Management Buy In (MBI)

A route to business ownership

The Challenge

A candidate registered with our MBI service and asked us to help guide them through the process of identifying and buying a business in which they could have complete or part ownership.

The Solution

The first stage of the process was a meeting between the MBI candidate, a specialist Business Adviser from our Corporate Finance Partner, and a senior consultant from BK Cornerstone to discuss the MBI candidate´s ideal target company and, crucially, to ensure they had the relevant skills and experience and were committed to undertaking an MBI.

Following this meeting, a considerable period of time was spent reviewing and refining the target criteria to help identify businesses that would match the market knowledge and experience of the candidate.

These criteria were then used by our specialist Business Adviser to carry out a comprehensive, pro-active acquisition search clearly focused on the exact requirements of the candidate.

The acquisition search included:

• Circulation of acquisition criteria to our partner´s network of contacts.
• Publication of criteria on businesses-for-sale websites.
• Review of businesses-for-sale websites for appropriate companies.
• Desk-top research of companies within the appropriate sector and then follow up contact with companies that were not currently for sale but which our partner (together with the candidate) believed would be good targets.

As is often the case with this approach, the successful target was a result of our partner´s focused desk-top research followed by an approach to a company which, at that point, was not actively looking to sell.

A deal was negotiated with the vendors, funding was raised, lawyers were introduced to the transaction, and the transaction was project managed through to legal completion.

The company was purchased for c.£2m with the MBI candidate acquiring c.60% of the share capital for an equity stake of £75,000. The remainder of the funding was provided by regional venture capital funds (£600k), invoice discounting (£1m), and an unsecured bank loan (£600k).

The company has continued to trade successfully, generating run-rate profits of c.£750k per annum and with comfortable levels of cash reserves.

The MBI candidate is now looking to add further acquisitions to the group and the funders to the original transaction are supportive of this given his successful track record.

The Benefits

The MBI candidate is now, to a considerable extent, in charge of his own destiny and is in a position to fully benefit from any wealth he generates.

That he has ended up in such a strong position is testament both to the abilities of the MBI candidate and to the appropriateness of the company purchased.

To discuss this case study in more detail please contact Neil McLaughlin at BK Cornerstone on 0113 397 6221.

You can register for BK Cornerstone's MBI candidate database here.