Transitioning From Senior Management To Ownership
A management buyout (MBO) is a form of acquisition where a company's existing managers acquire a controlling percentage or all of the company from either the current owners.
There can be different variations to a buy out, depending on the which managers are acquiring the business and how the transaction is funded. Below are the industry terms and brief description.
MBO – management buy out
MBI – management buy in
BIMBO – buy in management buy out
RAMBO – rollover assisted management buy out
A management buyout is a particular type of acquisition that combines many of our services including fundraising, acquisition advisory, valuation and strategic advisory.
We work alongside management teams in buying businesses they manage under different scenarios: sometimes it is a retirement sale of private vendors, other times it is a non-core subsidiary of a larger parent, or it could be a distressed parent looking to generate cash by selling subsidiaries.
MBOs are often sensitive, and high pressured situations as the managers can find themselves in a conflict situation trying to buy the business from the current owners and more often that not their employers. We are here to help teams through the process, allowing them the often once in a lifetime opportunity to become business owners themselves.
Keystone acts as lead adviser on such transactions and our role typically includes:
- explaining the nature of such leveraged transactions and the complexities involved
- investigating viable deal structures, valuations and funding options
- drafting and submitting offer letters
- leading negotiations with the vendors, including reaching heads of agreement
- advising on the most appropriate vehicle and shareholder structures to make the acquisition
- investigating and advising on the different funding options – debt, equity, vendor finance
- preparing and presenting a set of forecasts and a business plan
- helping clients assess the commercial, accounting and cash flow implications of particular financing structures
- introducing the opportunity to specialist providers of debt and/ or equity finance
- leading negotiations with funders
- introducing other professional advisers needed to complete the buy out
- assisting teams in interpreting the results of due diligence work
- preparing a detailed timetable of events
- arranging meetings, conference calls and generally oversee the total project management through to completion