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An MBO (Management Buy Out) is a business acquisition made by the internal management team of a target company, while an MBI (Management Buy In) is the acquisition of a company by an external management team. MBO's and MBI's are inherently risky ventures, the success rate of which is very low unless conducted with professional help.

The current management of a business undertakes an MBO if the organisation is divesting a business segment. It could also take place if the owner of a business is retiring and the management is convinced about the growth prospects of the business. An MBI is undertaken by a group of entrepreneurs or a strong outside management team. This team identifies underperforming businesses in its sector and buys the business that it thinks it can resurrect through its skills and expertise.

A broad range of MBI and MBO opportunities are available for senior executives who have the ambition and risk taking ability to acquire and run their own business. However, you need to take each decision with care in order to ensure the success of your MBI or MBO. The first decision that you need to take while mounting an MBI is to identify a target business. The selection of the target business should be based on the sector/industry in which you or your management team specialises in, the size of the business and its location. In case of an MBO, you need to determine the viability of the venture first.

For your MBO or MBI to be successful, you need to work out every detail and resolve all major and minor issues successfully. This is where you will need an experienced professional advisor. The advisor’s job is to help you draw detailed business plans that will ensure that you achieve your goals successfully.

In many cases in order to fund an MBO you will require external funding, you can receive the required funding through venture capitalists or financial institutions. However, you need to decide on the right venture capitalist, so that you get a funding package that is enough to meet your cash requirements and has flexible repayment terms. In most cases both MBO and MBI teams will be required to make a capital investment as individuals, this demonstrates commitment and confidence to external funders.

Mounting an MBO or MBI is a complex task and needs to be dealt with professionally. Whether it is the selection of an appropriate MBI or MBO target, identifying a proper asset financing company, or writing out a funding application, Inspired Business Vision can assist you throughout the process.

Contact Us now to see how we can help you in relation to MBO/MBI.

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