Become a Finance Ace Business Strategies and Financial Tips for Everyone

Consider only the important aspects of a loan

VCs will look for the same aspects in a business that is being considered for an MBI as they will in an MBO. The only difference is that where the CEO or management is not deemed to be worthy of their support they will need to bring in someone (usually at CEO level) whom they are prepared to support and whom they are confident will achieve the business targets that have been set.

Management/Employees acquiring 100% of the equity

It is difficult to generalise about what type of business the management and employees will be looking for in this type of buy-out, as the motivation for launching buy-outs will vary widely. However, it is safe to assume that management will be looking for all or most of the following before they will go ahead with the transaction:

Business must have sufficient growth potential for management to believe that buying it is a better option than being employed elsewhere.

The business owner must set a reasonable sale price and, where necessary, be prepared to offer terms of purchase.

The business must be able to support the purchase borrowings.

The management team must believe they can improve the business because of their expertise. Most management teams believe they can do a better job than the current owner!

A realistic, profitable exit strategy that will justify their risk and hard work.

Where a specialist EPO financier is assisting an employee buy-out, it will look for similar attributes in a business as are necessary for a traditional MBO.