Low risk VIMBO offers value and flexibility

By Steve Bell, Pierce

11 Jul 2023

Steve Bell at Pierce

In these increasingly uncertain times, many business owners are looking at ways in which to secure value for their shareholding having invested time and resource into building a robust business.

Many vendors remain cautious when considering a sale to a competitor. The opportunity to undertake a Vendor Initiated Management Buy Out (VIMBO) can provide low risk opportunity for the shareholders to realise the value of their investment.

We recently completed a VIMBO which saw the management team acquire a business they had worked in for more than 10 years.

The vendor had indicated that they wished to remain working in the business and the VIMBO opportunity allowed them to secure a significant value for their investment at preferential tax rates.

Through a supportive funder the company was able to raise a reasonable level of finance to provide an immediate cash lump sum to the vendors alongside secured loans and a retained shareholding.

Through the retained equity stake the vendors and management team were aligned in the continued success of the business, the loan notes provide flexibility in the funding structure to deliver the required valuation, reduce the third party debt requirement and provide a continued annual cash income over an extended period.

An MBO doesn’t always suit all situations, however where there is a strong management team and where the vendor is willing to remain with the business over a reasonable duration, a VIMBO can provide a low risk, controlled way to realise the value of their business.

Through our knowledge of the funding markets the corporate finance team at Pierce can provide clear advice on whether a VIMBO can be delivered and can support you through the transaction.

Enjoyed this? Read more from Steve Bell, Pierce

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