The funding process of a management buyout is the crucial point moving forward with a successful transition. You may have the right team and relationship with the vendor, but if the funding is not in place, the whole deal is a no go.
Management teams can sometimes falter in a bid to buy a company as they are under the impression that they cannot afford, individually or collectively, to finance the deal themselves. This is a common misconception that can seriously hinder potentially successful management buyouts.
In the majority of management buyout cases, single members of the team are required to invest a sum of personal money in return for a stake in the business. This is to solidify their commitment to the cause and does not have to be a vast sum of money.
The bulk of the finance however, is provided through third party funding such as venture capitalists, banks or the vendors through deferred consideration. There are a number of conditions attached to each potential management buyout; from the ability to service repayments to the banks, supply an equity stake to private investors; to vendors deferring consideration and therefore giving a financial endorsement to the team in light of potential third party funding.
The team at Lindsays has all the knowledge and expertise of dealing with management buyouts and the associated complexities. If you are in the early stages of discussing a potential management buyout of the company you work for, and require further information please call us today and we can assist you with your project.