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How To Move From Being A Manager To Being A Business Owner

September 17, 2019 Corporate Finance Advisor

It’s a common thought for most management teams, after all, they know the business better than most. There’s a lot of work leading up to the transaction and an effective management buyout (MBO) takes months of planning, negotiation, and fundraising.

What is a typical MBO journey?

1. Before you get attached to the idea of a MBO, you need to be asking yourself:

  • How much do you want this? Buying a company typically means committing at least a year’s gross salary. How can the company grow, what would you gain, and would you enjoy business ownership?
  • When should you do it? Your career or personal life might not be in the right place. You also need to anticipate the owner’s motivations and the current climate for corporate deals.
  • Who would be involved? It is possible to undertake a MBO by yourself, but most are completed by management teams. Who would want to join you and what value would they add?

2. You will need a business plan to secure finance for an MBO, with a robust set of financial forecasts. You will be glad of a good business plan once the buyout completes as you will have less time for strategising, and plenty of targets to meet.

3. Few things are as awkward as negotiating with the current business owner. Your corporate finance advisor will keep discussions running smoothly. They can push back and deliver bad news for you, so things don’t get too difficult between you, plus, an adviser will help structure the deal. This includes setting out:

  • When ownership will be transferred
  • How the buyout team will pay
  • The responsibilities of the buyout team and seller after the deal is completed.

4. Leave plenty of time to raise finance for a MBO. You need to find a good deal rather than going with the first person to wave a offer of finance around. Whether it’s a venture capital firm or a debt provider, you need to remember they will be a long-term partner.

5. There are likely to be parts of the company unfamiliar to you, so it’s crucial to get due diligence completed by a professional. This can be a comfort to you and your financiers, as it will raise any potential issues before you complete the deal.

With a solid agreement and funding in place you will be able to close the deal, and then it’s time to knuckle down and run your own business.

Finding the right corporate finance advisor

Our award-winning Corporate Finance team are here to guide and advise you on the prospects of an MBO, from both the buyer or seller’s perspective. Our team have recently completed MBO’s for the likes of ParkVia (formerly ParkCloud).

Contact our team today on 0161 832 6221 or email info@kjgllp.com to arrange a meeting.