Management Buy-Outs and Buy-Ins
Clear legal guidance when ownership of a business is changing
MBO and MBI solicitors
Management Buy-outs (MBOs) and Management Buy-ins (MBIs) can be complex, and each case will be different depending on the interests and requirements of the deal and the parties involved.
It’s vital to seek the expert advice of a trusted legal professional from the outset to ensure the process is as smooth as possible and all parties feel supported.
What is a management buy-out?
A management buy-out or MBO involves part or all of a company being acquired by the company’s management team through combining resources.
Usually, the management team takes full control and ownership of the company, using its knowledge and expertise to grow the company.
What is a management buy-in?
Like a management buy-out, a management buy-in or MBI involves a management team acquiring the company. But this is a management company from outside the company. The management team usually competes with other purchasers to buy the company.
MBIs are usually funded with a portion of the management team’s own capital and through external funding from banks and private equity investors.
What are the advantages of a management buy-out?
An MBO can offer several advantages. Firstly, since the underlying business remains the same and the management team already knows the company, there is less risk of failure. It provides continuity and reassurance to other employees, existing clients and suppliers.
In addition, there is usually less due diligence required by funders and this is often handled quickly and there is also no need to disclose confidential information to external parties.
What are the challenges of a management buy-out?
Management buy-outs are not always appropriate to a particular company. The strength and performance of the management team, as well as its plans for taking the company forward are vital to its future success. All members need to successfully transition from being employees to owners.
It is also important that suitable terms and appropriate repayment schedules are in place and there is stable cash flow to ensure that if a vendor’s loan has been used to finance the MBO, it is protected. We can advise on all these things.
How do you finance a management buy-out?
Management buy-outs are usually financed in the same way as other business purchases and are typically financed by a combination of cash, equity and debt.
Vendor financing can also occur, where the management buyout is financed by the seller through enterprise management incentives. The seller provides a loan or leaves the consideration for shares outstanding.
What should I consider before a management buy-out?
Before initiating an MBO there are a number of factors you should consider, including:
- The dedication and credibility of the management team
- Whether the company has a strong track record of profitability and good prospects without any high-risk factors
- The availability of finance and whether the company’s future cash flows can fund and support the company
Our team of specialist solicitors can help with this.
Why use Rothera Bray for legal advice on management buy-outs and buy-ins?
Our dedicated solicitors can provide you with legal advice at every stage of the MBO or MBI process and ensure you have all the correct legal documentation in place to protect your interests.
We have practical experience in co-ordinating all types of corporate transactions and working with all parties involved in such deals.
We will:
- Undertake due diligence
- Plan and coordinate the deal
- Prepare and negotiate all necessary documentation required, including the sale and purchase agreement, shareholder’s agreement, and articles of association
- Advise on any conflicts of interest
- Negotiate warranties and terms
If you have any questions, call us for a no-obligation chat.
