Case Studies

Assisting a management buy out

Twenty years ago, in another life, Client Finance Director Clive Eplett helped a friend with a management buy-in, creating the essential financial models, helping with the legals to completion and attending early-stage board meetings.

Last year, Clive received a call “I’m looking to sell on the business to the management team and wondered if you’d like to help?” Of course.

First step was to determine a sensible valuation. We created a financial model to determine an achievable deal price (notably higher than our client had originally envisaged) that the Management Buy-Out team would be able to pay. We also discussed with the client the ‘friends-and-family’ discount he was offering, compared to what could be achieved with a trade sale. Clive’s next step was to draft and obtain agreement to a comprehensive Heads of Terms (HoT) that outlined all aspects of the transaction.

Happily, the deal is now done – the whole process progressing smoothly and amicably. Having that HoT in place made the often tortuous process of agreeing the legal documentation relatively painless, avoided last minute glitches and kept costs under control.

The challenge for the MBO team now is to continue the business’s success. Signing the legals often feels like the end whereas it is actually, of course, just the beginning.