In recent years, Management Buy Outs (MBOs) have become more popular as a way of selling a business, with a number of key advantages, which must be weighed up against the potential pitfalls.
Rather than have to go to the marketplace, the buyer has instantly been found and confidentiality can easily be contained in-house, which is a great starting point. The balance of power can be transferred steadily and the business can continue with minimum disruption with people who are more likely to care about the history and who can be trusted in maintaining the legacy of the current and previous owners. The risk involved in a relationship change can therefore, be minimised.
Although in the past, funding may have been an issue with MBOs, (i.e. the buyer having limited financial resources to borrow money from traditional lenders), the Alternative Finance Market now offers a more favourable view, as they will show preference towards a new owner considered competent to run the business, thereby reducing the element of risk. And what better, if the new owner has first hand knowledge and experience of the actual company.
In fact, given a choice, the Alternative Investment Market would much prefer to lend money for an MBO rather than to an complete outsider, as a Management Buy In (MBI).
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