Alan Pink looks at typical structure for a management buy-out and some issues that can arise.
A management buy-out (MBO) can often be the ideal way for a business owner to realise the value that they have built up in his company over the years. The fact of the matter is that it is often the senior management, rather than an outside purchaser, who are best placed to take over the reins when the main men/women decides to retire, or give up their interest in the business for other reasons.
This article assumes that the business is run in limited company form, because this is how the majority of such businesses are set up in practice, and also the set up that can give rise to the most problems.
The structure of the MBO
Assuming that the decision has been made to sell the company to its current non-shareholding senior management, the question of how the MBO should be