Planning Your Exit from Your Business

8. Planning an MBO

8.1 Sound out your management team.

• Avoid raising their expectations too much.

8.2 Train your management team.

• Their skills will be a key issue for venture capitalists or banks funding a deal.

8.3 Put a value on the company.

8.4 Give the management team time to raise the money - they will probably have to approach banks and venture capitalists.

8.5 Talk to management about how you might structure any deal.

• Consider allowing them to acquire the business in stages, buying part of it each year for a number of years out of their share of the profits.
• You continue to take your own share of the profits until the deal is complete.
• Get a legal agreement committing the management to buy the whole business, so they cannot change their mind.Use this agreement to make sure you pay tax on any capital gain at the end of each year, rather than paying it all at the start.