Management Buy-out/Buy-in
A management buy-out (MBO) is a form of acquisition where a company's existing managers acquire a large part or all of the company.
A management buy-in (MBI) occurs when a manager or management team from outside the company acquires a large part or all of the company and assumes the management role.
The motivations for both are similar: maximising the financial benefit – often when the transaction requires outside financing.
Miles not only specialises in advising on MBOs and MBIs, we can help raise the capital for a successful transaction and manage the entire process. Key components of Miles' offering include:
- Review target business – identify and mitigate key risks
- Design the transaction structure for management and investors
- Prepare an information memorandum (IM) to solicit interest from debt and equity providers
- Conduct negotiations with current owners
- Project manage completion steps and settlement
Case Study
Miles was approached by management to advise in the potential buyout of a chain of retail outlets.
Miles' mandate included:
- Review of business and assessment of risk and value
- Negotiation of key commercial terms
- Raising of debt finance
Vital statistics of target:
- Annual turnover of $30M
- EBIT of $3M
- Price of $11M
- 14 stores in total with well over 100,000 individual transactions per annum
Key transaction challenges:
- Management team had little available cash, debt finance would be highly leveraged
- The relationships between the management team and incumbent owners was strained due to the stress of the impending deal
Outcome:
- The detailed credit application prepared by Miles was successful in securing the purchase price plus transaction costs
- Miles successfully negotiated a deal structure that provided significant additional value to the management team
- The introduction of Miles as the intermediary improved relations between the incumbent owners and the management team – this facilitated a seamless handover