Reaping the rewards of an MBO

For many managers, an MBO is their first venture as an entrepreneur. It takes courage to leave the relative security and comfort of a salaried management position.

However, most MBO team members find the personal satisfaction of controlling their own destiny is a massive reward.

Once you’ve bought your company, different difficulties and challenges will undoubtedly present themselves. You know the business, but the dynamic will change. Here are some of the key issues and challenges MBO teams need to address.

Understand your financial partners

Each of your sources of finance has unique rules of engagement. For example, private equity partners are very different from your bankers. Understand what each of your financial partners will and won’t do.

Have a trusted team of advisers

I would say this wouldn’t I? But a management buyout brings significant change, so it is important to pick advisers who you can really trust.

Appreciate you are in it for the long haul

You may have taken on a significant amount of debt to finance your management buyout and it is likely your financial partners will expect to be paid out before you see any money.

Don’t shirk the tough decisions

Once you’ve completed your MBO, your fate – to a large degree – is in your own hands. You may now be faced with difficult decisions that need to be made in order to successfully grow your business.

Put together a shareholders agreement

A well drafted shareholders agreement addresses issues you may not have considered, such as what happens if someone gets sick, dies, is dismissed (with or without cause), and what are the issues going forward that require majority consent from the shareholders.