Buy-outs rising in popularity

Management buy-outs (MBOs) are growing in popularity according to the latest research Experts say that MBO teams are able to negotiate lower prices for the firms they are buying because of a general downturn in trading and a shortage of trade buyers in the market.

The number of MBOs rose steadily during 2004 averaging 12 a week according to figures from the Centre for Management Buy- Out Research at Nottingham University Business School and the trend looks set to continue throughout 2005.

The biggest hurdle management teams face is arranging the finance. Many turn to banks, although venture capitalists and private equity firms are other popular options. Cash is loaned to the MBO to buy the company in return for a stake in the MBO company. A successful buy-out, however, is no guarantee of long-term success. A common problem faced by MBO teams is that while they possess the specific skills needed to run that particular company, they will also be taking on more general management responsibilities, such as looking after IT and human resources.

Anyone considering an MBO is advised to seek detailed financial and legal advice from the outset. Our team of business and commercial solicitors is ideally placed to help.