UK: Acquisitions - Am I the MBI type?

UK: Acquisitions - Am I the MBI type? - Consider whether you have the qualities for buying into a business.

Last Updated: 31 Aug 2010

Consider whether you have the qualities for buying into a business.

A prominent feature in changing small company ownership into the next century will continue to be the venture-backed management buy-in (MBI). Not all MBI candidates are suitable, and you should think about whether you have got what it takes. Typically, a successful MBI is the fulfilment of a talented, entrepreneurial managing director's dream. Sometimes they have already built their own business, which has been sold on, and are now looking to regain that fundamental spirit and sense of purpose which goes with ownership.

Searching for a suitable target for a buy-in can be difficult and frustrating.

Finding the right business, organising the finance, negotiating the deal and being prepared to walk away if the price is not right, requires the patience of a saint.

The biggest obstacle facing MBI teams, according to most advisers, is getting close enough to the target business once you have decided that you want it. You may not know where the problems are in the business and you can't assume people will tell you. A diligent approach doesn't pick up everything, and a vendor may be reluctant to allow the purchaser too close to his managers until the deal is a certainty. The best way of minimising problems is for the MBI candidate to have first-hand prior knowledge not only of the sector but of the target business.

Successful MBI candidates could be said to have proved they have the determination to run a business just by lasting the course of the deal, but this is, of course, no guarantee that the business will succeed. But if you really have the character that is needed, the significant rewards that could come with a bit of luck and a lot of hard work, will be well worthwhile. Certainly, knowing that you are 'backable' can be the determining factor once a potential target is identified. Vendors of any quality business have to be clear about the credibility of an offer.

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