Management Buy-Out
|METAL FABRICATION
|STAMPING
|MILLING
|LASER CUTTING
|TOOLING
|OEM
The first question most business owners ask us, “Is Management Buy-Out a viable option?”
Most owners are loyal to their employees and would like business legacy to continue to the next generation.
However, business owners assume that selling the business to key employees is a non-starter. They face concerns such as a lack of money or leadership skills to buy the company. Owners are not interested in taking the risk of an IOU note to fund their retirement
Some owners would like to resolve the issues by allowing management to demonstrate if they could finance the sale of the business, and if they have the risk tolerance to move forward.
The Process
The objective is to run a process to determine the viability of a management buyout. Next Point utilizes available financial information and interviews both sides to establish issues, options, and gaps and execution risk post transaction of ownership.
The Upside of a MBO
Despite the challenges noted above, there are many benefits of selling your business internally that should not be overlooked:
Smoother Transition
Insiders already know the business, and how to take care of your customers and vendors, which means less disruption and real continuity transferring ownership.
Achieve Personal Goals
You get to mentor the next generation. You may find great satisfaction mentoring younger people to learn skills that will make them effective business owners.
You get a chance to help them learn what you know works. You have a chance to make sure that what made your firm successful is still in place.
You’ll be able to influence behavior and you’ll have a higher likelihood of getting paid.
Tax Efficiency
Internal sales may be structured in a more tax-efficient manner that minimizes owner risk and keeps more of the proceeds in the seller’s pocket.
Business Continuity
As a responsible business owner, you care about what happens to your company after you’re out of the picture. Many owners are loyal to the employees that have helped build the company with your leadership. Maintaining the existing company culture and operating the company in a manner that is consistent with your values are more likely to carry on the seller’s legacy than the outside buyers would.
Maximize Value
Selling to management may be the best way to maximize the value of the business rather than selling to a third- party strategic buyer.
Management Group Successfully executed the Purchase of ABC Sheet Metal
Fabrication Shop
How did this work? – Who gave them the money to finance the deal?
Owner and Management owe it to themselves to determine the viability of a management buyout. You might be surprised at the funding sources looking to provide capital to OEMs and contract manufacturers in the CNC, metal stamping, and metal fabrication industries.
Next Point can help owners and management with a comprehensive evaluation on the viability of management buying out the owner in a transaction.