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Mar312012

Exit planning strategies - Management Buy-Outs (MBO) 

As an owner manager it is very likely that you have spent many years of hard work into making a success of your business.  Experience has taught many owner managers in the same position that this hard work can quickly count for little or nothing if your exit strategy is not well planned and implemented in advance of your actual decision to sell or step down.  There are several different exit planning strategies that CMC can advise on and help you as the owner manager get the financial results you deserve.  Over the next few blogs I will be presented some of these and will include some of the advantages and disadvantages of each.

This first article focuses on MBO’s as a strategy to exit.

Management Buy-Outs (MBO)
MBOs are common for the owner managed business, in particular for those who are willing to pass their business onto the existing team that helped to make it a success. This route ensures business continuity and provides peace of mind for the employees and other stakeholders.

Generally a MBO arrangement will enable the current management team to acquire the company via an MBO vehicle which will prevent them from having to raise all of the necessary finance personally and to then repay it from their own personal taxed income.

We (CMC Partners) have considerable experience in negotiating and implementing MBOs, making the process simple and efficient (read painless) for all parties, i.e. the current and the new owner managers. We can advise either of the MBO teams, specifically advising the current owner on all aspects of the buyout, including finding finance, creating the MBO vehicle and liaising with HM Revenue and Customs.

MBOs are a complicated process and require careful planning and adequate support and assistance at every stage to ensure completion is as fast as possible and the results the best outcome for all parties.  The financial outcome is key, it is not only how much cash you may get, but also when is payment  made, , tax liabilities, who is funding the MBO, e.g. venture capital or private equity firms, and many more issues.

The benefit of a MBO
A MBO or a MBI (discussed in the next blog) is often the best case scenario for many business owners and in many cases is the most effective of the exit strategies.  This route has several significant advantages:

  • The existing management team understand the business, and already have experience with running it
  • The existing managers will have detailed knowledge about the business so negotiations may be easier, and the motivation to run a business may already exist.
  • The existing managers may not need to personally raise the necessary financing and it may not need to be paid from their personal taxed income.

Over the past 20 years CMC have advised many owner managers on how best to exit from their businesses. Phil McConnell himself has been involved in the sale of several companies in which he was a significant shareholder. Future blogs will describe the benefits others type of exit strategies, including MBI’s, trade sale and a company purchasing its own shares.  If you wish to discuss with Phil how he can advise you as an owner manager to get the results you deserve, call Phil on 07720 397040 or email him

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