What is a Management Buy Out ?
A management Buy Out or MBO for short is when a company’s management team buys operations and assets of the company which they manage. This could be a large part or the whole of the company. MBO’s are appealing to most professional managers due to the obvious larger rewards gained as an owner rather than employee.
An MBO exit strategy is often favoured when a large corporation wishes to sell divisions that are not core to the company’s business. MBO’s are also often used in smaller businesses when the owner wishes to retire.
MBO’s often require a substantial amount of financing. This financing is often a combination of debt and equity, often derived from the buyers, financiers and at times the seller.
At CREF we have an experienced and versatile team that can help you with anything from financing your goals to Legal Advice, Tax Planning and business planning.
Some of the main Questions you might need us to answer are:
- Should you purchase Shares or Acquire Assets?
- What are your financing alternatives?
- What is the Company’s Value ?
- What is the best Negotiation Strategy?
- What Legal and Tax factors should be considered ?
Our Approach to a MBO
Phase 1 – Preparation For the MBO
In this phase we will get to know your objectives, background, vision, strategy and then determine your financing requirements.
Phase 2 – Buy Out
In phase 2 our goal is to acquire the company for you at an attractive price. We begin by valuing the target company using various methods.
Once the Valuation has been done we can move forward with the negotiation of price and other conditions.
Phase 3 – Transaction
Once the terms and bid have been agreed upon,we will ask for your approval to move forward with the transaction.
The first part of this phase will require an LOI to be signed.
Once the LOI is signed the Due Diligence process begins where we give a thorough investigation of the company’s books.
Should we find everything is OK once we have completed the due diligence process. We arrange the required funds for your acquisition.
Now that the funds have been arranged the SPA (Share Purchase Agreement) is signed and we can move to phase 4.
Phase 4 – We Help You get Integrated
Once you have acquired your business new relationships with your employees will need to be built.
You will also need assistance from your new management for the integration.
The company’s existing customers will need to be informed of the change and perhaps your customer relations should be expanded.
The Integration Process should be streamlined while saving costs in the process.
Our capable and experienced team at C.R.E.F. can take you through each phase of any MBO process. To find out more about our services please contact us.