10TIPS for Management Buy Outs
Sue Gull , Corporate Partner at Scrutton Bland, recently led their team of advisers who, along with Birkett’s solicitors and NatWest bank helped local firm Titchmarsh & Goodwin in their management buy out (MBO) (see pages 28-30). It was a long and complicated process, and Sue explains here some of the key points to bear in mind if you are planning to set out on this route.
1 ‘Failing to plan is planning to fail’ To attract lenders you will need to be able to articulate your current position in the market, communicate your projections for the future and to illustrate how and why you believe you can achieve these. Market research and benchmarking your business against similar businesses in your sector or region is particularly useful as this will demonstrate the credibility of your forecasts. 2 The price is right Getting an independent valuation of the business at the outset is vital for both the buyers and the sellers before any MBO process can begin. MBOs do not always reach conclusion and you may have to work alongside the other party in the future. Avoiding major under or over valuations and agreeing a fair valuation will not only speed up the process if the MBO goes ahead, but will avoid any ill will or animosity should the bid fall through. 3 Growth Many MBOs are only made possible through private or bank lending and all investors want to see a return on their investment. This is where having a good accountant can pay dividends – quite literally. Lenders will expect to see well laid out growth plans and you need to be prepared to demonstrate how you will achieve this growth, how long it will take you and how you intend to use any capital raised to achieve this growth. 4 Take a look around you Lenders will often support teams rather than businesses. You need to ask yourself if you have the right people in place within the business - not only to continue business as usual, but also to make your plans for growth happen. You need to show that you have a collective vision and the resources in place to turn that vision into reality.
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