An option sometimes open to senior executives within organisations is to consider a life outside the large corporate sphere, perhaps even starting their own business or, using their experience and contacts, to buy a share in a business they may know or understand. Others working within a business may wish to buy a management position or assemble a new management team, and these notes are provided to assist in making early stage assessments of such opportunities.


MBI
A "MBI" or 'management buy in' is where a company is sold to a new management team who take a majority stake. 

MBO
An "MBO" or 'management buy out' is where a business is purchased by its management often with the support of external funders.

 

M&A
M&A ostensibly stands for 'merger and acquisition'. True mergers, that is the one for one swapping of shares between two companies, are not common. More often than not one side is stronger than the other, so a majority of mergers can be said to be acquisitions.

Searching for targets
NSConsulting will search for targets for you and either assist you in making your own approach or make an approach for you. Please ask us to quote you for this activity. It is wise to recognise that it may take time to find a suitable target.

 

What makes a good target?
A good target will be a commercially viable business with an excellent track record of achievement in its sector.

Key essentials are a clear strategy for growth delivering a stable cashflow delivering regular income with good profitability, underpinned by strong financial controls and robust systems, delivered by a willing workforce and supportive management.

Management teams
A strong management team is absolutely essential to any MBI/MBO or M&A activity. So what is a 'strong management team'?

In our opinion it should at the very least include...

A chief executive with sector experience, good leadership and management skills, capable of, or used, to taking full P&L responsibility, and able to express a clear vision of the future while driving the business forward.

A finance director who knows and understands the business and the industry sector, who can install and maintain the required rigorous financial controls and essential reporting disciplines.

A sales director with a history of achieving growth who has extensive sector knowledge and experience; who knows the competition, can drive profitable sales, possessing an effective grasp of modern marketing and is a proven manager of sales teams.

An operations director who has a good knowledge of the technologies and processes involved and an accurate understanding of the cost base; used to upholding high standards of quality while seeking continually to improve methods and reduce costs.

A technologist expert in the technologies able to advise and, where required, participate or lead in new product development.


What's next?
We look at each case on its own merits, noting that this area of funding may, on occasions, involve elements of corporate recovery activity.

We will meet with you and your team and examine your proposals before offering you a formal 'Letter of Engagement'. Please refer to our page on "5 steps for business Funding" for an example of our funding methodology.

If you are planning your first MBI/MBO or M&A activity with a view to forming a small plc, and perhaps looking towards an IPO, please contact us at an early stage so that we can advise you accordingly.