Management Buy-Outs (MBO’s): A Great Option for Shareholders and Senior Management
In its 22+ year history, Quazar has enjoyed advising owners and managers in multiple sales/transfers from Shareholders to the Management Team. In looking back over the years, Management Buy-Outs (MBO’s) have been a very rewarding part of our practice for a variety of reasons. Here are some reasons to consider selling to your Management:
- Current Management is a logical fit for a succession plan.
- Banks and lenders like loaning to an already proven borrower; there is less risk.
- There’s no need to expose the “ins and outs” of your business to outsiders and competitors.
- Management will often pay “top dollar” and meet the personal needs of an Owner.
- Management knows the business well, they can move quickly, and in some cases they take a little more risk in the “Reps & Warrantees.”
When Owners come to us to discuss the sale of their business, we often ask them if they have considered selling to their Key Employees. The typical answer we get is, “no, because the employee(s) cannot afford to buy the company,” – our response is, “if they are a good fit, we can normally help find the money for them.”
In running the business going forward, having quality and competent Management in place is far more important than just having adequate capital – and if you can marry capital and Management together, you have a very good chance for long-term success.
We have several MBO success stories. Just to give you an example of how much money good Management can attract, in one of our past MBO transactions, the Management had put in less than 5% and the selling Shareholders received around $10 million.
As an Owner, you owe it to yourself to thoroughly explore the possibility of selling to insiders first. With the proper experienced advisor, you should be able to put together structure and pricing that will met your personal needs, receive the majority of the purchase price in cash at closing and be able to have a say in the transition process.
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