Updated: 20th May 2020
Developing an effective succession plan takes time, and needs careful consideration. It’s probably taken years of hard work to build up the business so you want to make sure you extract as much of the value as possible.
Selling may be an option – perhaps to a third party or the existing management team, but there are other exit strategies that might be a better fit depending on your circumstances at the time.
If there’s nobody to take over when you step down, for example, a form of voluntary liquidation could provide the answer. But let’s look first at your options for sale, and the various ways you could incorporate selling the business into your succession plan.
Management Buy Out (MBO)
If you’ve developed a strong management team with succession in mind, a Management Buy Out would facilitate the purchase of your company by the existing team members. MBOs offer a smooth transition when the time comes to make your exit, as the management team already understands the business and its place in the market.
Management Buy In (MBI)
A Management Buy In involves an entirely new management team purchasing and taking control of the business. The introduction of new ideas and a fresh perspective can be valuable in this scenario, although a lack of prior knowledge of the business is sometimes seen as a drawback.
Buy In Management Buy Out (BIMBO)
If you feel the options above offer benefits, but significant drawbacks also exist, a combination of the two processes could be the most suitable solution. A Buy In Management Buy Out (BIMBO) involves some or all of the existing management team remaining in place, and being supplemented by one or more new members - perhaps with specialist skills that aren’t already present within the team.