Prior to moving forward with an MBO, it is necessary to gauge the appetite and understand the motivation of both the business owner and the MBO team to commit to a deal.
Based upon an agreed valuation, it is important that the deal is structured in such a way that both the sellers and the buyers are comfortable with the deal structure.
This means that the Total Consideration paid for the business and the time period over which the payment is made are agreeable to both parties.
The owner will want to know how much money can be extracted from the balance sheet at completion. If, as in almost all deals, there is a deferred element to the Total Consideration, both the value and percentage amount of the deferred consideration, the way in which the consideration is deferred, often vendor loan notes, and the time frame over which this will take place will be subject to negotiation.
DCA Corporate works with both business owners and management teams in structuring MBOs and often acts as the intermediary in this negotiation process.