Management buyout

EOT
Management buyout
EMI Share Scheme
Acquisition

EOT
Management buyout
EMI Share Scheme
Acquisition

A management buy out is smooth way to pass ownership of your business over to the existing management team. Commonly a MBO is a clean exit for the business owner wishing to retire or move on to other ventures. Without the need to find a buyer it can also take less time to complete.

Whether you are the owners looking to sell or the management looking to buy, Areos will support you through the process to achieve the best possible sale price.

So what is a management buyout?

Suitable for any industry, a management buy-out (MBO) really does do what it says. The existing management team, usually with the help of external financing, takes full control and ownership of the business.

Typically, an MBO will take up to six months to complete. It can be a complex activity, requiring the input of lawyers, analysts, and accountants, as well as the support of funders, lenders, and possibly equity investors.

Financing a management buyout is often the most difficult step in the purchase process. There are multiple ways to fund an MBO and cash, debt, and/or equity investment may all play their part.

What are the benefits of a management buyout?

MBO’s are flexible enough to support almost any change of ownership for every type of company.

The main benefit of a management buy-out is that it is commonly a smooth process. Both sides know the business and each other. Once the financing is in place there is rarely any unforseen problems.

Another key positive is that the need to find a buyer is removed. Not only can this speed the business exit up, but sensitive business information does not need to be shared with competitors who express an interest in buying the business.

At the point of selling via an MBO it is essential to establish the correct ownership structure. This is to ensure that the departing owner benefits from all available tax reliefs and benefits. At the current time in the UK this includes Business Asset Disposal Relief (formerly Entrepreneurs Relief) which could represent a potential saving of up to £1million.

Talk to Areos about help with a management buyout

If you are thinking about a management buyout then Areos are ready and willing to help you through the process. Please give us a call on 01622 758257 or message us below.

FAQ’s about a management buyout

Is A Management Buyout Complicated to Implement?

A management buy-out is no more complicated than any other sale. In fact it is often more simple as the new ownership team knows the business. This makes the transition smooth and requires less commitment from the departing owner after the sale.

What Are The Tax Benefits Of A Management Buyout?

Depending on the proposed MBO structure and funding, there can be various different tax consequences that both vendor and the purchasing management team will need to understand and address before the sale.

Areos will take you through all these implications to minimise your tax liability in a legally compliant way.

For owners with more than 5% of a company’s shares, the Business Asset Disposal Relief scheme lets them apply a reduced rate of 10% capital gains tax (CGT) on the profits they make when they sell qualifying assets (such as their company shares) up to £1 million. This is half the current CGT rate of 20% once an individual reaches the higher tax band, representing a potential saving of up to £1 million.

What Will A Management Buyout Cost Me?

In terms of working with Areos the process of managing and suporting you through a Management Buy-Out we charge a nominal project fee plus a 2% commission on the final sale price. This is a totally transparent commitment on the part of Areos to find the best price for your business.

What Are The Downsides Of A Management Buyout?

For the seller a managment buy-out carries few downsides.

The exception to this is sometimes found in the buy-out teams ability to raise the finance for the purchase. If a company has been underperforiming then funders may deam the management team partly respnosible for this.

In line with this consideration is the companies future performance and the structure of your sale price payout. If you are not confident of the management teams ability to run the company succesfully then a staggered payment over many years will not be desirable.

What Are The First Steps Of A Management Buyout?

The first steps of a management buy-out are commonly either the owner approaching the management team about a potential sale, or the management team approaching the owner about a possible purchase.

In both instances it is sensible to have some level of proposal ready so that either party is not left shocked and uncertain about each others commitment.

Areos have many years of experience in kicking off such conversations and are ready to guide you through these important initial steps.

Let’s get started

If you are considering selling a business why not get in touch as we would love to hear more and explain how we can help you on your journey.

Call us on 01622 758257