Putting in place your succession planning? historically, most business owners first port of call when looking to sell their business would be via a trade sale to a similar or complimentary business.
However, our Corporate Finance team have recently seen a spike in the number of owners choosing to sell their business via a management buyouts (“MBO”) instead – what’s driving this trend? Having advised numerous owners and management teams in successful management buyouts transactions over recent months, our reflections would be:
Having Certainty in Selling your Business
With economic uncertainties due to political tensions, many business owners are seeking to realise the value they have built up in their business without being reliant on the whims of market sentiment. The management team are likely to retain business continuity having already a belief in the long-term prospects for a business that they know so well, despite any short term issues. If funding markets remain positive, an management buyout transaction is therefore much less likely to be de-railed by short term changes in business confidence.
Funding markets are supporting Management Buyouts
Availability of debt and equity funding for good quality businesses is at an exceptionally high level currently, with new entrants to the lending market continuing to emerge over the last few years. This competitive funding market is resulting in funders with a good risk appetite to support business restructuring where there is a change of ownership transactions such as management buyouts.
Management Buyouts can be quicker than a Trade Sale
A well-executed management buyout has the potential to be completed in a shorter time frame than a trade sale. In a trade sale you first must find your buyer, generally by engaging corporate finance advisers to market the business for sale – this part of the project can obviously be skipped in an management buyout as your buyer is already at hand – the management team. Of course, the management team are unlikely to have the funds available for the business takeover and therefore advisers will need to be engaged to raise the funding, but still, on balance, an management buyout transaction is likely to complete in a shorter time frame than a trade sale.
Our Corporate Finance Team have recently closed a number of MBO transactions. If you are considering an management buyout transaction, or would like more details on your succession plan, then why not drop us a line today to see how we can help make your ambitions a reality.
Tags: Corporate Finance
