Management Buy Outs – Are You Ready To Own The Business?

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I have advised on a wide variety of management buy outs.  They are without doubt an excellent opportunity for the current business owners to achieve an exit without the potential headaches of selling to an external buyer, whilst allowing a management team to become the owners of a business which they have helped to develop and grow. However, being part of an MBO team requires a certain mind set if it is to be a success.

The transition from employee to business owner is for many a leap that is taken with little hesitation, but for some it can prove difficult to make the necessary adjustments. There are a different set of pressures that come with owning a business to those of being an employee and for some, these can prove to be overwhelming.

It is essential to develop and support the management team prior to the buy-out process commencing. This can be provided by the vendors or external advisers and should provide the team with the fundamental skills they need to become successful owners, whilst giving comfort to the vendors that the management team include the right people who are ready for this new responsibility.

Being a business owner can bring great challenges but it can also provide great rewards. So when the possibility of an MBO arises, do not shy away or dismiss it, just take time consider all of the implications. Discussing the opportunity with third parties who have been involved in MBOs will ensure that both the management team and the vendors are prepared for what lies ahead.

Tim Mills – Corporate Finance Partner