Management Buyouts (“MBO’s”)
In Blog 13 we looked at the basics of an MBO as a possible alternative for a vendor to a trade sale. MBO’s can be an attractive option for vendors, and a credible alternative to the classic trade sale.
In this next series of blogs, we’ll look at each key stage in depth, but to start, here’s an overview of the whole process. Key stages are as follows:
1. Both sides to identify and agree the broad size and shape of the MBO opportunity.
2. Existing Management to form a committed team with a clear leader.
3. The MBO team to formulate a clear strategic plan to outline and confirm the future direction.
4. Initial serious negotiations to commence between vendor and MBO team, to reach agreement on value and structure of a deal.
5. Once agreement has been reached, MBO team to then build a robust full business plan including financial modelling to support that deal and any funding required.
6. Armed with an agreement and the plan, MBO team to meet and secure funding agreement.
7. Initial due diligence to commence, both financial and legal.
8. MBO team to commence “commercial” due diligence with the vendor on practical aspects.
9. At appropriate point in the diligence process, full legal documentation to be prepared, in readiness for completion.
10. Completion of the deal! Followed immediately by attending to key post – deal practicalities.
As can be seen from the above key stages, external advisers are required at all stages, and perhaps none more so than right from the start, using experience to guide the MBO team through the whole process, which will almost certainly be entirely new to them.
28 September 2017