A management buy-out or MBO is the purchase of majority or at-least 50 percent equity by the present management team, backed by funding from a financial institution, possibly from a PE investor.
The management may sign an agreement to buy a line of business or a product-line as well instead of the entire business, which can be at a developmental stage as well. If you part of a senior management team looking to acquire equity either through management buy-in (MBI) or management buy-out (MBO), we provide you with tailor-made solutions. Our in-house experts as well as business associates help you realize your dreams all through the critical stages of ownership transfer without a hitch. If the deal is funded by PE investors, then they are generally offered a stake in the business. MBOs are perceived as low risk investments since the existing management continues to run the business. Also the firm is already established and the management knows the market they operate in very well.
Both MBI and MBo involve running the company by professional managers, who become owners after the deal is completed. Hence the challenges are two-fold, managing the investors and helping the business with its day-to-day operations.
The deal advisor not only needs to help with selecting the right financial backers, they should also have sufficient management bandwidth to support running of the business initially, if required. It is important to note that the parties involved in MBO/MBI transactions – Investors, Management and Sellers pursue separate goals.
We recognize this and try to manage expectations from an early stage and suggest realistic solutions.
Assessing the viability of the potential targets for MBIs and prepare appraisal report on risk-return trade-off. Support the management in developing a detailed business plan.
Conducting due-diligence and prepare a valuation report with sensitivity analyses
Reviewing offers received in detail for MBOs
Advising on optimal capital structure for completing the transaction
Helping in raising the appropriate debt and equity finance
Support management in negotiations with deal terms with the involved parties, including banks, endors and investor
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