Management buy-outs are a great opportunity for a senior management team to become part owners of a business, but each shareholder will have their own set of goals. It’s vital that a succession plan is put in place very early on in the game to create transparency and trust.
It’s easy to identify those shareholders who have one eye on the business and the other on the door! They are the quick thinkers, possibly the more risk taking members of the group, who may want to buy up, merge and acquire at a faster pace than the other members are happy to do.
Those other members probably see themselves as long-term “employees” of the business, as well as shareholders. They like job security that part business ownership gives them. There is no right or wrong, though cracks can occur when a power struggle starts to take place.
For succession planning in this situation to be a success, a likely recommendation is to pull in an independent third party or parties to act as advisories. The aim is to ensure both parties achieve a beneficial outcome that they are all happy with. For those who want to build and sell up and get out, having independent advisors negotiate and facilitate the process allows for a smoother transition period.
For those who wish to stay on board, then advisors can assist with capital management and strategic planning to allow for the continuity of the business. Even for those who want to stay in the business it’s key to identify early on strong managers who can at some point take on greater responsibility. Training and development for these managers is a wise investment for any sustainable and profitable business.
Succession planning isn’t just an exit strategy it can also be a time to grow and develop a business, so staff, shareholders and customers all get the best deal. Whether you want to retire or just move on to something new, the only way to successfully achieve this is to plan ahead.