Management Buy Ins (MBIs)

A management buy-in (MBI) provides the opportunity to an external candidate or management team with significant experience in senior positions in their industry to acquire a business. We often see MBI candidates as individuals who’ve sold their business but aren’t quite ready to retire or people in senior positions with no opportunity to acquire the business that they currently work for.

An MBI gives the opportunity for significant capital returns and real ownership stakes in a business for an investment level of around one to two years’ salary. The majority of funding is provided by a blend of external debt and equity providers.

Following a successful transaction (when the timing is right) you’ll have the satisfaction of being able to pass on a business that you’ve grown and nurtured — allowing you to enjoy your success while the business continues on.

MBI candidates must be able to deliver growth and lead by example, with demonstrable experience and interpersonal skills that enable you to inspire others. You should be self-motivated, tenacious and have a strong track record. All MBIs have their quirks and you’ll need strength of character to proactively deal with the ups, downs and issues as they arise.

As funders are backing management, you need a compelling story for why you’re the person to drive the target business into its next phase of growth. MBIs are more likely to succeed if you stick to the sector you know. Depth of experience is key. You should be able to show that you’ve had previous profit and loss responsibility. Funders will back someone who has ‘done it before’. A few scars from previous experiences will help to prove your ability to fix issues and move on.

You must also be prepared to back yourself, as you’ll be putting real cash into the business to demonstrate your commitment. You should have excellent market knowledge and the ability to spot and capitalise on opportunities and new ideas.

It takes time to effect an MBI. This will usually be between 12 and 18 months, as we need to find the right target and then raise the finance. We’re generally approaching off-market deals, where the seller hasn’t yet ‘pushed the button’ to sell.

MBI candidates must have strength of character to manage the ebbs and flows. There’ll be more knock-backs as parties aren’t always ready to sell, so patience is key. Most MBI candidates maintain a consultancy role in their market to keep their knowledge up to date while retaining the flexibility to transact once the target is found.

An MBI is a chance to acquire a business and lead a team to an eventual successful exit — creating significant personal wealth.

We’ll work with the candidate to first establish that they have the skills to embark on this process — be aware that this isn’t for the faint-hearted. We’ll then establish the search criteria for the target to be acquired. Once we’ve agreed the targets, we’ll approach on a confidential basis to establish appetite.

Once a target is found, the process is similar to an MBO in that we’ll work with you to establish and negotiate the price for the targets and assess whether we can raise the finance to fund such a transaction. We’ll approach funders on your behalf to support the deal.

Ahead of embarking on an MBI process, the candidate must self-reflect and be honest as to the reasons to undertake it. This isn’t an approach to find a job — it’s an approach to lead a team and company and attract funders to deliver the strategy. The candidate will need significant expertise to demonstrate that they’re ‘backable’ with funders — and we can guide candidates through this.

MBIs are funded in the same way as MBOs — from a combination of management, debt, private equity and seller roll. The ‘cocktail’ of funding is dependent on the target and its cash requirements for the acquisition and growth with management’s plans overlaid.

We’ll introduce you to the funders that match your requirements and guide you through the pros and cons of each funding option.

An MBI will require a full management team. This is usually effected through a combination of external and internal management. The deal is then referred to as a ‘Buy-in Management Buyout’ (BIMBO). This combination of an internal and fresh approach from external management can be a powerful combination. 

An MBI is a complex process and the highest risk for deal advisors, so most of them shy away from such deals. Our Deal Advisory team has built up a reputation for successfully transacting MBI deals. By taking advice from experts like us at the outset, your deal with have the best chance of success. We'll work to ensure that the deal is right for you — and provide the structure and guidance that management teams need.