The purchase of a company by management is often seen as an opportunity for vendors to reward the team that has helped to deliver the business to its current position.

It also enables vendors to avoid having to divulge confidential information that may otherwise have to be made public through an open marketing exercise.

Management Buyout (MBO)

Although the term management buyout can sometimes conjure visions of a negative reactive state – like a hostile takeover, for example – the actual vision is for a company’s leadership to obtain greater control in the business, to possibly streamline processes, and increase profitability.

In an MBO, the management team will align to create a form of business alchemy that will result in them acquiring all or part of the company.

This achieves a very fundamental business goal – to essentially make that company private, in order to be able to exercise more control over its operations and direction.

Regent Evolution are your premier advisors on the very specific formula of a profitable management buyout.

Matters of financing still abound, though, with strategies and the realities of reward and responsibility, all part and parcel of a successful management buyout.

What is a Management Buyout?

Let’s break it down, though – what’s a management buyout, and how would it work?

As mentioned, a management team may come together to align on strategy and resources, in a grand effort to acquire a business.

This may often be spurred on by the news of a current owner’s intention to exit to retire, or their need to sell off sections of a company that are no longer contributing in profit to the overall enterprise.

With a management buyout, the acquiring team will use a combination of financing options – a management buyout often demands significant financial investments. These options may be specified using an amalgamation of debt and equity obtained from sources like the buyers themselves, outside financers, and even the seller of the business.

The advantages for the business are significant – often, new management brings in new processes, and areas of expertise that often do well to revitalise the organisation. And although teething issues can be a reality – adjusting from employee to owner and the responsibilities therein, being an example – the result is usually efficiency and profitability.

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How Does a Management Buyout Work?

The value here will be found in a new management team breathing life into a business, to ultimately make it worth a lot more.

So, from funding, to buyout, the acquiring team will make the transaction, and slip into operational duties. As mentioned, the immediate result is the business becoming a private entity. While in this state, new management will often use the time out of the public trading space, to fix inefficiencies and build positive productivity, once again.

It’s a prime example of the business alchemy that we promote – chemistry within an organisation, at top-level, that works to benefit its people, and maybe even restore its beating heart.

A management buyout is seen as a good investment opportunity for financiers. As a management buyout wraps up, and the incumbent team works on a company’s profitability while private, the vision is to become public again, with renewed vigour, and with a higher valuation at a later stage.

The most pressing drawback is in a new managerial team’s transition. There are significant benefits in ownership, but also hefty responsibilities. Some members may struggle with the role switch from employee to owner. 

Regent Evolution are your facilitators to a management buyout chemistry that will benefit both your new team, and the business you now own. We have the formula for a fair and robust approach when it comes to matters of negotiations, and the pivotal aspect and alchemical symbiosis of continued sound relationships with all parties. Not only that, but we can assist and oversee the raising of funding for a buyout, and we’ll continue to provide support as the transaction moves to each progressive phase.

Contact us today – ask us about our management buyout services.

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