Management Buy Outs: Are they successful?
Graham Spooner, a very experienced and widely respected venture capitalist, lists his “Eight Ps” as the necessary ingredients to make a Management Buy Out successful:
1. Potential in the quality of the business – growth prospects.
2. Product and process – what you do and how you do it.
3. People – quality of the management team to deliver.
4. Personal commitment and personal chemistry to each other – the company and the venture capitalist.
5. Projected positive cash flow – from sustainable profits.
6. Defensible position in the market place – is it sustainable.
7. Policing – effective control and corporate governance.
8. Prospects for an exit – trade or private equity sale, secondary buy-out or buy-in, or flotation.
Source: Venture Capital and Private Equity – A Practitioner’s Manual
So how can I help?
By passing on your business to your management team (a Management Buy Out) you are still selling your business and the relationship between you and the managers will change after the transaction is completed.
It is not easy to change the relationship, but it is just like any other business transaction and so should be treated in the same way. An amount of objectivity needs to be addressed and an ability to create an atmosphere where both sides can work in the future. It’s here I can help in negotiations.
How do I do this?
In an Management Buy Out it is just as important to protect the integrity between the parties and avoid being backed into a corner by the other side; there needs to be an ability to argue the point without putting the parties’ principles in the firing-line and to avoid antagonism by souring the relationships between the parties.
The benefit of using a professional corporate fancier in a Management Buy Out in this way is that each party’s position can be protected. In my experience and particularly in the case of a Management Buy Out, it is unlikely the seller will receive all the value of their shareholding on sale and will have to leave monies in the business where it will be paid after a period of time has elapsed.
Each party is likely to need to work together at least until all the proceeds have been paid and for this reason using someone like me to conduct the negotiations can help establish the new relationship and protect the proceeds left in the business by the seller.
So if you are considering passing your business onto its management (A Management Buy Out) and would like to contact me, then please do so on 07860 898452 or by email firstname.lastname@example.org
I look forward to hearing from you
Assynt Corporate Finance Limited, Chartered Accountants, is a member of the Corporate Finance Network which means we can provide access to other accredited national and international firms. We can also access additional Corporate Finance resources, particularly in the areas of advertising businesses for sale discreetly and accessing those lists for our clients who want to acquire business.
The information contained in this briefing is based on information available as at the date posted and may be subject to amendment. It is written as a general guide and is not a substitute for professional advice. You are strongly recommended to obtain specific professional advice from us before you take any action. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this briefing can be accepted by Assynt Corporate Finance Limited or its employees.