Management Buyout I Hilton Smythe

Management Buyout

Looking to pass on the reins to your management team? Hilton Smythe is here to act as your advisors and guide you through what can be a delicate process, ensuring fair and reasonable valuations and deal terms for both parties in the transaction.

Management buyout finance

What is involved in a MBO?

An MBO is financial transaction where the management team of a company acquires ownership of the business from its current owners. This can be done through various methods, such as:

  • Leveraged buyout (LBO): The management team uses borrowed funds to purchase the company, often with the assets of the company serving as collateral for the loan.
  • Equity buyout: The management team uses a combination of their own funds and investment from others to buy the company.
  • Vendor financing: The current owners agree to finance part of the purchase price, allowing the management team to pay off the debt over time.

MBOs confer numerous advantages compared to other kinds of business sale, including:

  • Business continuity: An MBO ensures that your customers, suppliers, and employees face minimal disruption, thereby minimising any equity loss associated with the transaction.
  • No need to disclose sensitive information to competitors: An MBO keeps all sensitive financial, supplier and IP information in-house.
  • Smooth ownership transfer: With an MBO, current owners gain a controlled and secure exit, knowing their legacy is entrusted to a qualified and experienced management team.

Book a consultation with Hilton Smythe

  • Over 35 years experience
  • Completely independent
  • Honest Advice
  • Tailor-made solutions

Is it crucial for every business owner considering an MBO to hire a business adviser?

An MBO can be a convoluted process. They typically involve: 

  • More fraught valuations: With both the buyer and seller within the same company, reaching a valuation could be trickier. Historical knowledge and insights held by either side can be used to influence the valuation, potentially leading to disputes.
  • More complex financial requirements: MBOs often rely on a mix of funding sources, including management’s own cash resources, debt, external equity, vendor rollover/vendor financing. Securing the right funding with realistic repayment terms is crucial for a smooth and successful transition.

A business advisers and corporate finance brokers like Hilton Smythe can:

  • Help negotiate fair and reasonable deal terms: Our experienced team can advise on valuation, deal structure, as well as optimal liability caps and transfer arrangements.
  • Help build a robust business plan that withstands funder scrutiny: We can assist in the arrangement of third-party finance via our corporate finance arm, helping to build a robust business plan that resonates with funders.

Other types of Selling Services
  • Employee Ownership Trusts

    Looking for a tax-efficient business exit strategy that also empowers your employees? Looking to pass on the reins to your management team? Hilton Smythe are here to act as your advisors and guide you through what can be a delicate process.

  • Sales Advisory

    Ready to leave your business venture? Our director-led approach to sales advisory, helps maximise and protects shareholder value by managing the entire transaction lifecycle – from exit planning, valuation and sell-side due diligence through to marketing, buyer research, deal structuring and negotiation.

  • Business Exit Strategy

    Thinking about a business exit? Hilton Smythe’s exit planning service helps you assess your exit readiness, build your company’s competitive strengths and design an exit strategy that will maximise your sale multiples.