The process by which the management team of a company combine their resources to purchase the company they are working for.
A management group or managers from outside the organisation buy the company. Often this is management who have valuable industry experience, if not detailed current knowledge of the business.
Buy-In Management Buyout
Where both internal and external management combines and pool their experience and resources to buy the business.
Types of buyouts
It is common for a private equity investor to be involved by supporting the management team with the necessary financial resources to purchase the business and fund its future development. In even more complex cases, the investor and the team may also rely on debt financing to fund the acquisition.
In the case of either an MBO or an MBI, sellers can support the buyers by deferring payment of some of the purchase price, agreeing to sell their shareholding in stages or by providing a package of funding arrangements to support the management team. Such subsequent payments to be made by the company are often subject to security arrangements including personal guarantees, a debenture registered against the company and charges at the Land Registry in respect of any property owned by the company.
We have also encountered situations where the company itself has sufficient cash reserves to provide the funds for the purchase of the entire issued share capital from the sellers.
How can we help?
We have knowledge and experience in both common and uncommon MBOs, MBIs and BIMBOs scenarios and offer a flexible fee structure to meet your budget. We can also call on our network of experienced solicitors if a deal requires specialist knowledge such as tax, data protection and employment.
The main parts of MBO transactions we assist with are as follows:
- drafting the heads of agreement (otherwise referred to as “heads of terms”, “letter of intent”, or “memorandum of understanding”) which contain the main basic terms of the agreement;
- the due diligence process by which all the business, legal and accounting aspects of the target are investigated through questionnaires;
- the purchase agreement which will contain details of the payment, exchange and completion structures, any terms which are specific to the transaction, warranties, indemnities and restrictive covenants;
- advising on any loan and security documentation required;
- documents ancillary to the transaction such as stock transfer forms, director resignation letters (if required), shareholder resolutions (if required) and board minutes and anything else required;
- managing exchange and completion, i.e. the process required to be undertaken in order for the transaction to be complete which is commonly outlined in the purchase agreement; and
- carrying out post-completion steps – these are normally deal specific but commonly include the payment of stamp duty, making certain filings in Companies House and updating internal company registers.
Having the right professional team, who are experienced in this area and have the right approach, in place throughout the purchase process will ensure that your best interests are represented and that the deal can proceed smoothly so that there is the strongest possible chance of completion happening and the company being successfully taken over by the management team.
We have experience in advising sellers, external and internal management teams and private equity investors in both simple and complex MBOs, MBIs and BIMBOs.