Business Transitions – Management Buyout

Business Transitions – Management Buyout (MBO)

Another means of exiting from a business is to pass on the leadership and ownership by selling the business to the current management team or employee group.

For the Seller – Keep Top of Mind

It is a way to ensure continuity of the business with the team that they put in place. Furthermore, the management group are starting with a great deal of inside information regarding the strengths and weaknesses of the business, negating much of the sales “pitch”.

The challenge with this scenario is that it’s difficult for the seller and buyer to stay at arm’s length. Have you ever tried negotiating against your boss? Other challenges may be the management/employee group’s capability to lead without the owner (how much does the success of the company depend upon the departing owner?), their financial strength to put the deal together without incurring debt, personal guarantees or asking for some form of concession from the seller such as a vendor deferred payout schedule.

The challenge with this scenario is that it’s difficult for the seller and buyer to stay at arm’s length.

  1. Establish a transition timeline and transition parameters (i.e. seller’s involvement in the business post deal).
  2. Determine valuation of the business.
  3. Flush out the financial strength of the buyers and what support they’ll need to get the deal done.
  4. Keep the negotiations on an arms-length basis by engaging a professional advisor who specializes in business transitions and mediation.

If you have any questions or would like to have a discussion of where you and your company are in terms of readiness for a business transition, please contact us. Details are below.

WelchGroup Consulting helps entrepreneurs to build better businesses. We are a full-service management consulting firm that delivers outstanding results and value. We help our clients to achieve their objectives quickly and economically, delivering practical consulting services. We work with clients to help them build organizations of higher value as well as providing mergers and acquisitions (M&A) advisory services.

Candace Enman ProfileCandace Enman, CA, CPA is the President of WelchGroup Consulting and has more than 15 years of financial and management experience. She has played key roles in all aspects of growing a business in both the private and not-for-profit sectors. Candace believes that successful businesses do more than keep score, they build value from the ground up, and she brings that philosophy to all of her engagements. Candace Enman| President | W: 613-236-9191 | CENMAN@W-GROUP.COM

Stephan May ProfileStephan May, MBA is the Managing Director of WelchGroup Consulting. He brings years of experience in M&A, debt capital, private equity, advisory and restructuring services. Stephan works with companies to maximize their value and ensure a smooth transition process, whether through buying or selling your company, financing or restructuring. Stephan May | Managing Director | W: 613-236-9191 | C: 613-724-9787 SMAY@W-GROUP.