Buy outs (MBO, MBI, EBO)

A business buy out can make an excellent succession strategy for a business. WMT provides specialist advice on management buy outs (MBOs), management buy ins (MBIs), and employee buyout (EBOs), to business owners and management teams, helping them to plan and manage the project from beginning to end.

What is an MBO?

A management buyout is an increasingly effective exit strategy for a business owner, where the ownership and the control of the business pass to the hands of a trusted management team.

For the management team, it represents a once in a lifetime chance to buy a share in a business that they know and understand, for a relatively small consideration.

Benefits of an MBO

• Perceived as low-risk with less warranty and indemnity cover, due to the management team’s close working knowledge of the business.
• Faster sales process with less due diligence.
• Rewards the management team, as they can take a share of ownership and determine their own future.
• No need to market the company for sale.
• It can be initiated by the vendor (VIMBO); you do not need to wait for management to approach you.

What is required for an MBO?

• A management team with a track record of achieving profits and growth.
• A viable business plan backed by detailed financial forecasts.
• Realistic seller expectations of the value of the business to a buyer.

How we help your MBO succeed

An MBO is time consuming and, at times, emotions can run high. Our experience enables us to anticipate and resolve conflicts before they become a barrier to success, managing the interactions between parties and keeping the process moving forwards.

We are experienced in acting on both the buy and sell side of MBOs.

Business owners rely on our expert view on the terms they are offered by the management team. We check they are competitive in headline terms and that the split between cash paid on completion and deferred payments offers fair value.

When acting for the management team in the lead advisor role we will:

• Prepare a valuation of the business based on our detailed financial projections and review the feasibility of the transaction.
• Discuss and negotiate the terms of the offer with business owner and their advisers.
• Help you prepare a funder friendly business plan and financial forecast.
• Approach funders and negotiate the terms of your finance.
• Project-manage the deal from inception to its successful completion, coordinating activities with all other parties to keep the project on track.
• Develop a transition plan to be implemented when the deal is complete.
• Advise on related matters such as shareholder agreements and directors’ remuneration.

What is an MBI?

A management buy in occurs when a manager or a management team from outside the company buys the business. An MBI is considered as higher risk than an MBO, because the incoming management team will be less familiar with the workings of the business. To secure funding, an MBI team must have a credible strategy and be able to demonstrate their ability to deliver on it.

How our corporate advice can help your MBI succeed

We will help you find the acquisition target, where appropriate, and work with you as we would with an internal management team on an MBO.

What is an employee buyout (EBO)?

With an employee buyout, the business ownership passes to the employees. It can be a very effective succession strategy for owner managers, as it is highly motivating for the workforce and is less disruptive than a trade sale, with no confidential information disclosed to competitors.

Benefits of an EBO

• The legacy stays intact – the possibility of losing it through a trade sale is avoided.
• No adversarial party to negotiate with.
• Loyal employees remain in gainful employment. They are able to influence how the business is managed and to share in the future reward.
• Tax incentives make an EBO very attractive to both the exiting owners as well as the new employee-owners.

The WMT approach

We ensure that your EBO is expertly managed all the way through to its successful completion. Once we understand the goals for your EBO, we will work with you to plan how you might achieve them, design your share scheme and communicate with your employees.

Get in touch with our corporate finance team to find out more about which buy out option is best for you and your business.