Management Buyout (MBO)

A Management Buyout (MBO) is a common and popular exit strategy that allows shareholders to sell the business to its existing management team.

Often used when an owner is looking to retire, an MBO enables a smooth transition by handing the business over to those who already know and understand it. It can also be an effective way for companies to sell off specific divisions or subsidiaries to internal teams.  

Most owners are emotionally as well as financially invested in the business, especially if they’ve grown it organically themselves from scratch. By selling it to the MBO team, vendors have the satisfaction of seeing it in the hands of people who are similarly invested; people who share their business values, aims and objectives.  

Transactions can often be completed more quickly with an MBO as there’s no need to put the business on the open market – there’s a readymade, known and trusted buyer. But, before going down the MBO route, there are a number of key points that the seller should consider. 

Primarily, is the current management team capable of taking on all the responsibilities that come with owning as well as running a company? Are they ready to take the big step up from manager to owner – and do they have the money or access to funding needed to go ahead with the acquisition if it’s not wholly financed by the business’s profits? 

There is no point in selling to a management team that is not yet ready, unless the vendors are prepared to stay involved in the business for quite a while longer. If the owner is keen to retire within let’s say, the next 12 months and the team isn’t fully prepared to take it on, then selling via an MBO makes little sense. 

From valuation, negotiation, due diligence then sale, our experienced and expert advisers can guide and support you through every stage of the MBO process.

What is a Management Buyout?
Management Buyouts: A Jerroms Miller Client Success Story