If you are a business owner considering your plans for exit, or part of a management team looking for the step into company ownership, you may have a number of options available to you.
In this series of articles we take a look at some of the key deal structures you may come across – what they are, how they differ, and some of the advantages and risks associated with each.
So, are you looking at an MBI?
What is an MBI?
Unlike the MBO where the existing team acquire the business, a management buy-in (MBI) is a transaction in which an external management team acquires a significant stake or ownership. The team usually invest their own capital, securing additional finance from external sources to fund the acquisition.
Advantages of an MBI include:
- Fresh Perspective –external managers bring a different perspective, new ideas and skills to the business, potentially leading to innovation and improved efficiencies. The new team may bring a fresh strategic vision, helping the company adapt to changing market conditions and stay competitive.
- Objective View – without the pre-existing relationships and history with the company, a new team can be more objective in their decision-making.
- Expertise – the team may have specific industry expertise or skills that can benefit the company, especially if they come from a background with successful track records in similar businesses.
- Access to Capital – MBIs often involve external financing, injecting new capital for growth, expansion, or restructuring.
Other considerations:
- Integration – if not well managed, integrating a new management team with an existing organisational structure and company culture can be challenging. As with any change in ownership, the arrival of a new team may create uncertainty and impact employee morale, particularly if significant changes are planned.
- Delivering the plan – a new team may take time to become familiar with the intricacies of company operations, its employees and customers. The success of the MBI relies on the effective execution of the new management team’s business plan, any failures in execution could impact on delivering the plan, potentially resulting in poor performance.
- Financing Risks – securing external financing may pose risks if the new management team fails to meet performance expectations or if the business encounters difficulties.
As with any business transaction, the success of a management buy-in depends on careful planning, effective communication, and the ability of the new management team to navigate potential challenges. For many companies bringing in a new management team can bring a fresh perspective and a welcome injection of new ideas and energy to take the business forward.
Did you miss our last article on MBOs? Just click here to read it.
Are you thinking of selling your business?
Are you considering selling your business? Do you have any questions about what you may need to consider? One of our experienced sales negotiators are always here to chat through any important points you may want to discuss.
Are you looking to buy a business?
Are you looking to purchase a business? The ACF sales team are here to work with you. Perhaps you are considering entering a new market or expanding your presence within an existing one? Whatever stage you’re at ACF have a wealth of opportunities that may be of interest to you.
Want to know what else we have done recently? Click here to check out our LinkedIn profile!
