Inside and Out of Buyouts
Let’s be honest, a management buyout is not for the faint-hearted. It requires nerve, risk taking, acumen, intuition, self-belief and diplomacy in addition, of course, to the backing of a supportive funder. But, as ever in business, fortune favours the brave and the rewards for yourself and your fellow management team could be life changing.
Take a look at our 8-point guide below giving you the Inside and Out of Buyouts. We hope that these will resonate with you as you embark on potentially one of the most important business adventures of your life.
Fit – Are you and your colleagues ready for the battle of your business life? Not everyone is comfortable with business ownership. You could have to take little in order to gain a lot in the long run.
Forthright – You will no doubt have some tough negotiations with the current owner whom you may know well. We have all used the line ‘It’s just business’ but you are negotiating to own someone else’s business and you may have sentiment and respect for them. It will require forthright discussions and it is important not to burn bridges if they do not come to fruition.
Fellow Travellers – It’s your career and money so your team has to share your vision and inner steel. You will have to be laser focused on success and make the difficult decisions, such as bringing in outside talent and letting go of the weakest links.
Fair Price – A company is worth what someone is prepared to pay for it ultimately. Invest in a thorough and independent valuation so you neither overpay or negotiate on supposition.
Funding – Equity, debt finance or asset-based lending? Self-finance? All of the above? A rock solid long-term plan is essential in approaching the finance market. Explore all the options. We have supported many MBOs over the years and every situation throws up new solutions and approaches that may not be immediately obvious to the management team.
Forfeit – You will have to have ‘skin in the game’ to attract the right funding and demonstrate your commitment. Whatever you decide to do, always have a Plan B for your and your family’s sake. Risk taking is the name of this game. But risk mitigation is the game of self-preservation.
Focus – An MBO could take quite a while and you still have a day job with the current owner. Pace yourself and keep body and soul on an even keel.
Foster – The current owner may want out but so may the customer base if he or she makes a sudden exit. Foster an ongoing relationship which allows them to escape to enjoy the next stage of their life without disrupting the ongoing business.
And…finally….High Five. You’ve done the deal. Mark the occasion. Recharge the batteries to get down to the serious business of making serious money.