The last couple of weeks I have been advising my client on a somewhat unusual transaction.
His business distributes software, word-wide, through a network of company owned outlets, resellers and distributers.
The owner of one of his distributers approached him a few weeks ago, asking if he wanted to buy her out so that she could pursue other interests.
My client was hesitant; he has no resources in that geographic area. It became apparent that both the operations manager and the sales manager were interested in acquiring the business.
As with many Management Buy-Out transactions, the management team could not raise sufficient finance to acquire the business.
My client has an existing user-base and a recurring revenue stream from that market. We’ve put together a structure where my client’s business will take a majority stake in the distributer with the management team injecting additional funds to meet the vendor’s agreed price.
Over time, the managers will receive incentives allowing them to purchase further shares to eventually become the majority owners and perhaps even complete ownership.
The operations manager and the sales manager have not managed a business before, so my client will be involved in the day to day management immediately after the sale.
I have advised on the structure of the deal, the shareholders agreement, the share option agreements and the post-acquisition integration arrangements. What I don’t have is a sensible name for a deal like this! It’s partly an MBO, obviously, but my client is also injecting management expertise and finance.
I’m calling it a corporate buy in, management buy-out