Management Buy-Outs

What Do We Mean by Management Buyouts?

• Management buyout financing – are they just an M&A deal with more participants
• Assessing the feasibility of a buyout – key considerations
• Kick-off meeting: how to start to put a deal together
• Private equity funds, their growth and their objectives
• How do we differentiate between equity houses?
• Work through a transaction structure example, to illustrate the key concepts 

The Parties Involved in a Buyout: Respective Roles and Interests

• Management teams
• Seller(s)
• Private equity houses
• Banks and other debt providers
• Potential areas where interests may conflict – and how to manage these
• Other advisers
• List of legal documents – key differences to a ‘normal’ M&A deal 

Why and How Debt Matters

• The principle of using other people’s money
• Capital structure: the cost of capital concept, as applied to buyouts
• Interest deductibility and tax shelter
• The limitations to leverage: company debt capacity, debt market limitations, and tax deductibility
• Integrated finance vs typical management buyout structure 

Buyout Economics: What Makes a Buyout Work Well

• Approach to value building
• Three key drivers of success
• Worked examples, with flexed inputs to demonstrate the sensitivity of the key measures of return
• Sensitising the use of debt; interaction with how much a PE house can pay
• Private equity buyout and the long term: Exit planning/ exit review  

Building a Simple Economic Model

• A true ‘back of envelope’ methodology
• A simple management buyout model you can take and adapt
• An on-screen look at the more complex models used by buyout advisers 

The Position of Management

• Their economic position in the deal
• Incentive forms: sweet equity and ratchets
• Their rights during the buyout
• Relationship with the PE house: Governance and shareholder agreement overview
• Secondary management buyouts with management rollover 

What if Things Go Wrong?

• Development of economic interests – the model revisited
• Typical rights for each party 

Case Study MBO

• Review business buyout plan
• Dealing with PE houses – key selling messages
• Analysing and comparing three alternative bids for the same company
• Comparing economic outcomes if the business plan is achieved
• What drove management’s choice? 

MBO Training Course Conclusion & Overview

Redcliffe's MBO training is delivered by an expert who has worked on corporate finance and capital markets transactions for over thirty years; holding positions on the client side as well as leading advisory teams.

At the Department of Energy, he was a civil servant involved in the privatisation of British Gas, a global IPO involving a large advisory team. He also spent two years (1990-92) in the Hungarian Government privatisation agency working with many advisory firms, as the changing political environment triggered massive ownership change. He has worked in major investment banks (Swiss Bank Corporation International – now UBS - and Lazard) and also co-founded a successful M&A advisory boutique firm. In 2021 he retired from KPMG, where he spent 13 years in the firm’s global M&A business, based in Scotland.

His experience combines a broad range of M&A and equity transactions in North and Central America, Asia Pacific, major European countries, and most recently Africa. His courses draw deeply on case studies from transactions he has run, bringing practical examples to set alongside the theory.

• MBO training gives an introduction to the concept of buyout transactions.
• What drives buyout economics – understand the sources of funds (debt & private equity) and the key value drivers.
• Explore the motives and objectives of private equity investors and their typical target returns.
• Debt matters: demonstrate how debt enhances returns - appreciate the fundamental role of bank debt and the potential other forms of buyout debt.
• Why buyouts are more complicated: Overview of the extra layers involved (relative to a trade sale) in putting buyouts together.
• A crowded house: understand the roles of the various parties, and how to deal with each – focus on potential conflicts of interest.
• Management’s role: understand the specific issues relating to the management team and what advice the managers will need.
• Partnering: choosing the right equity house(s) to approach.
• The worst case: Understanding how MBOs may go wrong... and what may ensue.

• Our Management Buyout (MBO) course trainer has been involved in negotiating and closing M&A transactions for over 25 years.
• He has worked on a wide range of M&A deals, including trade sales as well as management buyouts. This course conveys the key differences between the two.
• He will explain what makes an MBO a business suitable for a buyout – and the key negotiating points in bringing the multiple parties together.
• MBO training is illustrated throughout with practical examples and real-world case studies.
• A complete, one-stop introduction to all aspects of MBOs and Private Equity.

Buyouts are such an important part of the M&A landscape. So important, that in recent years they can make up to 50% of all transactions.

This management buyout training course begins by helping you understand why buyouts have become popular, through a focus on the main industry participants driving activity – the private equity houses. Whilst these may appear to have much in common with each other, we take time to understand how to differentiate between houses and choose the ‘right’ buyout partner.

We then walk through what makes a buyout successful in economic terms, taking time to understand the importance of growth, debt and timing. Going beyond the economics, the course explores the relationship between management teams and equity houses, the key to success, but also a relationship which can become tough when deals falter.

With clear case studies and financial explanations, plus a look at the type of financial modelling on which buyout participants base their investment decisions, MBO training gives a full and valuable overview of how to start on the journey to a management buy-out and plan a successful transaction.