MBO Funding Benefits

Are you currently in a non share holder management role but have considered running your own business.

It is easier to continue an existing company rather than start a new business and a management buy out could be your ideal solution.

A bank or funder will support you financially for Management Buy Out for a number of years but once the finance is repaid you will have gained an equity value in your own business for a small investment.

With a small personal investment combined with MBO Finance you could stand to greatly increase your personal wealth and have job security. If your employer sold the company to an external party then the new owners could take the decision to bring in their own management team.

When commencing a Management Buy Out you must consider the effects of the working relationship with your employers and co workers. You will also be gaining access to sensitive company information.

You will also need to convince funders of your commitment, have a defined business plan for continuing the growth of the business and meet its debt repayments.

MBO Funding is sourced by Sterling Capital Reserve Ltd, a professional Corporate and Commercial Finance practice that has been sourcing funds for Management Buy Out’s and Management Buy in’s for over 12 years.  We work in partnership with our clients to provide a range of innovative and competitive funding packages for management buy outs.

MBO Process

There are many ways to put the funding together for a Management Buy Out (MBO), let’s look at the most common sources of finance:

  • Business valued at £2.5m at the transaction date.
  • Management are required to invest £250k
  • The remainder of the deal is funded by debt of £3.8m and deferred consideration of £1m.
  • As the value of the business increases under new ownership and the level of debt is repaid, the value owned by the management increases substantially.
  • After 5 years the business in the illustration is worth £7.5m, all the debt is repaid and 100% of the business is owned by the management.

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