Considering a management buy-out? Read on…

Founders Don’t Always Want To Hold On To Shares

Here’s what you know.

Founders of a business are sometimes the Managing Director or Executive Chairman, and also controlling shareholders. They may have a vision as to where the business should go to in terms of development. They also harbour desires and hopes that younger members of their family will enter the business and be groomed for senior management positions.

Here’s what you may not know -A major shareholder, at some stage, will need to exit their business or sell their shares. The reasons could be financial/personal/emotional. They need to make a choice: wait for someone to come knocking on their door and buy their business; put themselves through the anxious process of talking to a competitor and revealing their commercial trading secrets; or, do they have a serious conversation with their directors or senior management to see if they want to buy a shareholding in the business with a view to controlling it? The latter is the opportunity you’re looking for.

You Don’t Necessarily Need A Lot Of Capital

You’ve always wanted to buy, but never dreamed you had enough money. What is little known is that you, the management, do not necessarily have to have a huge amount of capital to buy a business. By using debt and buying equity in a Newco alongside the financiers, you can achieve a large shareholding in the Newco or by achieving pre-set targets laid out at the time of completion.

Financiers Are Keen

Management buy-outs are well regarded by financiers because they are regarded as being less risky because there is continuity of management. If you have a plan for the business and it is a profitable and growing one, then financiers will be keen to back your buy-out.

You should constantly review your ambitions within a company. Don’t forget you can approach major shareholders in case they want to sell their shares. You would probably need a third party such as a corporate advisor to make an approach for you for confidentiality reasons and continued negotiating support.

If you’d like to talk about your buy-out options, please get in touch to arrange a free discussion: 020 8202 3355 or contact us here.