Turning Managers into Owners

Equity Ventures is a venture capital and corporate finance firm. We will help you raise money for expansion or a management buyout or even a secondary buy-out (SBO) if you have already done an MBO and the private equity firm is still invested in you.

We manage a regional venture capital fund in which HSBC and the European investment Bank were investors (they have now exited having achieved about 1.4x their investment); and we can co-invest with other venture capital firms; but mostly we raise capital and arrange management buyouts by working for management teams in companies with annual sales of between 1 million and 100 million.

Whether we invest, co-invest or arrange a management buyout for you depends on the circumstances of each transaction. But call for a brief chat to see if we think we can help you.

We also work with managers in existing private equity companies who are looking for an exit or secondary buyout opportunity. And we will work with the shareholders of companies who are looking to make acquisitions or sell all or part of their company - usually a retirement type sale.

We are a small team so you always work with the same people.

What is your business worth to a venture capital firm?

Venture capitalists use detailed spreadsheet models in valuing and structuring buyouts. Our model distills the essence of these and it is a useful tool which has been used on many buyouts and has been purchased by several institutions, companies and banks, including the Bank of England. although this model is now no longer sold publicly you can try it online.

The model shows how the future exit value of the company will be shared between management and the venture capitalists. It is also useful for managers of existing buyout and private equity deals who are beginning to look at an exit by sale or secondary buy-out. You can see our model here to try it out for your company: MBO buyout business valuation  You will need to spend a little time putting in some financial information to get the best use from this model, but we also have a quick "lite" model if you want - just call us or try this link to it : MBO quick valuation 

Industrial sectors suitable for management buyouts

We are interested in most sectors. However, because of EU rules, we are excluded from transactions involving oil & gas, and offshore fishing. Apart from these exceptions, if it is legal and profitable, we will look at it. Turnrounds are slightly more difficult to do but we know some of the best practitioners in this field.

How does a small team buy a large company in a management buyout?

The way that a management team can fund and finance an MBO is now well established. The existing business is known as the "Target" and the MBO company is referred to as "Newco".  Newco is funded by money from the management team, venture capitalists, and banks. Because the venture capitalists invest in shares as well as loans or preference shares they get a lower precentage of the economic ownership of the company than the MBO team for each pound invested. By varying the investment proportions management can have a significant financial stake in a large company for relatively little money - provided the company increases in value after the deal is done.

What you should do to start the MBO process

The next step is to contact us by phone or email. You can approach us with just an idea for a transaction, an executive summary, or a full business plan.

If we think you have a potentially backable proposition we will arrange to meet you. This can be at your premises or elsewhere; and we are happy to meet outside normal office hours if that is more convenient or you are worried about confidentiality issues.

Equity Ventures - a venture capital firm with experience of all aspects of management buyouts

We prefer to invest alongside management and on similar terms to them. This helps align our interests with yours. We won't encourage management teams to produce profit forecasts that we don't believe in or to pay more for a business than we think sensible. This approach comes from our experienced background in banking, consultancy as well as being venture capitalists for over 20 years. We also did our own management buyout - so we have seen all sides of transactions.

Fees and costs

You can start on the management buyout process without worrying about incurring costs on a transaction that doesn't happen. In fact, you can get quite a long way through the process before having any personal exposure to fees and other costs. Typically, a deal will require about fifty days and our fee is usually paid by the acquiring company (Newco) which is funded primarily by the venture capital firm, not by the management team personally. Most deal fees, including ours, are contingent upon a deal actually happening.

The one area where management do have a personal exposure to costs is for professional advice on the terms of their employment contract with Newco but these will only occur once there is near certainty of a deal completing.

Is a buyout of your company possible?

A management buyout requires a seller, be they willing or unwilling. A willing seller is typically the planned retirement sale by the owner of a private business; or part of a corporate group being sold for strategic reasons. Much of the time expended in dealing with willing sellers involves finding financiers who are interested in the company at a price that nears the vendor's expectations.

An unwilling seller is a typically company in distress or administration because of losses or excessive borrowings. Even an unwilling seller will only sell if the price is acceptable to them, and distress deals often fail because the purchaser finds the problems in a distressed company are often far worse than initially disclosed. Presenting the right amount of information in the right manner is important.

At Equity Ventures we can help you establish at an early stage if it is feasible to do a buyout of your company.

We have experience of making the first approaches and assessment of buyout and acquisition possibilities and we can discuss and agree these with you. But you won't know what can be done unless you start the process - with a phone call to us.