Management buyout finance, structured the way a credit committee reads it.

MBO finance is the funding that lets a management team buy the company it runs. It is usually a combination of senior debt from a bank or cash flow lender, an asset based facility where the business has a strong balance sheet, a vendor loan note from the seller, the management team's own cash and, on larger deals, private equity. The debt is raised by a new company set up to buy the shares and is repaid from the profits of the business itself.

MBO stands for management buyout: the purchase of a business by its existing management team, normally with the support of external funders. The related terms are MBI, a management buy-in by an external team, BIMBO, a blend of incoming and existing managers, LBO, a leveraged buyout led by a financial sponsor, and EOT, the sale of a controlling stake to an employee ownership trust.

In the UK, a management buyout is the most common route by which an owner-managed business passes to its senior team when the founder retires or a group divests a subsidiary. The team forms a new company, funders lend against the target's EBITDA and assets, the vendor is often paid partly over time, and completion is documented in a share purchase agreement alongside the facility agreement and a shareholders agreement. Business lending to a limited company is unregulated in the UK, which is why arrangers like us do not hold FCA authorisation.

Enough to be meaningful to them personally, rather than enough to fund the deal. Funders typically look for the team to invest 5% to 15% of the purchase price in cash from the team, often the equivalent of a year or two of salary each, and will not lend to a team that has nothing at stake. The rest is debt, vendor deferral and, where needed, investor equity.

Four to nine months from the first serious conversation with the owner to completion is typical. Indicative funding terms can be obtained within two to four weeks of a credible information pack; credit approval, due diligence and legals take the balance. The most common cause of delay is not the funder but an unresolved gap between the vendor's price and the debt the business can carry.

Not with none, but with far less than the price. Vendor loan notes, asset based lending against the balance sheet and private equity backing can take a team's cash contribution down to a small fraction of the deal. What no funder will accept is a management team with nothing personally invested, because that is the alignment the whole structure depends on.

For the owner: a confidential sale to people who know the business, continuity for staff and customers, and often a faster process than a trade auction, against a price that may be lower and partly deferred. For the team: ownership of a business they understand without paying a start-up premium, against personal guarantees, leverage and a dual role as buyer and employee while the deal is negotiated. Our guide to the advantages and disadvantages of management buyouts sets out both sides, including the taxation of the sale.

The vendor pays capital gains tax on the sale of shares, at 18 or 24 percent as of September 2026, with Business Asset Disposal Relief reducing the rate to 18 percent on the first £1 million of qualifying lifetime gains. The team's shares fall under the employment-related securities rules and are usually protected by a section 431 election. Interest on the acquisition debt is generally deductible for the new company, subject to the corporate interest restriction. We do not give tax advice; the team's and the vendor's accountants should confirm the treatment.