Finance for a Management Buy-InSpeak to one of our experts020 4525 5312
Making A Buy-In Affordable
- Bespoke finance packages
- Individual solutions
- Flexible repayment arrangements
- Terms to suit your business plan
- High levels of finance available
- Individual support
- Redemption arrangements available
- Variety of repayment structures
- From 2% above base rate
- Up to 25 years terms
- Finance secured on business or personal assets
- Early repayments without penalty
Buying into an existing business can be an effective way to gain control of a thriving company. The investment required will be high - but solutions exist to help
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Owners eventually need to retire from the businesses they have built up. Groups may decide to dispose of divisions that no longer form part of their key business focus.
Where there are no obvious successors for a family business or the existing management team do not wish to buy the business, an external management team can provide an alternative with a Management Buy-In, or MBI. This is when an individual or a management team from outside the company makes the decision to acquire it, raise the necessary finance, buy the company and becomes the business’s new management.
It can re-energise a business. As well as providing a way for the business to continue, it can generate renewed growth by bringing in additional expertise, connections and fresh perspectives.
A Management Buy-In may appear to be similar to a takeover. However, unlike takeovers which may be hostile, and based on the acquisition of public quoted shares, a buy-in tends to be agreed for mutual benefit and is usually appropriate for smaller operations. A variation is the Buy-In Management Buyout - known as a ‘BIMBO’ - which combines a management buy-in with a management buyout when a company is bought by a combination of existing managers and individuals from outside the company who will join the new management team.
The Buy-in will mean major changes for the company involved, and there will inevitably be some challenges and conflicts of interest to overcome. Most obviously, the vendor may wish to maximise the price for the concern he or she has built up. They may also want to minimise uncertainty for the workforce and for suppliers, while the MBI team will want to keep the cost as low as possible.
But the greatest challenge may be to provide the funding required.
Funding a Management Buy-In
The cost of a complete Management Buy-In will be directly comparable to what it would cost to buy the entire company. However, it is rare that a management team will have the funds without external finance to buy a company, meaning it will be needed, and so MBIs are, more often than not, funded using a combination of different sources, much the same as a Management Buyout.
Lenders may be sympathetic - taking over a business that is already trading successfully avoids the costs and risks of setting up a new venture. But the high costs of acquiring a valuable business will remain.
There are many ways to deal with these costs. Once a price has been agreed - it usually requires a combination of debt and equity that is derived from the buyers, financiers and sometimes even the seller, and can be structured in a number of ways, for example, a conventional purchase or even a Leveraged Buyout.
In practice, MBIs tend to be financed by a combination of funding sources:
A buyer contribution – The management team is usually required to introduce personal funds as evidence of the team’s commitment to the transaction. Those buying in may need to raise the funds by selling off assets or getting a second mortgage on their home.
Asset Refinance – leveraging against the assets in the company, including premises, stock and equipment, can generate a high level of funding. Using the assets of the company to buy the company itself can be a particularly effective solution for those businesses with a large investment in plant and property. A Commercial Remortgage can raise considerable sums and spread the cost over up to 20 years.
Business Loans – business lenders may offer Unsecured Loans, repayable over three to five years, or a larger scale of lending and a longer term with a Secured Loan, with the security provided by other business assets.
Private Equity – Private Equity firms may be able to advance funding for an MBI, but may impose strict conditions. Their funding often includes stipulations about how the company must be run and may include financial and other objectives.
Vendor Loan – the vendor can help fund the transition by leaving some of their equity in the company as a loan, which will be repaid over time.
Why you need Rangewell to find finance for your Buy-in
If you are ready to buy into an established practice or business, many lenders will be happy to lend. Your status as a professional represents a good business risk, and you can prove the viability of an existing business with accounts and order books.
But not all lenders will be prepared to offer you the most competitive terms or give you the flexibility that you require.
Looking for the most competitive deal across the entire market takes time and expertise. At Rangewell, we know the lenders who can offer the most competitive rates for you, and we find solutions for all types of business finance.
We help source the entire range of conventional loan products, and Alternative Funding from new loan providers and styles of funding. Even more important when it is an MBI, we can work with you to tailor the kind of complicated ‘Jigsaw’ Funding plan required to support your plans.
We understand the challenges of MBIs, and the solutions to them. Call us now to get our experts working to provide them for you.
REAL EXAMPLES OF WHAT WE CAN DO
Source a funding loan to allow two partners to buy a regional air tool dealership
Find the most competitive Asset Refinance deal to allow the acquisition of a specialist printer
Help two dentists arrange ‘Jigsaw’ Funding to acquire an existing partnership
Find Mezzanine Finance to acquire a drone manufacturer from the corporate owner
Produce funding for a team to buy a prestigious London accountancy partnership
Last update: 9 December 2022
Download Rangewell’s free and detailed guide to Finance for Buy-Ins and Buyouts
What types of finance are there - which do you need?
Why not all providers are equal - finding the one that’s right for you
How we can provide an additional income stream
The downsides to finance - and how to avoid them
How to arrange finance - what paperwork do you need?