Funding for Buy-Ins and Buyouts
Helping you acquire your business
- High levels of finance available
- Reducing the costs
- 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
- Bespoke finance package
- Individual solutions
- Flexible repayment arrangements
- Terms to suit your needs
Acquiring a partnership, directorship or other share in an existing business - or even buying the entire business - can be an excellent investment.
You know the kind of profits your new business will be generating from day one, and avoid the costs and uncertainties of setting up. But although you have a better chance of enjoying real rewards, you can be certain of having real costs to deal with.
There are several ways to acquire a business or an interest in a business.
Partner Buy-In - joining a business or practice
The simplest may be a Partner Buy-In. This is where a new partner joins an existing team.
Partner Buy-Ins are common with professional practices and may be an opportunity for an existing firm to bring in new talent as part of an expansion plan, or as a way for an existing partner to leave the business, often to retire.
Funding will be required from the joining partner, either to support the growth plans of the business, or to recompense the exiting partner for his or her hard work in building up the company - although it is common practice for any fees to include a proportion for the business.
The sums involved will reflect the turnover and potential of the business. A new partner joining a small dental practice might expect to pay considerably less than someone joining a major accounting or legal firm, although, in both cases, there would be negotiation and it may be possible to stagger payments with the agreement of all concerned.
Funding a Partner Buy-In
Solutions for funding a Partner Buy-In will depend on the scale of funding required. The scale of funding required with larger businesses may make some form of Secured Loan necessary. It may also be possible to arrange a Practice Loan effectively a form of advance secured on the future performance of the business.
A Management Buy-In
A Management Buy-In occurs when a manager, or a management team, from outside the company buys the entire company and becomes the company's new management. Acquiring a company in this way may appear to be similar to a takeover, but is usually appropriate for smaller operations. In addition, management Buy-Ins are usually amicable and simply represent the sale of a company, unlike takeovers which may be hostile, and based on the acquisition of public quoted shares.
A buy-in management buyout - known as a ‘BIMBO’ - combines a management buy-in with a management buyout. In this case, the company is bought by existing managers and individuals from outside the company who will join the management team.
Funding a Management Buy-In
The cost of a complete Management Buy-In is directly comparable to the cost of buying the entire company. It is rare that a management team will have sufficient funds on their own to buy a company, and external finance will be needed, so MBIs are usually funded via a combination of sources, much like a Management Buyout.
REAL EXAMPLES OF WHAT WE CAN DO
Source a professional loan to allow a newly qualified chiropractor to buy a partnership in an existing practice
Find the most competitive asset refinance deal to allow the manager of a transport company to buy out its owner
Help a dental professional arrange ‘jigsaw’ funding to allow her to acquire an existing practice
Find mezzanine finance to allow the management board of a medical equipment company buy the business from the corporate owner
Produce funding for a lawyer ready to buy into a prestigious London partnership
A Management Buyout (MBO)
A Management Buyout allows a company owner, or owners, to sell their business to the existing management team. This may be preferred to a trade sale for a variety of reasons, especially if the owner feels strongly that the company and its staff carry on independently in familiar safe hands.
Since the new owners know the company, the risk of failure is reduced, and employees and trading partners can be reassured it will be business as usual. The internal changes and transfer of responsibilities between the vendors and management can remain confidential, while any due diligence required by funders can often be handled quickly.
Funding an MBO
For an MBO to be successful, vendors must be willing to sell the company at a realistic price and with a deal structure that is acceptable to both parties. Management Buyouts can be structured in a number of ways, such as a conventional purchase or a Leveraged Buyout model.
Leveraged Buyouts are often used because few management teams have the resources to buy the target company outright. They need external financing to facilitate the purchase, and are often interested in leveraging some of the assets of the target company.
In practice, MBOs are usually funded via a combination of sources:
Management contribution – if they are unable to fund the whole transaction, the management team is usually required to introduce personal funds, Funding companies consider it a gauge of how committed the team is to the transaction. It is not unusual for managers to raise the funds by selling off assets or getting a second mortgage on their home.
The management team’s financial contribution is very important. Asset Refinance – leveraging against the assets in the company, usually property, stocks or capital equipment, can allow the buying team to raise a high level of funding.
Borrowing – in additional to Asset Finance, lenders may provide an Unsecured Loan, repayable over three to five years, to support an MBO. A larger scale of lending may be provided by a Secured Loan, with the security provided by other business assets, or by their home.
Private Equity – this an increasingly popular source of finance even at the smaller end of the market with many funds looking to back management teams to scale their company. Private Equity firms usually want liquidity after 3 to 6 years and expect to take their profits then. Their funding often includes stipulations about how the company must be run and what financial, and other, objectives have to be met. Remember that the Private Equity firm is looking to maximise its own returns, rather than building a sustainable future for the business.
Vendor Loan – the vendor can help fund the transition by leaving some of their equity in the company as loans to be repaid over time. This may be required by some lenders who seek evidence that the plan is seen as fully viable by the sellers.
Why you need Rangewell to find finance for your business Buy-In or Buyout
If you are planning to buy into an established practice or business, many lenders will be happy to lend to you. Your status 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 the most competitive terms, or provide the flexibility that you need.
Looking for the most competitive deal across the entire market takes time and expertise. We know the lenders who can offer the most competitive rates for you, and we find solutions for all types of finance, including Professional Loans, Unsecured and Secured Loans, Invoice Finance, Asset Finance, Merchant Cash Advance, Commercial Mortgages, Growth Finance and more.
As well as conventional loan products, we can help you find Alternative Funding, using new loan providers and styles of funding.
Whether you have a straightforward, small-scale funding need, or require a complicated ‘Jigsaw’ funding plan made up of a combination of financial products, we can work with you to find the answers.
Call us now to get our experts working for you.
Helping you build your profits
Lending tailored to your needsAt Rangewell we can help you find the most appropriate finance for any type of Buyout or Buy-In.
Funding scaled to your needsFunding solutions are available for your plans whatever the size of business, from tens of thousands of pound to tens of millions.
Cutting the costsWe can help you find the most cost-effective solution for your needs.
Reducing risk with expertiseOur expert teams understand all aspects of business funding. Their expertise works to support you and reduce your risks.
Releasing the value in your businessAsset Refinance can help you release the value in the business to help you buy it.
Specialist lendersAt Rangewell, we can help you find the most appropriate lenders for your sector.
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?
Key terms explained
Can I find finance to help with cash flow?
How can you finance your management buyout (MBO)?
Do the management teams have any bearing on being accepted for finance?
Will a private equity firm be involved to run the business?
Getting the right funding arrangement is essentialThere are many forms of business finance available. Getting the most appropriate type for your particular needs is essential to avoid excessive costs.
Your key equipment could be at riskIf you are unable to keep up repayments on an Asset Refinance agreement, the equipment your business depends on could be could be at risk.
Long-term financial commitmentsYou may not be able to pull out of a finance arrangement once set up.
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