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Key Considerations for MBOs
Key Considerations when Completing an MBO:
- Is the current owner willing to sell on reasonable terms and conditions
- Is the price reasonable?
- Is this the right time to negotiate a purchase?
- Do you have the necessary skills to complete such an undertaking?
- Do you have a leader that is passionate about the business and its prospects under new ownership?
- Are you prepared to make a significant equity contribution towards the purchase price?
- Can you develop a realistic business plan demonstrating the potential for the continual growth of the business?
- Will other sources of financing be available to complete the purchase such as bank lines of credit, term and subordinated debt and vendor notes?
- What will be the reaction to the ownership change by the other stakeholders (customers, suppliers and employees)?
- What, if anything, will be lost by being detached from the current ownership group?
What do you need to be successful?
- A strong understanding of many aspects of the business world: accounting, marketing, general business structure, etc.
- A viable business. The company should currently be cash flow positive with the potential for substantial growth.
- A willing vendor with reasonable expectations for the selling price and payment terms.
- A strong management team with a clear vision for the future.