As specialists in assisting in management buy-in (MBI) transactions, it is not uncommon for us to speak to entrepreneurs/owners who are not quite sure what an MBI transaction entails or are not familiar with it at all.
If the entrepreneur in question is a director of a family business where son, daughter, nephew or niece is already well prepared to take over this role, this is of course no problem at all. If this is not the case, as an entrepreneur you may also be fortunate that your ideal successor is already active as an employee within your business.
Of course, if this man or woman is not only a good manager but also a fine entrepreneur, we too feel that further delving into what an MBI transaction entails makes little sense.
MBI transaction
But what if there is no one in sight as a successor and you are gradually getting ready to sell your business? You must then look for a party to which you can confidently hand over your customers, employees and other parties with whom you have built up a close relationship. Is that the competitor you have fought against for years? Will this competitor maintain the core of your business and what standards and values will apply? Will your name remain on the facade and will this facade remain in the same location?
All questions that can run through the mind of an entrepreneur who is about to make perhaps the most important decision of his life: selling the business into which years of heart and soul have been put. For these entrepreneurs, it is very useful to understand what an MBI transaction entails as an alternative and what the possibilities and pitfalls are in such processes.
Doing business by taking over
As a possible alternative, private equity parties come into the picture. Here, a selling entrepreneur often wonders: who am I actually selling my business to? What will happen in the longer term? Important questions to think about at such a time and also a good reason to look into yet another very good alternative: selling to an MBI manager, who, in our words, is going to 'do business by taking over'.
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For the record, we do not always advise against selling to a competitor or to a private equity party; it can be the best solution for transferring a business in certain situations, and we also have positive experiences with such transactions. But transferring it to a new entrepreneur is worth considering; in doing so, you bring in an ideal son or daughter-in-law, so to speak.
Flesh and blood
The MBI managers we seek businesses for have a demonstrable drive to become or have already become entrepreneurs. Not a whim, but a well-considered decision for which serious resources are available. A dream that has not come true before because of great career moves. Now the decision to become an entrepreneur is fixed and time is set aside for a professional search for interesting businesses to take over.
For the selling entrepreneur, "what you see is what you get. Not a representative of a business or investor, but a flesh-and-blood human being who puts everything aside to go into business. And very important: with surprisingly interesting offers for selling entrepreneurs (and sometimes also for fellow advisers), even for larger SMEs.
