Take ownership of the business you already know
A management buyout can preserve the business, reward the team that helped build it and give an owner a clear route to exit. It also asks managers to become buyers, investors and future owners at the same time. We guide the transaction from early discussions through funding, due diligence, negotiation and completion.
Our corporate solicitors advise management teams and business owners across the South West from five offices in Devon.
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- Can you explain the new inheritance tax laws to me?
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- How many specialities does your team have?
- How long have you been practising in this field?
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Turn management knowledge into a workable transaction
Managers may understand the business better than any external buyer, but the deal still needs an objective assessment of value, risk and funding. Conflicts can arise between existing duties, future ownership and negotiations with the seller. We help establish a clear process, protect confidential discussions and structure the acquisition so the management team can operate the business after completion.
How we can
help you
We advise on heads of terms, acquisition vehicles, share and asset purchases, due diligence, warranties, disclosure, seller protections, management equity, shareholder arrangements, restrictive covenants and completion. We also coordinate with accountants, tax advisers, corporate finance advisers, banks and private equity investors where external funding or a more complex ownership structure is involved.
Why choose CWC Solicitors
Management buyouts require close project management because the buyers are usually still running the business while the deal is negotiated. Our team keeps the legal process focused, explains the consequences of each proposal and helps the parties concentrate on the points that affect funding, control and future value. We act for management teams, sellers and other transaction participants.
Frequently asked questions
Still unsure or need something explained in more detail? Contact us, and we’ll guide you through it.
1. When is a management buyout a realistic option?
An MBO may be viable where the management team has the experience and credibility to run the business, the seller supports the process and a workable valuation and funding package can be agreed. Early financial modelling is essential because the business must remain sustainable after acquisition costs and debt are taken into account.
2. Should the management team sign a confidentiality agreement?
Usually, yes. Discussions may involve sensitive information about the seller, the business, funding and individual managers’ intentions. A confidentiality agreement can control use and disclosure of that information, particularly where not every manager or employee is involved in the proposed transaction.
3. How are management buyouts funded?
Funding may come from management’s own investment, bank debt, private equity, other investors, seller finance, deferred consideration or a combination of sources. Each funder may require different security, governance rights and financial protections, so the funding package and acquisition documents must be developed together.
4. Does the management team need a new company to make the acquisition?
Often a new acquisition company is used, particularly where external funding or several managers are involved. It can provide a clear ownership and finance structure. The precise arrangement should be designed with legal, tax and financial advice because it affects control, liability and how value is distributed on a future exit.
5. What due diligence should managers carry out on a business they already run?
Management knowledge is valuable but may not cover historic liabilities, ownership issues or matters controlled by the seller. Due diligence should still address accounts, tax, contracts, employees, property, intellectual property, disputes, finance, insurance and regulatory compliance. Funders will also expect a disciplined review.
6. How are shares divided between members of the management team?
The split may reflect investment, seniority, expected contribution, negotiation and the requirements of external funders. The team should also agree voting, board representation, leaver treatment, future dilution and transfer restrictions. These arrangements are usually documented in a shareholder agreement and the company’s articles.
7. What protections will the seller usually be asked to give?
The buyer may seek warranties about the business and indemnities for identified risks. The seller will usually negotiate disclosure, financial caps, time limits and conduct provisions. Where consideration is deferred, both parties may also require protections around payment, security and how the business is operated after completion.
8. What happens if the MBO cannot be completed?
The heads of terms and confidentiality arrangements should address costs, exclusivity, information and conduct if the deal ends. Management must also consider how failed negotiations may affect its relationship with the seller and the wider workforce. Careful communication and clear boundaries from the outset can reduce disruption.
Related services
Mergers and acquisitions
An MBO is a business acquisition with additional management and funding considerations. We manage the purchase process, due diligence and transaction documents through to completion.
Private equity
External equity can make an MBO achievable. We advise on investor rights, management equity, leaver provisions, governance and the future exit framework.
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