What is a vendor initiated management buy out (VIMBO)?
A vendor initiated management buy out (VIMBO) is a management buy out where the owner offers the business to the management team. Typically in a management buy out, it is the management team that ask the owner if they can buy the business.
In our experience, management teams often need help pulling together a buy out proposal and approaching the owner. With a VIMBO, the vendor puts together a sensible and well-structured deal before approaching the management team. This can take the pressure off the management team to come up with an acceptable offer. It also lets the business owner take control of the process.
Often the owner keeps a minority stake (perhaps as much as 25%) and regularly would act as a consultant to the business after the buy out. This usually makes the change of ownership easier for everyone concerned.
Owners and management teams usually find a VIMBO more attractive than selling the business to a third party. As an owner, a VIMBO can provide you with significant tax advantages over, for example, extracting income through salaries and dividends. The deal has to be structured carefully to make sure you receive all available tax reliefs.
It is increasingly common for a large part of the payment to the owner to be deferred. This means that the management team may not need to borrow from an external funder.
Do you still have questions? Get in touch with our corporate finance team to find out more about how they can help you.