The Legal Process of a Management Buyout
- Corporate Law
- 1st Jul 2021
Management Buyout Series Part 3: The Legal Process What is a Management Buyout? A management buyout (MBO) is a transaction where the core management team of a company work together to buy a company, or part of it. Please refer to our blog on MBOs: the Pros and Cons and MBOs: Considerations before, during and […]
By Rachel OwenMLP Law
Management Buyout Series Part 3: The Legal Process
What is a Management Buyout?
A management buyout (MBO) is a transaction where the core management team of a company work together to buy a company, or part of it.
This guide sets out the likely legal documents required on an MBO assuming that a single newco buying vehicle is used by the MBO team and external funding is required.
Heads of Terms between seller and buyer for the acquisition
Heads of Terms with any equity investor
Bank Term Sheet
Due Diligence Enquiries
Responses to Due Diligence (and supporting documents)
Management Questionnaires for the investors
Allotment of Shares
Shareholders Agreement between MBO team
Articles of association
Sale & Purchase Agreement (including a Tax Covenant)
Disclosure Letter (and Bundle)
Stock Transfer Forms
Powers of Attorney
Deeds of Release / Discharge of Indebtedness
Investment Agreement (if an equity investor)
Security in favour of the investor (debentures and guarantees)
Investor disclosure letter
Directors Service Contracts
Vendor Loan Notes
Vendor Debenture (or other security)
Bank Facility Agreement
Bank guarantees and debentures
For each of the Buyer (newco) and the target company, some or all of the following:
Resolutions of Shareholders
Application for shares
Loan Note Certificates
Appointment Letters and forms
Resignation Letters and forms
Forms to register security
Forms to deal with allotment of shares and statement of capital
Other Ancillary Documents that may be required:
Completion monies undertakings
It can be seen from the above that an MBO is far from simple in terms of legal documentation, particularly where third party funding is required by the MBO team. However, MBOs remain an attractive option for both business owners wishing to exit and managers wishing to step up into an ownership role.
If you have any questions about the above, please get in touch with a member of the MLP Law Corporate team by emailing email@example.com or calling 0161 926 9969.
About the expert
Stephen is the Owner of MLP Law and leads our Commercial, IP and Dispute Resolution teams which provide advice on all aspects of the law relating to mergers, acquisitions, financing, re-structuring, complex commercial contracts, standard trading terms, share options, shareholder and partnership agreements, commercial dispute resolution, joint venture and partnering arrangements, IT and Technology law, Intellectual Property, EU and competition law, Brexit and GDPR.
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