Management buy-out (MBO)

What does a management buy-out look like?

We often see entrepreneurs who consider their business as their 'baby.' It's not uncommon for business owners to want a successor they fully trust and who has a deep understanding of the business and the market. In such cases, you can consider a management buy-out (MBO) as a sale strategy. In this strategy, the current management team has the opportunity to acquire shares in the business. One significant advantage is that these employees already know the company, its processes and strategies inside out. This strategy is quite common, especially among smaller SMEs and family-owned businesses that find it increasingly challenging to find a successor within the family.

However, it's essential to consider the potential challenges that a management buy-out can bring. For example, financing requirements, risks for the management team and potential conflicts between buyers and sellers. A thorough due diligence process and professional guidance are crucial to ensure that all aspects of the management buy-out are handled carefully and successfully.

Financing a management buy-out

In a management buy-out, the buyers often don’t have sufficient personal funds so financing must be obtained through other means. They often pool their own capital and resources to finance the acquisition, for example, through loans from banks or investors. It's important to establish written agreements in such cases.