19. December 2011 13:41
Recently it was a big week for one of our clients, who had announced to his 30 staff that he would be selling his IT company (he owns 100%) to its Management.
With JFP’s help he had weighed up the various options. With a trade sale he could make about £1.5 million, whilst a Management Buy-Out (MBO) was out of the question as the Management were unable to raise the £100k to £150k required.
By selling to the Management, a “Newco” will be formed whereby it would buy the shares of the current company over a period of seven years, paying £1 million in the process.
Selling to Management has risks as there is no guarantee that the company can continue to generate sufficient profits to pay the annual installments. The owner realises this but feels he has a moral obligation to support his Management, who have helped him build a successful business over the last fifteen years. Selling a company for the highest price is not always the best scenario – and for our client, it was the right thing to do.
If you are thinking of exiting your company, you should call JFP for advice on 01344 872230.