CLOSE SEARCH
Because the management team already knows the business, an MBO can feel like a natural next step. But familiarity doesn’t mean simplicity. If external lenders or private equity investors are involved, the process can quickly become complex, detailed, and heavily negotiated.
Whether you're a management team considering a buyout or a business owner exploring succession options, we can help you achieve a smooth and successful transition.
Management team (buyers): Existing managers seeking to acquire the business.
Current owners/sellers: Shareholders or a parent company selling the business.
External financiers/investors: Banks, private equity firms, or other funders providing capital.
Bringing our MBO lawyers on board early helps you shape the deal from the ground up. We’ll make sure your management team is protected, the structure works for your business, and the process runs efficiently — saving you time, cost, and stress later on.
Preliminary structuring advice – assessing the most suitable legal structure for the buyout.
Review of existing company documents – articles of association, shareholders’ agreements, and service contracts.
Identifying key stakeholders – determining management participants and current shareholder interests.
Confidentiality arrangements – drafting and negotiating NDAs to protect sensitive information during discussions.
Heads of terms preparation – setting out the key commercial principles of the proposed deal.
Due diligence scoping – planning the legal due diligence process and identifying potential risks early.
Financing arrangements: typically this will involve debt, equity, vendor funding or a combination. Where 3rd party lenders are involved, liaising with finance providers and reviewing indicative terms
Structuring the deal: The transaction is planned to comply with company law, shareholder rights, and liaising with specialist teax advisors.
Timetable and transaction plan – creating a clear roadmap for legal steps through to completion.
An MBO involves balancing legal compliance and risk management, commercial and control issues and financing issues. The main legal challenges include:
Information disclosure: There must be fair access to company information while protecting confidentiality, particularly if the MBO does not proceed. Proper NDAs and data room controls are essential.
Warranty protection: Because management already knows the business, sellers often resist giving broad warranties. These must be carefully negotiated to provide adequate protection.
Financing structure: Each source of funding - debt, equity, or vendor finance, carries distinct commercial and legal implications. If company assets are used as security, financial assistance rules must be observed.
Employment and service agreements: The management team’s ongoing roles should be clearly defined, with suitable non-compete, incentive, and good/bad leaver provisions in any shareholders’ agreement.
Governance and control: Where investors are involved, decision-making powers, voting rights, and board representation must be clearly set out to avoid future disputes.
Non-compete clauses: Restricting previous owners from competing with the business.
Earn-out provisions : Linking part of the purchase price to future performance targets.
Common funding options include:
Debt financing: Loans from banks or lenders, typically secured against company assets.
Equity financing: Private equity investment or capital from other investors in exchange for shares.
Vendor financing: The seller agrees to deferred payments or an earn-out structure.
Management contribution: Personal investment by the management team to demonstrate commitment and share the risk.
Combination funding: A balanced mix of debt, equity, and vendor finance to maintain control and cash flow stability.
Effective structuring is essential to balance control, risk, and flexibility and ensure the transaction remains legally sound and commercially viable.
If you are considering a management buy-out, our team can provide practical guidance on structure, funding, governance, and legal documentation. Contact us to discuss your plans and explore how we can support you through every stage of the MBO process.
Get in touch
If you would like to speak with a member of the team you can contact us on:
