What are the typical costs associated with an MBO?
In an MBO, most fees are typically covered by Newco, the new company owned by the management team responsible for acquiring the Trading Company.
These fees are usually contingent upon the successful completion of the MBO, offering protection to the management team from incurring professional fees if the deal doesn’t proceed for any reason.
It is customary for each party to cover their fees, but there are situations where the vendor might underwrite a portion or the entirety of the management team’s expenses if the deal falls through.
The types of fees commonly encountered in an MBO include:
- Fees for management team advisers
- Solicitors’ fees
- Tax advisers’ fees
- Lender arrangement and legal fees
- Valuation fees
- Costs associated with external due diligence
The total costs of the deal will fluctuate based on factors such as the deal’s size, complexities, funding structure, and the extent of external due diligence required. Additionally, it’s important to consider that there is a 0.5% stamp duty payable on the acquisition of shares in addition to the mentioned fees.
We specialise in conducting MBO transactions wholly contingently. Please get in touch with us to understand the costs associated with your specific transaction; we would be delighted to help.