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BETTER BUSINESS

reality – that “the buyer is buying a vision of the future with projections
business at a price that is right for the that demonstrate the business will be
seller but leaving enough in it for the sustainable going forward,” says
buyer to turn a profit and sell it on”.
Good advisers and backers Philbrick.
It’s very easy for a management He says: “There needs to be clear
team, caught up with the process, to direction on how they wish to take
fail to have their own advisers in the business forward, including fore-
place; they can, as a result, not casts that show viability; variables
receive the advice they need to
ensure their stake in the buyer and have been considered and there is an
their future package and incentives element of flex to the plan.
are right for them. “Also, very importantly, a clear
It’s for this reason that Jackson, narrative that paints the picture
naturally, says that “engaging a spe- behind the numbers and tells a
cialist adviser early in the process will
enable a buying management team to story.” The MBO tem don’t necessar-
take advantage of any tax planning ily need to have every detail nailed
opportunities and can add value and down, however. Philbrick adds:
avoid potential pitfalls”. She contin- “Often, it’s not just about the num-
ues: “A good adviser should be able to bers, but also people’s goals for the
guide a management team through
the process whilst giving insight into future.”
the current market trends.” Lance Hill, managing director,
But while the buying team needs says that Eight Days a Week Print
people with experience and expertise Solutions (EDWPS) was the second
in MBOs to identify potential road- time he had been involved in an
blocks before they are hit, Jackson
also says that “they need people they acquisition, the first one being a
can work with, someone who they VIMBO (vendor-initiated manage-
can truly relate to and get along ment buyout) of the 4DM Group in
with... someone who can keep team 2007 “which was considerably more
spirits up to help alleviate the stress complex, and took a lot longer to get
of the deal”.
Lastly, there is the requirement to over the line”.
deals can go awry very quickly”. choose the right funder, particularly
As to how due diligence should be conducted, Jackson says that it requires where the MBO is private equity In summary
extensive investigations into all aspects of the business with the manage- backed and the funder wants to be An MBO involving a change of
ment team verifying its financial standing, the tax, legal, commercial, and involved in the ongoing business. ownership needs to be managed
insurance position as well as other specific areas of the business depending On this Jackson says that the man- externally as well as internally as it
on the nature of the firm. For Jackson this presents a number of challenges agement team will need to be satis- can bring uncertainty to employees,
fied with the track record of the
for the management team that includes “being able to focus on keeping the funder and how successful they’ve customers, suppliers and other stake-
business moving forward – it is very important they do not get distracted been in investing in other businesses holders which needs to be sensitively
and forget about the day to day running of the business and allow it to in the sector. She says that the invest- managed.
decline”. ment strategy of the funder for the
In terms of timescales, these will be driven “by the parties involved and business must be assessed and sug- Jackson believes that successful
their willingness to agree on a deal,” according to Paul Philbrick, managing gests asking a number of questions: MBOs not only complete due dili-
director of Close Brothers Asset Finance’s Print division. “Are they able to support the value gence and other associated pro-
“It’s important to assess and identify the steps required to complete and creation strategy of the business cesses, but they also in the closing
attributing realistic timescales to each. Then both parties can agree to a tar- through, say, acquisition targets or stages of a deal carefully think about
get completion date,” he adds. organic growth and expansion? Is the the communication strategy and its
funder’s investment team the ‘right
Avoiding conflicts of interest fit’ – have they got the right capabili- implementation. “Remember,” she
With every MBO comes the need to manage the unavoidable conflict of ties and experience? In other words, says, “there are legal obligations
being both a buyer and seller and the challenges that come with this. are they people the management regarding communications, espe-
And valuing the business is often where this comes to a head. Jackson team can work with?”
comments that “a buyer is going to want to make some money and perhaps, On the other side of the coin the cially with employees, and particu-
particularly where private equity is backing an MBO, ultimately sell the funder will want to see a comprehen- larly where there is a union involved,
business on”. This is why she says that there needs to be a perception – and sive business plan that offers “a clear and these must be followed.”

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