By Megan Gibson, Service Manager in Growth 365

A management buyout (MBO) is a form of acquisition where a company’s existing managers acquire a large part (or all) of the company from either the parent company or from the private owners. It can motivate management by allowing them to invest in the business, whilst providing a financial structure that can enable significant organic and acquisitive growth.

Last week we brought together a group including clients, Private Equity investors and experts from within Grant Thornton to deliver an exclusive client event exploring the topic “Preparing for a Management Buyout (MBO)”.

One of our speakers was Vasu Majumdar, a Director in the Grant Thornton Corporate Finance team, who explored the drivers of an MBO, preparing for a deal and managing the deal process. Here are his top five tips for a successful MBO:

1. Preparation: We all know the old saying “failing to prepare is preparing to fail”. Leaders need to ensure they have conducted a 360 degree review of their business, including business planning, competitor benchmarking and talent reviews.

2. Find your tribe: It’s imperative to have a strong, aligned management team who are invested in the success of the company.

3. Be hungry: The MBO process is not always plain sailing. Business leaders need to be ambitious and willing to work hard to grow their business.

4. Choose wisely: A great relationship with a trusted adviser makes all the difference.

5. Patience and persistence: The deal process may take several months. Management need to ensure momentum is maintained throughout in order to achieve the best outcome.

David Adams and James Peck from the Grant Thornton Tax team then explored financing an MBO, Entrepreneurs’ Relief, Enterprise Investment Scheme (EIS) and Enterprise Management Incentives (EMIs). Here are their top five tips for a successful MBO:

1. Entrepreneurs’ Relief: Structure from the get-go as dilution of shares during the MBO process may affect shareholders ability to claim this relief.

2. Different means have different rules: Understand the difference in tax treatment between cash, shares, loan notes and other methods of financing.

3. External financing: Be aware of the tax implications of external funding, what this can mean for both shareholders and the company.

4. Avoid common pitfalls: Develop a relationship with a trusted adviser who knows your particular market to drive maximum benefit.

5. Consider yourself: Plan for both individual shareholders’ and corporate tax matters post-MBO.


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