There are plenty of advantages to a management buyout (MBO). For the outgoing owners, it offers the peace of mind that the transition should be smooth and that the company is being left in trusted hands. That safe handover is also good news for clients and customers, who can be reassured that there’s no need for the relationship to be impacted in any way.
And for the new management team, the benefits are obvious. They are now in a position to drive the business forward in their own image, shaping its future in a way they weren’t able to before.
But for all their plus points, management buyouts are certainly not straightforward and there are plenty of potential pitfalls along the way. Here are some of the common mistakes to avoid.
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Being unprepared
An MBO isn’t something that can be done on a whim. It takes a lot of careful planning, so make sure you’ve done your due diligence as part of the process. You need to think about how you’re going to fund the buyout – be it through asset finance, private equity or any other means – while you also need to consider the tax implications and the impact they might have.
Not asking for outside help
Completing an MBO can be a complex procedure, so it stands to reason that you might want to call on professional help to offer an expert guiding hand. As a third party not directly involved in the transition, they can offer objective advice on how best to proceed. They should be able to point out potential issues that you may not otherwise have spotted, before offering solutions to these challenges to ensure the process runs as smoothly as possible.
Being too hasty
It’s unlikely that you’ll be able to hurry through the process – and nor should you. An MBO may take around six months to be fully completed, so don’t expect things to happen overnight. That’s not to say you should drag your feet in terms of completing the requirements for your side of the deal, but don’t attempt to push things through too quickly as you may only succeed in upsetting others.
Failing to learn lessons
Once the MBO is complete and you’ve formed a new management team, try to avoid the mistakes that were made in the past. If things weren’t working well before you took over, what can you do to improve the situation? Don’t be tempted into making change for change’s sake, but chances are there’ll be some elements of the business you can tweak to ensure a successful future.
