Commercial Opportunities.
The initiative for a management buy-in must come from the managers themselves, and many buy-outs also arise from the initiative of the management team. Groups are prepared to consider divestment, including management buy-outs, for various reasons, including:
• the business is an unwanted part of a larger acquisition
• it may no longer fit into the present commercial rationale for the group
• the business may be too small to carry the overhead costs associated with a separate profit centre of a large group
. . . Multiplied their original investment tens of times
• the market is simply too competitive to carry the full weight of corporate overhead
• the need to generate more cash or the wish to invest the proceeds in other opportunities
Other opportunities for management buy-outs, and possibly buy-ins as well, include:
• privatisation of state-owned corporations
• the purchase of a listed company, particularly where there are substantial family shareholdings and members of the family are approaching retirement
• an alternative to an unwelcome bid for a listed company
• purchase of a company in receivership
Despite the availability of opportunities, and the substantial potential rewards, common sense demands that a hard-headed and objective approach is adopted by the management team.
Suitable companies for a management buy-out or buy-in The essential ingredients for a suitable company are:
• cash flow
• asset backing
• the business
the management team
Each aspect will be considered in
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