Management Buyouts (“MBO’s”) – Post Deal Transition
Having successfully negotiated and completed a deal, in many ways the hard work is only just beginning! Whilst you, as an MBO team, will inherently know the business well, guiding the business through the post sale transition period can still be tough. Key points to consider will include the following.
• First and foremost, don’t give in to “deal fever” as the MBO is going through. You’ll have spent a lot of time on the deal itself, quite possibly and understandably deflecting some attention from the business. Once completed however, your focus must be fully on running the business through that important immediate post acquisition phase.
• As shareholders and the MBO team you may well have had equal input through the process, but be aware that this may not be the same when running the business.
• All MBO businesses need a leader, someone to take tough decisions, and where the buck ultimately stops.
• As an MBO team you must have a Shareholders’ Agreement, there is no more critical document, but it is one which is so often neglected. It should cover all eventualities so that, if and when unforeseen difficulties occur, there is a fully agreed way forward.
• Ongoing financing will be really important. Hopefully the funding you arranged for the MBO will also allow you to grow the business and provide a buffer to weather the inevitable storms that will occur from time to time.
• You must pay close attention to the workforce, as employee morale, and how everybody feels about their job and the workplace environment, is an absolutely critical factor. When a company changes for any reason, employees may feel unsettled, you must be aware of this.
• A key issue in any event is to ensure full and open communication not only with employees but also externally with key customers, suppliers and other important people.
• Empirical research suggests that MBO companies outperform their non-MBO peers but you must not get carried away especially regarding reaping rewards from your investment. You must not on any account denude the business of precious cash too quickly. Remember you’re in this for the long haul, not short-term gain.
A final thought, take time to enjoy the experience. Despite the inevitable ups and downs of any business, this is likely to be the most rewarding time of your business career.
16 November 2017