Management Buyout

A Management Buy Out (MBO) can present a significant opportunity for a management team and an appealing alternative to a trade sale for the vendor. The most difficult aspect is ‘opening up’ the opportunity. Management will recognise that a vendor approaching retirement will need to seek an exit at some point.

1. But who should make the initial approach to suggest an MBO?
2. When should this be made?
3. Is the response predictable?
4. Are there dangers in even raising the issue?

How we achieve success for our clients
Our Corporate Finance Team has significant and personal experience of Management Buy Outs and Buy Ins. We are able to recognise the key issues for ‘both sides’ and structure a deal without creating an adversarial situation.

Balanced approach
Providing an independent, unbiased andprofessional approach:

• Our initial taskis to meet with the management team and the Vendor and advise on the viability of an MBO.
• We undertake anindicative valuation of the business to ensure that the price expectations ofthe vendor and structure of the deal are realistic and that the deal is fundable.
• Whilst the management team must have ownership of the business plan, we apply our expertise to its preparation for presentation to potential funders. The plan must be comprehensive but concise, and setting out clear strategic objectives.
• We recognise the potential conflicts of interest to the vendor and the management team. Both still have a business to run.

Raising Finance

Pursuing opportunities for profitable growth often requires additional development and working capital. A management buy out or acquisition requires funding to buy the business and for working capital. It is important to ‘match’ the funding with each specific requirement.

How we achieve success for our clients
The need for finance requires the presentation of a clearly defined strategy to potential funders. We know what they require and we negotiate the funding structure on individual circumstances.

Comprehensive Support
We have extensive professional contacts inthe corporate finance community and excellent relationships with banks and equity providers. We are therefore able to take a measured and considered approach that benefits our clients in a number of ways:

• Funders know that we only present proposals to them which we believe are worthy of serious consideration and that we are therefore prepared to support.
• In order to ascertain an initial view, we sometimes present an outline scenario to funders when we believe it might be difficult to raise finance or in situations that present difficult issues to overcome. Funders appreciate this method of approach and it avoids unnecessary costs for our client.
• We highlight the business strengths and opportunities in the business plan. Importantly, we also acknowledge the weaknesses, and how they are being addressed and overcome.
• We manage the transaction throughout the fund raising process and co-ordinate all those involved.

Business Valuations

The valuation ofany business is not simply an accounting exercise. There are factors that increase and decrease the valuation of any business Many of these factors are commercial and market issues that are important to potential buyers and need to be recognised in most valuations.

The preparationof a business valuation is not an exact science.  A business can only be valued on the basis of what a conventional trade buyer would likely be willing to pay. This is an indicative valuation range.

How we achieve a professionally considered valuation
Our Corporate Finance Partner has many years experience of valuing businesses. He also acts as an expert witness for legal firms on the valuation of businesses in shareholder disputes.

An independent view
Whether we are preparing a valuation of a business prior to the sale process, or for shareholders in a dispute, our method of approach is to provide a truly independent valuation.

1. We look to identify the key features that differentiate the business from its competitors.
2. We indentify the most appropriate methodology to using a multiple of profits recognising any key issues, such asnon- recurring exceptional revenues or exceptional costs to determine‘maintainable profits.
3. We advise on the potential payment structure of any deal which can impact on the valuation range.
4. We normally present our valuation report in person to shareholders explaining the rationale, the key features and method of approach.

For further information please contact Bob Gore T: 0161 817 6100  E: bob.gore@mitchellcharlesworth.co.uk or Paul McGerty T: 0151 255 2300  E:paul.mcgerty@mitchellcharlesworth.co.uk