How long does it take to complete an MBO?

It typically takes between 3 to 9 months from the point when you appoint a corporate finance adviser to legal completion when you become the owners of the business. Occasionally it can take longer.

Why does it take so long?

The following stages of the buyout can each of take several weeks to complete:

• Initial discussions with the vendors exploring their willingness to sell and negotiating the price and structure for the transaction
• Preparing detailed and robust financial forecasts and a credible business plan
• Introducing the opportunity to suitable funders, holding meetings with funders, provision of further information, through to funders offering finance
• Financial due diligence for the funders
• Legal due diligence and the production of a raft of legal documentation

Is the first step to approach the shareholders to see if they will sell?

In our experience, getting a corporate financier’s advice prior to making any approach ensures that you understand what sort of deal will be possible to fund and complete.

How do we approach the shareholders?

This very depends on the management team’s relationship with the shareholders.

Getting the initial approach right is very important. In the event that the approach is unsuccessful or if negotiations break down, the MBO team will not wish to have damaged their relationships with the shareholders, their employer.

It is often helpful to “put yourself in their shoes” and think about how you would feel if you were one of the shareholders and received an approach from your management team. What would make you receptive to such an approach and would anything about the approach annoy you? Understanding any sensitivities will help you minimise the risks.

The goal is for the shareholders to regard the MBO approach as a welcome and credible option for selling the business.