Management buyouts are increasingly seen as an effective route for business owners seeking to realise value and despite challenging economic conditions there has been plenty of activity over the past few years.
MBO activity
Volumes
The number of private equity-backed management buyouts jumped to 94 in 2010 from 63 a year earlier, according to figures published by the British Venture Capital Association.
Value
The amount invested rose from £1,729m to £4,725m
The highest number of deals (42) took place in the £10m and below bracket, although that was only marginally ahead of volumes in the mid-market £10m to category in which 39 Private Equity backed deals took place. There were 13 deals valued above £100m.
(Source: Figures from BVCA Global Investment Activity Report 2010)
Trends in 2011
The overall number of MBOs fell again in the early part of 2011, with 65 recorded in the first half of the year against 72 in the same period in 2010, according to KPMG, overall mega deals made a comeback with two above the £1bn mark.
Performance
Private equity backed buyouts outperformed both private and listed companies during the recession, according to the Centre for Management Buyout Research. Productivity was 14% higher and profitability 5% greaterCOUTTS SURVEY
Vendor Attitudes
Relatively few vendors see management buyouts as the preferred exit option, according to research carried out by Coutts in 2011. When entrepreneurs who had not previously taken part in a sale to management were asked which exit option they would favour, only 18.7% ticked the MBO box. This compared with 55% who favoured a trade sale.
When asked if they had discussed the possibility of an MBO with their management team, 21.62% said they had against 78.38% that hadn’t. When asked if an MBO had been discussed with individuals outside the management team around 78% said no.
Outcomes
When vendors who had been through an MBO were questioned, the same survey revealed a high degree of satisfaction. 85% said they were very happy and 97% said it was an effective way to sell a business. More than a quarter said they had chosen the MBO option because it offered the best deal.
