Vendor initiated management buy out (VIMBO) – do it your way

22/03/2019

When looking to sell your business, there are a number of routes you can take. A Management Buy Out (MBO), Management Buy In (MBI) or and Employee Buy Out (EBO) are all feasible options. But what is a ‘VIMBO’ and how do its benefits differ from the rest?

What is a VIMBO?

A vendor initiated management buy out follows a similar process to a management buy out with one key difference – the vendor (the current owner) makes the approach to the management team rather than the other way around. This means that the business owner can initiate the deal in their own time and on their own terms.

A faster more straightforward process

In an MBO, the management team put together an offer for the purchase of the business from the business owner. The business owner will usually have an idea of what they want for their business, and this could be quite different from what the management team are offering.

The management team may not understand what needs to be done, or may be very nervous about approaching the owner with such a proposal.  They may also be anxious about how much to offer and how to fund such a transaction.

A VIMBO allows the vendor to put together a sensible and well-structured deal before approaching the management team. Usually the vendor will have the business valued and map out their ideal exit plan with their advisor. This speeds up the process and helps keep the vendor in control of the transaction.

It is common for the vendor to help fund the VIMBO by deferring a substantial part of their payment. This allows the management team to buy the business without having to borrow considerable amounts from external sources.

The tax advantages

As a business owner, a VIMBO can provide greater tax advantages for extracting income from your business. A sale of this type will often qualify for entrepreneur’s relief, but will need to be constructed carefully to take full advantage of all available reliefs.

A VIMBO offers the ideal vessel for passing a business on to the next generation. It protects the company while the current owner exits and transfers business ownership in the most tax efficient manner.

What next

If you are considering selling your business and think a VIMBO could be the best option for you, then we can help. We can work with you to structure a deal that ensures you receive a fair value for the business, benefit from all available tax reliefs, and our experienced corporate finance advisors will guide you through the planning and sales process to successful completion.

For further information on using a VIMBO contact Andrew Williamson.