Making an MBO work for you

MBO activity in the North West is on the rise according to recent figures, with growing numbers of business owners looking for a post-pandemic exit.

While handing over the reins to a management team looks like a great way of ensuring your business continues to move forward and is in safe hands after your departure, there are several things to consider.

It is important to have good lines of communication between everyone who has a stake in the business’ future from the start of the process. This is especially critical if it is a family business with all the dynamics that can entail. Succession planning is also vital – and it needs to start early, and it needs to be focused on the end game.

Owners need to have confidence that they have the right management team in place to take on an MBO and to make it work. Equally importantly, so do external investors.

Having a quality management team in place, with an understanding of the key issues facing the business is the key to success, especially if looking for equity investment to fund the deal.

Funders want to be sure that there are the skills and experience there to take the business forward, along with a clear vision and direction.

They will look to see that the management team has a strong customer and employee retention plan, has a thorough understanding of the business and knows the numbers.

Succession planning must look to address any weaknesses that exist and for that to happen an honest assessment of the management team is needed.

That team also must be clear about the transition it has to make in becoming the business’ owner and be committed to that.

Get the process right and everyone wins. The owner walks away having secured the price that is right for them, and the knowledge that their legacy will be retained.

The management team can bring new focus and energy to the business, backed by investment and the skills and experience private equity can bring.

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