Previous month:
March 2006
Next month:
May 2006

Succession by Management Buyout

Securing succession is a big issue for all business owners.  One could sell to a trade buyer, but a Succession Buyout (I suppose this is an SBO but I feel there are too many three letter acronyms in this business already) is an increasingly viable and popular alternative.  This involves selling to the rest of the management team.  Here's five reasons why you should consider one.

  1. You'd like your successful independent business to continue beyond your retirement.  This is most likely if you sell to your team.  A trade sale might lead to big changes in the company.
  2. Tax efficiency; the deal can be structured to mitigate your tax liabilities, and can be tax beneficial to the MBO team.
  3. Rewarding management.   You've worked with them for ages and you want to give them their chance.
  4. Customisation: as a “friendly” deal it can be tailored closely to your personal objectives.  You could for example withdraw from the business in stages both financially and operationally.   
  5. Funding, finance for SBOs (oops sorry used the acronym) is available from banks and equity providers.  Vendor finance often forms a significant part of the funding if the vendor is to retain some involvement in the business for a period.

Is your business suitable for a Succession Buyout?  Provided it is profitable, and you can reach a suitable valuation, the answer is probably yes.    As you will see from my last post we have just completed a succession buyout, and we have two more in the pipeline.

Three in three weeks

I haven't posted for a wee while; usually this is down to lack of inspiration but on this occasion I have been gainfully employed.    We've just completed three transactions in just under three weeks.  Of course this is not the normal running rate; so I have to boast about it while I can!

On 31 March - this being our year end a degree of brinksman ship involved here - we completed the disposal of a c£18M turnover manufacturing business following an auction process, and on the same day the acquisition by a local design house of one of its main suppliers.  Last week we completed a succession / management buyout of a c£20M turnover nationwide equipment hire business.   I could acquire a taste for champagne at this rate. 

Thanks to the other professional parties involved in these deals; Tom Pickthorn and Jonathan Burton at Mills & Reeve, Clive Smith and Edward O Rourke at Kester Cunningham John, Simon Walker and Sian Griffiths at Taylor Wessing, and Mark Gearing at Hewistons on the legals.  On banking  Val Dring and Paul Marks of Royal Bank of Scotland, and Dan Harrison at Lloyds Bank.

It is nice to have acheived a mix of M&A with a company sale and an acquisition and a management buyout.  I hope to be able to tell more of the story once PR is cleared with various parties.