Considering a Management Buyout? Legal Support Is Crucial
- AuthorBetsan Powell
The pandemic has reshaped the way we live and work and, for many employers and employees, it has seen them question the status quo. We are receiving a lot of enquiries about employee ownership and, specifically, management buyouts (MBO).
MBOs involve the management team buying the business they manage. An MBO is also a way for a large company to sell a division that is no longer part of its core business.
Our Corporate Solicitors have been advising on MBOs for many years. While an MBO can be a complex process, it is also one that offers great benefits, both to the longevity and stability of the business and for the team that invests. An MBO sees team members who have real commitment and vision for the long-term future taking the reigns, which can reinvigorate a company.
How does it work?
An ambitious management team may approach current owners with a proposal outlining:
- why they want to buy the business
- what they think it is worth
- how they would fund the purchase
The aim of a management team is usually to:
- grow the business
- improve its operations
- generate and reap the rewards of business ownership
Alternatively, an owner may approach the management team he or she has cultivated, with a view to ensuring a smooth and carefully-planned succession. This is usually the case when a founding shareholder wants to retire or if a majority shareholder wants to exit. Sometimes, an MBO may be the result of a forced sale brought about through administration or a company restructure.
How can I make sure an MBO runs smoothly?
MBOs can take a number of different forms and they can be complex and challenging. It is very important to seek tailored and detailed advice from experienced solicitors, accountants and, if appropriate, a corporate finance specialist, as early as possible in the process. JCP can assist from the earliest stage – helping you to consider how your deal is structured, assisting with due diligence and funding requirements, through to finalising the legals and closing the deal. We are familiar with the challenges an MBO can serve up along the way and we have advised on transactions large and small.