Realise The Power of Private Equity and Alternative Investment

BENEFITS OF AN INVESTMENT-BACKED MBO

A Management Buyout (MBO) can allow owners to dilute or fully exit by providing investment to support the current management team, in additional to strategic or operational guidance. If the shareholders are not involved in the day-to-day running of the business, where private equity and alternative investment funds can assist is by providing the funding for the management team to buy the shares from the existing shareholders. This can be a win-win from a succession planning perspective. The shareholders cash out and are removed from the equation, while the management team obtain a shareholding, funded by the PE firm, and then work alongside the PE firm to take the business to the next level. In return for the funding, the management team run the company. That can lead to some very lucrative benefits for the shareholders when the private equity fund decides the time has come to ‘flip’ their investment, generally within the usual timeframe of three to five years. For example, KBS Corporate oversaw the sale of a company to an MBO backed by private equity. The PE firm acquired 72.5% of the company, absorbed the shares of the original holding company, created a new company, and the management team received 27.5% of the new company, owned together in unison. Within 16 months, a much shorter period than the usual timescale, the private equity firm had sold the company on – for 11 times the original outlay. This would have presented the management team with a choice: they could have rolled over their 27.5% shareholding, which would now be worth a much greater amount due to the growth they had generated, or have cashed out all, or a portion, of their shareholding.

One of the primary benefits of partnering with a private equity investment firm is the access to capital, which can be used for various purposes, including expansion.

Private equity partners will work closely with management teams to identify areas for improvement and develop strategies to enhance overall performance. This focus on operational efficiencies and enhancement can play a significant part in contributing to the growth journey and future capital value.

CONTACT US TO FIND OUT MORE:

0161 258 0818

s.daniels@kbscorporate.com

kbscorporate.com

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