Navigating succession planning: understanding MBOs, MBI, and BIMBOs.
MBOs and BIMBOs have become an increasingly used succession/exit planning strategy for business owners who are either looking to retire, semi-retire or completely move out of the industry they are in.
They are popular because the business is passed into the control of an already established and trusted management team.
What are they?
- MBO – the current management team agree to a deal to purchase the business from the owner.
- MBI – a management team come together to look for a business to buy and run.
- BIMBO – a combination of MBO and MBI where the incumbent management team hires additional member(s) into the team in order to complete the deal. This typically happens when in an MBO situation the existing management team realises they are light in say finance or business development and they identify someone with the skills required to complete the deal.
MBOs offer several advantages, such as a quicker sale process, retention of key personnel post-sale, and a reduced risk of the sale falling through. However, it’s important to note that a trade sale often fetches a higher price, albeit with fewer guarantees for the workforce, impacting the departing owner’s legacy.
Typically, an MBO involves forming a new company or acquiring existing shares, although alternative methods exist. Based on our experience, this is the most common approach.
The MBO team invests their own capital and secures additional funding from sources like asset-based lenders, private equity, venture capital, and angel finance.
How can we help?
- Conduct a feasibility study for the management team, including developing the business plan, projections, key sensitivities and how these may impact the business.
- Conducting business valuations, due diligence and tax diligence (both corporate and personal for each director).
- Negotiating with the business owner(s), lenders/funders and other advisers involved in the deal.
- Assisting you with the legal documentation, and agreements.
- Post-deal support – completion accounts, deferred considerations and corporate & directors’ tax planning.
- Tax: transactions & asset purchases