Tuesday, 28 Jun 2016

Management Buy- Outs (MBO)

Management Buy- Outs (MBO)

Our Bradford Solicitor Umberto Vietri explains:

“A Management Buy-Out (MBO) is an existing team of managers work together in order to buy a company or part of a company, which they work for. MBOs are becoming a more frequent option for sellers due to the advantages that come with them but sellers need to also be aware of the disadvantages of this approach. Below are a few of the main advantages and disadvantages of a management buy-out.

Advantages

One of the main advantages to an MBO is that the buyers already understand the strengths and weaknesses of the business better than any other buyer and therefore these transactions can often be much quicker. Selling to the management of the business also allows the seller some peace of mind as they will be selling on to a group of people that they know and can trust with the continuation of the business.
An MBO will give the managers a taste of running a company and will usually be their first opportunity to do so and this can greatly increase the commitment of the management to the business.

Disadvantages

Although MBOs are becoming more frequent it is often difficult for the management to raise the money that the seller is asking for the business, often this will mean that payment will have to be deferred or sellers will have to look to third parties to sell the company. Finance may also be sought from banks and other lenders who will seek certain guarantees and security for the amount that is leant to the managers which will add extra debt to the business.

There is a significant different between being a manager of a company and owning it; some managers are better equipped for the change in position than others and the MBO team will need to make sure that everyone is aware of their roles and what they skills they are bringing to the table in order avoid future conflicts.

Conclusion

There are a range of advantages and disadvantages to MBOs as there are in any business sale. When looking to sell or buy a business expert advice is crucial to ensure that the deal runs smoothly and the parties are happy with the terms of the deal. At AWB Charlesworth our experts have dealt with a range of MBOs for both smaller and larger businesses and would be happy to discuss the process with you and help you to work out if an MBO is right for you.”

For further advice or assistance on  MBOs or on any Company or Commercial Law matter contact our Commercial Law Specialist Umberto Vietri 01535 613674 umberto.vietri@awbclaw.co.uk

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