The vendor may be considering a number of exit routes, including a trade sale, and a Management Buyout.
It is crucial that the Vendor seeks tax advice on structuring and investment before reaching heads of terms with the MBO team. Because of a potential conflict of interest it is preferable for the MBO team to be advised to use separate advisors to those instructed by the Vendor (normally their existing advisors / auditors).
Often it is possible to design a structure which enhances the proposition for the vendors and also protects the MBO team from unnecessary tax issues – see MBO management team advisory.
It may be appropriate for the vendor to consider arriving at a proposed exit route and arrange the finance and structuring solution to the MBO team. This approach, sometimes described as a VIMBO (vendor initiated management buyout) can be quite attractive to both the vendor and the MBO team.
Others areas on which advice is critical include:
- Warranties and indemnities to be provided by the vendors, this would normally follow a review of the business (due diligence) by the MBO team and their advisors)
- Structure of the business bearing in mind future planned activity and growth
- In the case of a vendor who is keeping an ongoing investment in the business it will be necessary to consider his final exit strategy (a key consideration for all businesses which should be considered on establishment).
Please contact us if you would like to discuss this are in more detail.