21/10/2016

Moving on: Have you considered management buyout options?

Business owners looking to move on or retire are increasingly opting for management buyout (MBO) options. This involves selling their company to an existing management team. This can involve the management team initiating the deal (an MBO) or the business owner themselves approaching the existing team in a vendor initiated deal (VIMBO). With the launch of the Wales Management Succession Fund, managed by Finance Wales, earlier in the year these kinds of deals are happening more often.

“The process of selling a business to the incumbent management team can be the best solution for the seller,” explains Steve Galvin, Senior Investment Executive at Finance Wales. “There is a large degree of certainty associated with this type of deal.  The handover process can be smooth and the transition can be effected with minimum disruption to the business. We are seeing an increase in MBO opportunities and are happy to provide funding to those management teams which have a viable business plan.”

When the management team of Caerphilly-based Fusion Occupational Health (formerly Santia) wanted to buy the company they worked for, they went to Finance Wales to help fund the deal.
Fusion Occupational Health offer services designed to improve the health and wellbeing of an organisation's employees. They work with businesses of all sizes. The management team were offered the opportunity to buy out the occupational health business when Santia Consulting was bought by the Alcumus Group in 2015.

“We had a plan, but we needed money to finance it. That’s where Steve and the team came in,” says Bill Bartley, Managing Director of Fusion. “They worked fast and a deal was sorted quickly. The whole process was very smooth. The experience was easier than we expected and, for us, the best option.”

“This was an easy, fast-paced deal,” adds Galvin, who structured the deal. “The new management team have more than 50 years of combined experience at the company. They understand how it operates and have a solid business plan to ensure continued success.”

The company who provide occupational health services to businesses were introduced to Finance Wales by the Welsh Government.

Another deal recently facilitated by Finance Wales was a VIMBO at Cwmbran technology firm Analogue & Micro. The shareholders worked with their existing management team, advisers and Finance Wales to transfer ownership of the company.

Finance Wales structured a seven figure loan for the firm to help with the VIMBO. Alan Rees, his wife Jane and Sheila Robbins widow of Frank who established the company sold the profitable business to an existing management team led by General Manager Stefan Marks.

“We have an exciting growth plan mapped out for the company over the next few years,” explains Marks. “We’re building on Analogue & Micro’s existing success, working with a number of bluechip companies. The VIMBO process was phased over a number of months and allowed us to develop our team. Finance Wales introduced us to our new chairman, Mervyn Ham, as well as our advisory team.”

Robert Lloyd Griffiths, Director of the Institute of Directors Wales (IoD Wales) says it is important for businesses to start planning for succession early: “It’s important to get your ducks in a row. Business owners need to plan early. You should surround yourself with good advisers and business partners.”

The IoD and Finance Wales are hosting a succession breakfast event in Cardiff on 3 November. Tickets for the panel and breakfast can be purchased via the IoD Wales website.
“We’re excited to be co-hosting this event with Finance Wales, we have an experienced panel ready to answer business owners and management teams questions. This is a really important issue for Welsh SME owners,” explains Lloyd Griffiths.

“We have a number of funds which can be used to help with succession,” adds Galvin. “We can invest in Welsh companies from £1000 up to £3 million in a single round, and off course we have the dedicated Wales Management Succession Fund which launched in spring this year. Our advice to management teams and business owners is to get in touch as soon as possible. We can talk confidentially to companies about their options and we’re able to fund viable management teams in MBO and VIMBO deals.”