Financing Health Product Management Buy-in With £7.65m Funding

A management buy-in sees existing employees becoming directors or shareholders in the business. This typically involves approaching the existing director or team of directors to discuss the possibility – since many UK companies already have their full allocation of share capital and don’t have ‘space’ for new directors. 

In a recent case, Rangewell were able to help a health product company transition from its founder and owner to a new team of managers-come-directors. They approached Rangewell for our help in financing the purchase, as well as for guidance on how best to structure the deal to the benefit of both the departing director and the new owners. 

Guidance and support throughout the process

The existing owner had formed his business in the 1980s and had a long attachment to the brand, having grown it from a hobby to a full online and wholesale retail business that employed 47 people and had a turnover of £14m per annum.

The business was profitable and was operating consistently, but the founder was not heavily invested in growth or the day-to-day operations needed to build a stronger business. As a result, they recruited a driven young management team which included a finance officer, marketing director and operations director.

Following a profitable period during the COVID-19 pandemic, the owner decided they wanted to retire. After hearing this, the younger management team approached the owner and offered to buy the business provided they could secure the finance. They contacted Rangewell for support, with both the seller and buyer working collaboratively to secure the best outcome. 

Making management transfers more effective

The company’s EBITDA was over £2m, portraying a strong business with good growth potential. We helped the management team build out a business plan that would demonstrate to potential lenders the opportunities and areas in which the new team could grow. This, in turn, would help give the lender more confidence in the team and provide a stronger offer. 

We also introduced the tea to independent financial advisors that could evaluate the business’ financial metrics with an outside perspective to come up with a fair valuation. This turned out to be 8x the EBITDA for an asking price of £8m. 

We identified three lenders offering different terms to the management group. Each varied based mainly on the length of loan and interest rate. In the end, the team chose a longer repayment term to reduce rates and over £7.65m was offered in finance – with the team only contributing £100,000 each from their own personal assets. 

The departing owner was able to successfully retire, confident in the knowledge their company was in safe hands and would continue to flourish. 

With such a significant amount of capital required to complete the buyout, approaching Rangewell early in the process helped the team ensure they not only secured the finance at the best rate, but also that the valuation for the business was fair and based on an external perspective without any internal bias. 

If you’re a manager considering buying into ownership, or an owner looking to sell your business to your employees, contact Rangewell for any assistance needed with finance.