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Management buyouts: a trending option during Covid-19

There are many prospective buyers, both trade and financial acquirers, looking for a bargain, particularly in relation to companies whose performance has suffered as a result of Covid-19. Selling to an opportunistic buyer might well mean losing a great deal of the value built up in a business and seeing years of effort dissipated.

Are there any other options?

If there is a management team in place which the owner(s) feel could take the reins and have the desire to own the business there may well be.

A management buyout (MBO) is a method of transferring ownership to an incumbent management team and allowing the current owner/directors to exit. Essentially, the management team typically form a new company which acquires the company in question and then carry on running the business.

Clearly, this normally needs outside finance to accomplish, and raising finance may in some instances be more difficult than it was pre Covid, however there are several ways of structuring such transactions without paying the agreed purchase price in cash at completion of the transaction.

In terms of the value the owners obtain, no one is better placed to understand the value of the business and its prospects than the people running it. Whilst a team performing an MBO will obviously hope to acquire the business on the best possible terms, they and the owners will both know where true value lies despite any short term challenges created by Covid.

Our corporate finance and taxation teams are experienced in advising the owners of such  companies and management teams on MBO’s. Please contact me or your usual UHY adviser should you wish to discuss this further or get in touch via our contact form.