Whether as a succession planning strategy or a way to preserve the culture and operations of a business, management buyouts (MBOs) carry significant implications for both new and existing business owners.
Under this type of transaction, where a company’s management team purchases the assets and operations of the business they manage, there is a unique opportunity for owners to sell their firm to a team they trust while ensuring the business continues under the leadership of people who are already familiar with the company’s operations.
However, if not done correctly, MBOs can create additional legal or financial difficulties for everyone involved. To avoid this, it’s crucial that you understand the steps involved and the associated legal considerations.
What happens during an MBO?
The steps of an MBO will look different for each transaction, but typically follow a similar structure that aims to preserve the rights and obligations of all parties, including:
It is best to take impartial advice at every stage of the transaction to ensure that all parties are acting fairly and within their legal obligations.
How does the law view MBOs?
Many management teams seeking to buy a business look at MBOs through a purely financial lens, but this is a potentially costly mistake.
There are a number of legal considerations that you’ll need to make if you plan to go through the MBO process, including:
Remember that an MBO can be beneficial, allowing for a smoother transition with less disruption to the business’ operations, culture and client relationships – but it also carries substantial responsibilities on the part of the buyers.
We can help you manage these risks and responsibilities to achieve the best outcome for all involved in an MBO.
Contact our team today to discuss your requirements.
