MBO Funding

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

  • Equity
    Management Equity, Business Angels, Venture Capital and Mezzanine Finance
  • Debt
    Cash Flow Loan, Crowd Funding, Invoice Discounting, Asset Finance or Commercial Mortgage
  • Vendor Assisted
    Deferred Consideration or Earn Out

There is no “normal” blend of the above funding sources to comprise a deal, but by and large they will comprise equity, debt and vendor assisted funding in one form or another.  The precise quantities of each will be totally dependent upon the unique circumstances attributable to each deal.

During a Management Buy Out our role is pivotal, we work alongside you to in all aspects of the MBO process from start to finish, which will incorporate the following:

1. Initial negotiation of the consideration with the vendor (or their advisers).
It is important that we are engaged at this early stage on your behalf, as it establishes your serious intent and should negotiations fall down for any reason, you are distanced from these.  After all you still have to work there if the deal falls through.

2. Assisting you in the preparation of a comprehensive business plan,  incorporating financial projections to substantiate to potential lenders that this is a credible MBO, and can meet its funding obligations.

3. We then source the finance, often from more than one lender, in order to get the most suitable blend of finance for your MBO.  Every deal is different, therefore every blend is different.  Our funding packages are “tailor made” for your deal, we don’t simply rely on the high street funders.

4. We liaise with your solicitors, the vendor, their solicitors, your funders, their due diligence teams, etc.

We project manage the whole transaction to a successful conclusion, leaving you to concentrate on running the business.

Assisting other advisors

If you already have advisors working for you, we can be engaged to work with them to solely source offers fron non bank lenders

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 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 20 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 and deferred consideration.
  • 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.
  • This represents a significant return on £250k investment using MBO Funding

MBO Funding is a specialist area of finance sourced specifically for management buy outs or buy ins.

MBO Funding is sourced by Sterling Capital Reserve Ltd, a professional Corporate and Commercial Finance practice that has been sourcing funds for MBO’s and MBI’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.

At Sterling Capital Reserve Ltd, our corporate finance advisors have extensive experienced in accountancy, corporate finance and banking. In all transactions we work alongside our commercial finance brokerage, which enables us to access many different sources of finance to ensure that the most appropriate funders are approached.

It is a myth that Management Buy Out's have to be multi million pound businesses, before they can obtain affordable professional advice. At Sterling Capital Reserve Ltd most of the MBO's we conclude are in respect of family owned businesses in the £500k to £5million turnover sector.

Why choose us above a corporate finance department of an accountancy practice?

  • As we are an independent practice and not owned by any of the larger accountancy practices, we can undertake Management Buy Out's at "sensible fee" rates.  In most cases our fees are totally contingent upon completion of a successful transaction ensuring that we “buy in” to the deal with you.
  • Our MBO funding team, trained and qualified with large accountancy practices and provide a lead advisory role throughout the transaction, we don’t use unqualified trainees.
  • With access to many innovate debt finance providers through our Commercial Finance Brokerage, we are able to use more creative funding packages than the conventional high street bank can offer, thereby increasing your chances of funding the deal.

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