Case Study: MBO and eventual sale

Background

The largest investor in the business wished to exit their position and various potential suitors had been approached to acquire the business. However, this failed at the last minute with the new suitor wishing to change the deal terms.

Challenge

The challenge here was to find a buyer in as short a period of time as possible as the change in terms resulted in the company entering administration due to lack of funds. The company had had a chequered trading history and a lack of long term contracts to support a high valuation. An alternative option was explored whereby the incumbent management entered the bidding to acquire the business.

Solutions

An MBO was achieved within a short timescale together with setting clear objectives from that team to sell the business on within a 3 year time frame. This involved creating forecasts of future trading and ensuring the business had sufficient funds to overcome the period immediately post sale. The team were faced with lack of credit being extended by suppliers, nervous from prior trading, and from customers who wanted reassurance that their service would continue uninterrupted.

The process involved creating a 100 plan post sale of objectives for the team and in identifying where future value would arise and trade buyers who might be approached for eventual sale. For the management team a shareholders agreement was put in place and clear objectives set on a personal level for each member of the team.

Benefits

The management team sold the business within 3 years of the MBO and were firmly focused on cash throughout the period. Despite losing some key contracts, all staff were successfully re-employed and shareholders all exited making a small gain on their initial investment.

Testimonial:

We completed a management buy out in late 2013. I was CEO and he was CFO. We sold a substantial part of the business in April 2017.

During that period we established a very effective working relationship. I had complete confidence in his ability to manage the financial position, both operationally and strategically. He used his experience and knowledge to provide a calm, measured voice of sanity to an often fraught management team. His particular skill is to see the bigger picture and ensure any decisions taken are consistent with the overall strategy. His demeanour is one of quiet confidence and I have never seen him flustered.

We continue to work together and I hope we can do so for years to come.

Graeme Derby- Director Media 5 Solutions Ltd

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