The acquisition market is changing. Regularly, businesses consciously choose to divest activities or business units rather than expand their offerings. Not because things are going badly, but because they want to focus on the core. This offers management buy-in candidates (MBI) opportunities.
A well-known example is Philips, which has let go of its consumer business to further focus on health-tech. The same applies to organizations such as FrieslandCampina and Unilever, which divested activities that no longer matched their core businesses. These and smaller branches are then mostly acquired by strategic buyers and private equity parties.
It is precisely in these places where the best opportunities arise for private (equity) investors and MBI candidates who, as experienced professionals, want to shape their entrepreneurship by stepping into an existing organization.
From divestment to acceleration
So strategic divestment is not always a sign of contraction, but also of refocusing. Businesses sell divisions or brands that no longer contribute to their vision for the future. This may involve a niche product, regional branch or service that is outside the strategic focus.
Divestitures are forcing businesses to rethink their core businesses and are also creating an influx of businesses looking for new leadership. This presents opportunities for management buy-in candidates and private (equity) investors. Those who get this right will find a nice growth opportunity in divestment.
Partners in growth
Private investors are playing an increasingly important role in finding suitable financing. They see that MBI candidates are often the key to successfully continuing divested business units. Consequently, we have seen the number of private (equity) investors guiding MBIs to entrepreneurship increase in recent years.
These investors make their capital and network available to MBI'ers who take on day-to-day management. The MBI'er provides vision and direction; the investor provides support through knowledge and financial backing. This is positive for the speed of the acquisition process. For example, businesses that were "out of strategy" for their previous owner suddenly have the potential to perform well under new leadership.
The ideal MBI environment
Divestitures in particular often present a great opportunity for an MBI candidate looking for organizations with a proven product or customer base, stable cash flow and staff who know the operation but lack the entrepreneurship.
The MBI candidate brings a bucket of experience, energy and strategic leadership. That combination makes the likelihood of success high, especially when the acquisition is carefully structured and supported by appropriate financing.
Getting in without stumbling
MBI'ers who manage to bring their journey to a successful deal have usually thought carefully about the following issues:
- They see not only numbers, but also untapped value. For example, in the areas of customers, processes or technology.
- They are building a strong team. An acquisition is not just a financial transaction; the human match is also of great influence. Differences in vision, style or corporate culture can disrupt the process. Thorough preparation on corporate culture can make or break an MBI.
- They look critically at various financing options. An MBI often requires a combination of equity, debt and/or capital from private (equity) investors.
Get good advice
Businesses are increasingly focusing on their core, which means non-core businesses are regularly being offloaded. That offers others a great opportunity. So for private investors and MBI candidates, that can be a good time to step in.
