buy-ins and Buy-outs

Many people dream of running their own business, and the current high level of Venture Capital funds available means the dream is a real possibility for more and more people. For some, the route to becoming a business owner will mean starting from scratch. For many, however, it will involve taking over an existing business, often by way of a Management Buy-Out (MBO) or a Management Buy-In (MBI).

Management Buy-Out is the term applied when a business is sold to the existing management team. Often this occurs when large companies seek to dispose of parts of the business or when the existing owner-manager is looking to retire.

The existing management are often the people in the best position to take the business forward as they have expert knowledge of the company and its work-force. Strategically, they also present a more favourable option to the existing owner than selling to a competitor or closing the business down.

The main problems for the buy-out team will be securing the necessary finance. MBOs generally require more capital than a start-up or expansion scheme.

Management Buy-In is the term applied when an outside management team buys a stake in an existing business. Typically this happens where the business is under-performing due to weak management or lack of suitable expertise or where the business growth demands a more knowledgeable and experienced management team.

The MBI enables the business to inject the depth of experience it requires and the new managers share in the future profits they generate.

"A team of managers considering a buy-out or buy-in will be facing one of the most difficult and challenging decisions of their lives. Although they know that the task will be time consuming inevitably they will under-estimate just how much time and energy it will take.

A management team needs experienced advisers who can guide them through the process and help them avoid the common pitfalls. Ultimately, they will need accountancy, tax and financial advisers who they can rely on to help them run their own business after the transaction. We help teams throughout the process, from the initial valuations, the development of business plans, structuring of the new business, raising the finance, tax planning (both for the business and the directors), evaluation of the assets and confirmation that the financial management systems and reports are accurate. We also help the management team with the significant negotiations with both the finance providers and the owning company as well as the various other professional advisers involved."