Dealmakers: Thinking ahead - delivering a successful MBO

By Pauline Rigby Partner, corporate and restructuring, Forbes Solicitors

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Positively, here at Forbes we can report that in recent times we have seen a rise in the number of successful MBOs completed within the region.

An MBO (management buy-out) is essentially the purchase of a business by its management, usually in cooperation with external funders.

MBOs vary in the way that they are structured, their size and of course the circumstances giving rise to the MBO itself.

There are a number of core factors that need to be present and need to be met in order to achieve a successful MBO.

Firstly, let’s focus on the management team itself which is the most important factor.

The most successful MBOs involve a team that have different strengths and capabilities, that have and do work well together and cover and look after all of the key aspects of the business itself.

In the event that external funders are involved, they will scrutinise the management team to ensure that it has the ability and necessary skills to take the business forward backed by their funding.

Secondly, it is important to consider the business itself and its commercial viability. Clearly, the financials are extremely important when considering the viability of the business.

But other commercial factors, such as ability to survive without the existing shareholders, its strategic plans and any legal risks need to be reviewed.

Finally, there needs to be a willing seller, or a number of them!

Most sellers favour MBOs for a number of reasons: many owner managers feel emotionally attached to their businesses and continuity and protection of staff can be a leading factor for a seller when favouring an MBO verses a trade sale. All in all successful MBOs are not only a joy for corporate lawyers to work on; they are of course a positive to the region too. Fingers crossed they continue at their present rate.