Management teams who desire to own the businesses they oversee often come to the Business Exit Planning Advisors for our strategic help when they see an opportunity to buy the business from the selling owner or shareholders. For retiring owners, selling the company to key management is an attractive way to monetize the value of their business, preserve its legacy, and give back to the top level executives that have helped them grow their bottom line.
These are not simple transactions and may require meaningful amounts of capital, often more than what management may have saved from their salary over time. In addition, bank financing can become difficult due to the complexity of the transaction. The Business Exit Planning Advisors partners up with external private equity firms that can help facilitate a desired MBO.
Once the purchase price and terms are agreed upon, the sale takes roughly two to three months to close. Many key tasks include: due diligence, financing, and transaction documentation. The process begins with a third party advisor to assess the financial condition, market dynamics, competitive landscape, and legal condition of the company. Thereafter, lending sources can be arranged to acquire debt financing needed to facilitate the transaction.
A private equity sponsored management buyout is an ideal option for business owners who are retiring and would like to see their company's legacy continue. It allows the owner to immediately and fully diversify their wealth outside of the company and it sets the management team up for a successful transition and future growth in which they will participate as equity owners.