Selling your business through a management buyout

What is a management buyout?

A management buyout (MBO) involves the existing management team of a business purchasing it from its owners, who are looking to exit the business.

In most cases, an MBO involves the management team that has grown with the business who will then take full control and ownership.

Benefits of a management buyout

Management buyouts often provide a simpler transition of ownership as opposed to a third-party buyer.

Many of them are planned over long periods of time, enabling the ‘new’ owners to fully integrate with the business.

Employees, existing customers and suppliers are likely to feel reassured by an MBO option, as it will ensure business continuity.

What to consider before taking the plunge into a management buyout

In some cases, those undergoing a management buyout underestimate the toil it can take on both parties.

The owner goes from boss to former chief, and the management team transition from employees to owners.

This shift in power can cause problems if not dealt with carefully.

How does a management buyout work?

Typically, a management buyout is seen as an in-house takeover, however the legal and tax situations do not allow for that.

Incoming and outgoing parties may not realise that it is an intricate process requiring the expertise of solicitors to advise on the best routes to take.

A management buyout can be a long time in the planning, therefore it is advisable to engage your team as soon as possible to ensure a smooth transition and a successful exit.