Management buyout

The existing management team buying the business.

What it means

In a management buyout the incumbent managers acquire the business, usually with external funding and often with some deferred consideration.

Why it matters

It is a common succession route where there is a capable team and no obvious trade buyer, and it preserves continuity for staff and customers.

What it looks like in practice

Funding usually combines management's own money, bank debt, and vendor loan notes or an earn-out. The seller is often financing part of their own exit.\n\nManagement have a conflict of interest during the negotiation and need their own advisers.

What to watch out for

Management who can run the business and cannot fund it. And the seller left with deferred consideration dependent on people who are now running it without them.

Where to get proper advice

A corporate finance adviser and separate legal advice for each side.