Management buy-outs are making a “resurgence” following the credit crunch, according to Swindon-based corporate finance experts Watersheds.
Acquisitions of companies by their management teams were common until 2008 when the banking crisis hit. They are now making a comeback but they are tricky with less funding available from banks.
Sue Green, director of the firm based in the town’s Bath Road, said: “Management buy-outs are making a resurgence following the recession, we are definitely seeing more of them. Our concept of including an investing non-executive in the team can make it easier.
“Managing directors may be uncomfortable about raising the possibility of a management buy-out with an owner, unsure in the current banking climate if it’s practical. They may be uncomfortable about damaging their relationship with their employer by suggesting an MBO.
“An investing non-executive director or chairman can help to assess the practicality and share the burden post completion. Critically, they can also be a source of funds if the management team is short of cash. They can be the one that asks the owners if they would like to sell.
“Having an investing non-executive director or chairman as part of the deal also helps because it strengthens the management team and gives the funders more confidence.
“Finding the right investing non-executive using our network of interesting and valuable relationships can be what makes a deal happen.”
An example is the recent sale of Coalville-based AMG Electronics Ltd, a contract electrical and electronics assembly company.
Watersheds was challenged with finding an investor who would see the value in a sub‑contracting business with no intellectual property and no product of its own. The company found a perfect match in an experienced chairman building a group of unconnected businesses but all with a people focused culture similar to AMG’s.
To find out more about Watersheds visit: www.watersheds.ltd.uk
Pictured above from left to right: Mick Grewcock with Ian Bates after sealing the AMG deal