MBO – Management Buyout

Management Buyout – Buying the Company You Work For / Selling to Your Employees

A management buyout (MBO), that is, buying the company you work for, is entirely possible when existing shareholders decide to put the company up for sale.

This option is all too often overlooked by company owners who may not realize that a) their employees probably know very well how to run the company, and b) as a group, they may actually have sufficient financial wherewithal to buy the company.  Such a transaction can be triggered either by the employees themselves, or by the company’s shareholders who decide to first explore the option prior to a sale to a 3rd party. 

Selling your company to your employees can be a particularly attractive option if:

  • You have a strong attachment to the company you or your predecessors founded, especially if it carries your family name,
  • You have a strong attachment to your employees and the community,
  • You do not want to sell to your competitors (and you want to keep your trade secrets away from them),
  • You are looking to a more rapid transaction as due diligence can be greatly reduced,
  • You may not be interested in selling all 100% at once but are willing to relinquish control over a period of time,
  • You may be willing to help finance your employees via a balance of sale, or
  • It avoids liquidating your company.

Lenders can also be very supportive of MBOs as employee-owned businesses present certain reduced risks especially if management has an already proven track record.

In a buyout scenario, Cafa can help as follows:

  • Formulate the buyout strategy;
  • Assess the value of the business;
  • Prepare a financial model to illustrate realistic capital structures;
  • Formalize the option to purchase or the letter of intent;
  • Prepare a memorandum on the transaction;
  • Negotiate the financing;
  • Introduce legal, tax, environmental experts suiting your needs and objectives.

Please see our publicationstools and FAQ as well as our related MBO transactions. Employees may also wish to refer to these general publications related to buying companies, while business owners may wish to read these publications on selling a company.

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