If you’re still in the profession, the chances are you’re continuing to field succession questions from clients.

It’s one of those conversations that comes up more often than people expect and a MBO is often an option worth putting on the table.

We wanted to share the latest thinking on MBOs in case it’s useful the next time a client raises the subject and as a reminder that Harbourside Corporate Finance is always happy to be a sounding board if you want a second opinion on a case.

Why clients gravitate towards MBOs

What makes a MBO attractive to a lot of owners isn’t just the convenience of handing over the business to someone you know, it’s the chance to keep the business in trusted hands and preserve the culture they’ve spent years building.

The buying team doesn’t have to be limited to existing managers. New hires can be brought in where it makes sense and family members with a genuine commercial role in the business can be part of the ownership group too if they wish to.

For incoming owners, they have a head start over an external purchaser, since they already understand the working culture from the inside. Sellers who care about legacy tend to find that reassuring.

What the process actually involves

If a client asks what a MBO looks like in practice, the shape of it tends to follow a similar pattern.

There are exploratory discussions with the management team, followed by training and support so they understand what shareholder responsibilities will mean for them.

A valuation gets agreed, then a funding plan gets structured, often drawing on business assets, personal contributions from the incoming owners, bank loans, private equity or deferred payments to the seller.

A new holding company is then typically formed, tax clearances go to HMRC and legal agreements ratify the whole transaction.

The pace of the owner’s exit is flexible. Some step back quickly once the deal is completed, while others prefer a gradual handover, staying on in a mentoring or advisory capacity while the new owners settle in.

Where clients tend to go wrong

The advice we’d pass on is the same advice we give directly to business owners. MBOs work best when there’s a proper succession plan behind them, not just a willing management team.

We generally recommend clients start planning their exit three to five years out. That gives enough time for the management team to grow into the role and feel genuinely comfortable taking on ownership and it leaves room to deal with any structuring issues properly rather than under time pressure.

Where there’s no clear plan, the risks are real and you may have seen some of them yourself. Disagreements over control or over how responsibilities and profits get shared can derail things quickly.

It’s also worth checking that the intended successors actually want the business and are capable of running it, not just willing to say yes in the moment.

Other senior staff often need to be part of the conversation too. Poor communication around succession is a common reason firms lose good people, so it’s worth flagging that risk early rather than after someone’s handed in their notice.

If a client’s management team is being lined up for ownership, a clear development plan that closes any skill gaps through training or mentorship makes a real difference, both to the transaction and to retention.

Pairing that with a share incentive scheme in the years before the MBO tends to strengthen the whole process.

How we can help

If you’ve got a client weighing up a MBO or thinking about succession more broadly, the experts at Harbourside Corporate Finance are happy to help with valuation, structuring and working out which succession route genuinely fits the business.

We’re always glad to take a call from a familiar face, so do get in touch if it would help to talk a case through.