Management buyout

We can help business owners looking to sell or management teams looking to buy through loans and equity finance.

The funding has helped us to complete the MBO and set us up for future growth; using our knowledge of the business and the market to realise our true potential as a team.

Matthew Parsons, Director of Deckrite

What is a management buyout?

A management buyout, or MBO, is when an existing management team or workforce buy a business from its owners. It can offer the vendor a quicker completion, give management teams the opportunity to capitalise on their knowledge of the business and is usually the least disruptive type of business succession.

Management buyout financing

Some business owners can overlook their management teams when looking to sell their business, but a management buyout can offer many benefits:

The business is sold to those who know it best
It can protect staff jobs, culture and your legacy
It's often quicker and causes the least disruption to the business, customers and stakeholders

Through our loans and/or equity we can empower your management team to take care of the business you’ve worked so hard to build up over the years.

Taking over a business can provide a life-changing opportunity to management teams, but there is often a misconception they can't afford to buy out the business owner.

However, we can support management buyouts with loans and/or equity to cover the majority of the finance, so you only need to provide a small level of personal investment.

We take a minority stake while the team that's taking over the business gets the majority. Our equity deals reward the people or teams who are buying the business.

We work with businesses across a vast range of sectors and can offer loans and equity investments between £500,000 and £3 million. We can help ambitious management teams buy Welsh businesses when the current owners retire or sell up.

If you're not sure where to start with an MBO, we help businesses get the advice they need. If you have questions about how the transaction could be structured, please get in touch.

Or, take a look at the other options for buying a business.

Loans and equity provided
Interest is fixed for loan terms and is based on each business's individual circumstances
When you apply you need to provide a structured business plan explaining how you’ll run the business and repay the finance
When writing your plan you might want to consider involving a specialist accountant or corporate finance adviser
Financials, statements and forecasts will be required to progress your application

Trust

We're an institutional investor backed by Welsh Government

Support

New management teams have time and space to find their feet

Experience

Over 300 succession deals structured by our expert team

Value

You'll have access to our strong network of NEDs and advisers

Helping businesses like yours

How does a management buyout work?

Step 1

Initial application and discussions about your options. Map out which transfer plan could work.

Step 2

Develop your preferred transfer plan and start discussions with finance and legal teams.

Step 3

Transaction complete and support provided to help the company adjust to the new structure.

Step 4

Ongoing advice & training provided to the new management, board and shareholders.

Your questions answered

How does a management buyout work?

An MBO (management buyout) is a transaction where the current management team buys part or all of the business, in which they are currently employed, from the existing owner.

There are a number of stages to an MBO:

1. Management team formation

2. Valuation and financing

3. Negotiation and agreement of heads of terms

4. Due diligence

5. Purchase agreement and legal documentation.

6. Complete the transaction

7. Post-MBO integration

Management buyouts can be a beneficial exit strategy for owners looking to retire or divest from the business while ensuring continuity under the existing management team. It also provides the management team with a direct stake in the company's success and allows them to realise the value they create.

What is business succession?

The transfer of ownership of a company to another person or team is known as business succession. There are various ways this can happen, from passing it on to a family member to selling it to a trade buyer or management team. Find out more in our guide to succession planning.

Why should I consider an MBO?

There are a number of different succession routes, an MBO can provide a seller with a number of non-financial benefits such as preserving their legacy via job security and offering continuity both internally for staff and externally for customers, suppliers and other stakeholders.

An MBO can be a less disruptive option as the management team will already know the business, making a due diligence exercise easier.

When's the best time to think about selling my business?

It’s never too early to consider management buyout. Proper planning and preparation will allow you to gain the best value for your business by creating a strong management team. They should be able to take on the responsibilities of ownership, demonstrate stability and identify future growth opportunities.

If you're contemplating succession options, it can be very beneficial to engage with professional advisers and funders early in the process.

What are the funding options for management buyouts?

Many management teams will want to go ahead with an MBO but often wonder where to start with funding. This is usually found through a number of sources:

Management team – a management team rarely has the ability to pay for the MBO personally, they'll often look to external funding sources, however, they will have to provide a share of the funding.

Loan and equity – we can support with the majority of finance through a mix of debt and equity. Our loan interest rate's fixed and our funding structure is based on each business’ individual circumstances.

Deferred consideration – this is where the purchase price is agreed and part of the payment (consideration) is deferred until a later date. The buyer obtains the shares or business / shares at completion but pays part of the purchase price at an agreed later date.

You can read more about the funding options in our guide: How to finance your management buyout

How much of a share will I need to put in for a management buyout?

The amount you need to contribute to an MBO may not be as much as you expect, but this varies depending on several factors such as: