MBOs: 7 reasons to look close to home

Why is it that so many agencies overlook the possibility of a management buyout? And are they making a mistake?

In our experience, the idea of a management buyout (MBO) is usually ignored for one of two reasons:

  • The owners do not want the staff to know they’re selling.
  • The owners do not believe the staff have the capacity to purchase the business.

The owners are often wrong on both counts.

The real estate industry has traditionally been built through sales staff and property managers leaving an established business to set up on their own. In many cases, they take much of the established clientele with them.

So why, if you’re planning to sell, would you let potential buyers walk out the door?

Take time to consider who among your staff might be suitable for an MBO and don’t restrict your view to just sales people. Ensure all key staff are given an equal opportunity, especially those in administration and property management as their skill sets often make the best business owners.

Without doubt, some of our most successful clients have structured business and succession plans that include partial and eventual full sale to their existing staff.

The main benefits and features of an MBO are:

  1. Minimal disruption to the business, staff and clients through the sale process.
  2. Seamless transition from outgoing owners to the new owners.
  3. No cultural change or shock to the business.
  4. The outgoing owner can provide guidance and leadership over a period of time, allowing the new owners to settle into their new role.
  5. MBOs more often than not achieve a greater sale price as the buyers see the value proposition and will pay a higher price to secure their future returns.
  6. Property management slippage is usually negligible.
  7. Subject to meeting normal credit criteria, banks are usually very supportive of MBOs.

Realestimations has consulted on numerous MBOs, ranging in value from $600,000 to $5,000,000. Each was a successful transition and the businesses continue today.

If you would like to find out if an MBO might be suitable for your business, why not contact us for an obligation-free chat.

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