If you’re considering an exit from your business, whether it’s because you want to move onto a new challenge, or to finally retire, then you’ll have several different options available. Among the more interesting of these is a sale to your existing management staff, in a management buyout. This approach has several distinct advantages.
What is a Management Buyout?
As the name might suggest, a management buyout involves selling your business to those who already manage it. This is in stark contrast to the traditional of selling it on the open market, to a third-party buyer.
Let’s consider a few of the key advantages of a management buyout.
If you’re selling to people who already work for the company, then you’ll ensure that the transition isn’t quite as complicated as if an outside party had to come in and learn the ropes.Once the sale has gone through, moreover, the buyer will be strongly incentivised to grow the business and make it prosper.
By the same token, management buyouts tend to involve a much simpler process, as the buying party will already have an intimate knowledge of the business and its operations. That means less time devoted to explanations and guided tours in the weeks and months surrounding the actual sale. Due diligence is something that you barely need to worry about.
Since your management is already present at the company, there’s no need to go out and find them in the same way that you would a third-party buyer.
Owning a business tends to involve a very different set of skills to merely managing one. Consequently you might find that your existing management are not yet equipped to buy your business. However, with enough forward planning, this can be remedied – you simply need to know ahead of time that you’re going to pursue this option.
A sale can be a difficult thing, as it involves divulging the inner workings of your company to outside parties, who may not ultimately decide to proceed with a purchase. If your competitors were to come into possession of this knowledge, then you would find yourself at a disadvantage. While this sort of thing is still possible when you’re selling to your own management, it’s a great deal less likely – and where it does occur, it’s often a great deal easier to apportion blame.