Management buyout and management buy in funding

Finance options for management buyouts, buy ins, mergers and acquisitions

Blog

By Stephen McCarthy

29 Mar 2021

Are you a business owner considering a Merger or Acquisition (M&A)? Or maybe you’re examining a possible Management Buyout (MBO) or Management Buy In (MBI)? Like many entrepreneurs reflecting on a disruptive Covid-19 pandemic, you may have decided it’s time to exit your business or you could have come to the conclusion that now is the time to refocus, innovate and grow. 

Term debt and cash flow loans provided by the banks have traditionally been used to fund such transactions. However, Invoice Finance can play an important role in the funding mix while also helping to keep loan repayments down. What holds many business owners back is that they don’t want to have to take out a loan to finance a restructuring transaction. As a result, many are instead using Invoice Finance as a way of partly financing these deals or even on a standalone basis, as it offers businesses access to money outstanding from their unpaid invoices, helping them to access income they have already earned but not yet received. 

So, if, for example, you have €300,000 or €3,000,000 currently owed to you by your clients, Invoice Finance will give you up to 90% of the invoice’s value within 24 hours. The remaining balance will then be paid to you minus an agreed fee, when the customer has paid their bill. So, unlike a loan or overdraft, Invoice Finance does not involve ongoing monthly repayments. 

With many businesses looking to engage in restructuring without having to borrow money, it’s perhaps not surprising that, at Bibby, we’ve seen a significant rise in M&A, MBO and MBI activity in recent months.

One recent Bibby customer utilised the facility to finance a Management Buy-In. In this case, Bibby were approached by experienced corporate financiers who wanted to fund the purchase of a majority shareholding in a professional services business. The company was turning over €2.5m annually and had a well-established client base generating impressive margins.

The existing management team had the opportunity to facilitate this ‘buy-in’ to the business by the new investors and wanted to realise some value for their previous efforts but remain with the business on an earn-out basis for a period thereafter. A deferred consideration will be paid for the balance of the shareholding over the following years and the incoming majority shareholder will take a seat on the Board immediately under the MBI.

Invoice Finance was an ideal fit to release the required cash and help fund this management buy-in. A confidential Invoice Finance facility was used towards the initial contribution and continues to provide essential working capital to allow the business trade-on successfully without any cash flow concerns.

So, if you’re actively considering your options for your business, Invoice Finance can help. Get in touch with us today and our expert business advisers can advise on what financing options will help you fund your business growth ambitions.


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