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Financieel Management

In any MBO there may be potential conflicts between the fiduciary duties of the management to the shareholders and management’s personal interests.

This perceived conflict has to be addressed at the outset and the best way to handle it is to be open about it and discuss it. Management has to agree with the vendor on the rules of engagement and the steps in the process, the timeline, approach and goals. The vendor will usually set guidelines concerning the supply of information to seek a level playing field with the MBO team and possibly between the team and other potential buyers.

It may help discussions to point out that the investor instead of the management really is the buyer. This will establish that the price is an issue the vendor must negotiate with the investor. In avoiding this sensitive issue, management can focus on promoting the MBO as an attractive option for the vendor and beneficial for the business. Management may also want to emphasise the mutual goals: the best interest for the business and a transfer of ownership in a non-disruptive smooth and swift manner.

The relationship with the seller evidently demands skilful handling throughout the process. The financial adviser will assist in this. Explaining and making understood the true economics of the MBO the vendor and creating trust from the outset are crucial.

Too often potential buyouts fail not for sound economic reasons but because of problems of communication, personality, perceived conflicts, lack of knowledge and failure to rise above traditional vested interests.

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