Management buyout finance for UK management teams.

MBO financing is built in ranked layers, cheapest and most secured at the bottom. Senior bank debt sits first, priced at an indicative 7% to 10% all-in and secured by a debenture over the trading business, with the tightest covenants and the shortest patience. Above it, specialist cash flow lenders advance against EBITDA rather than assets at roughly 9% to 14% all-in, which buys leverage a clearing bank will not write. Asset based lending runs alongside both, releasing cash from debtors, stock, plant and property at around 6% to 10% plus facility fees.

Higher up, mezzanine debt at 12% to 18% including PIK including any PIK element fills a gap that senior lenders will not stretch to, and the vendor loan note, commonly 5% to 8%, sits behind everything under a deed of priority. Equity, whether management cash or an institutional investor, takes the last position and the largest share of the upside. Pricing is indicative as at September 2026 and moves with Bank Rate, leverage and credit quality.

The document that holds the layers together is the intercreditor agreement, or on smaller deals a deed of priority. It ranks the lenders, says who may be paid while a senior covenant is breached, and decides who controls enforcement if things go badly. That is why the order of conversations matters as much as the mix: agreeing security or repayment terms with a vendor before a senior lender has set its own conditions almost always means reopening the negotiation later. We settle the senior terms first and fit everything else beneath them.

Each layer has its own page: buyout loans, asset based lending, vendor finance and private equity.

This is the most common reason a management team decides a buyout is impossible, and it is usually wrong. The benchmark contribution is 5% to 15% of the purchase price in cash from the team, and there are four established ways to bridge a shortfall. A larger vendor loan note pushes more of the price into deferred consideration. Sweet equity with an institutional investor gives the team a geared share of the upside for a small cash subscription. Deferred subscription lets managers earn their shares out of bonuses over the first two years. And where the balance sheet allows it, an asset based facility raises day-one cash that a term loan alone would not.

What funders are testing is commitment, not net worth, and the financial contribution is read alongside the business plan rather than on its own. A team that has remortgaged nothing but has skin in the game proportionate to its means reads better than one that has borrowed personally to look richer. The benefits of a modest, honest contribution are simple: the directors keep their financial resilience if trading dips in year two, and the lender is not relying on people who are already stretched. We would rather present a modest, genuine contribution alongside a well-argued forecast than a stretched one that leaves the directors fragile the moment trading dips.

Read the detail in funding a buyout with limited personal capital and personal guarantees in an MBO.

The buyer, not the borrowing. An MBO is bought by the incumbent management team, so gearing is moderate and continuity is the credit story. An MBI is bought by an external manager or team, which raises execution risk and pushes lenders towards more equity and less debt. A BIMBO blends the two, incoming and existing managers buying together, and funders generally like it best because the operational knowledge stays in the building and the transition is smoother. An EOT sale suits businesses where the owner wants continuity above price. An employee ownership trust sale transfers control to a trust held for the employees, usually financed by the vendor over several years.

A leveraged buyout describes the financing technique rather than the buyer: a financial sponsor acquires a business using substantial debt raised against it, targeting a return over a defined hold period, often in a growth sector where the exit multiple is expected to rise. Gearing is higher, the debt package is larger and more structured, and a unitranche facility often replaces a bank plus mezzanine split. Plenty of MBOs are, technically, small leveraged buyouts. Where a deal is genuinely sponsor-led acquisition finance we handle it through our sister desk at LeveragedBuyoutFinance.co.uk.

Compare in detail: MBO vs LBO, MBO vs MBI, buy-in finance and EOT finance.

Names active in this market fall into groups that price the same deal very differently. Clearing and challenger banks, among them Barclays, HSBC UK, Lloyds Bank, NatWest, Santander UK, take the cheapest senior slice on conservative leverage. Specialist cash flow funds such as ThinCats, Caple, Growth Lending, Boost&Co lend against earnings and go further up the multiple. Asset based lenders including Close Brothers, Aldermore, Arbuthnot Commercial ABL, Secure Trust Bank Commercial Finance release cash from the balance sheet. Institutional investors such as BGF, LDC, Maven Capital Partners, Mercia take the equity gap, and regional funds including British Business Bank, Development Bank of Wales, Scottish Enterprise back deals in their own footprint. That list is illustrative of names active in this market, not a recommendation, and no funder is obliged to consider any particular case.

We work on management buyouts and little else, which is the whole argument for a specialist rather than a generalist. We are an arranger and introducer, not a lender. Matt Lenzie founded the desk after 25 years in banking with significant transactional experience including buyouts, and more than £400m raised for clients across corporate and property transactions. We charge an arrangement fee of 1% of the debt raised, payable only on successful drawdown. Where a lender pays us an introducer or procuration fee, that is credited first and you pay only the difference up to 1%. No fee at all if the transaction does not complete. Lenzie Consulting Ltd is not authorised or regulated by the FCA; we arrange unregulated business finance for limited companies and LLPs only.

1. 1. Brief 15-minute call

   We take the deal outline: the business, its EBITDA and trading history, the price the vendor has in mind, who is in the management team and how much cash they can put in. Fee-free; no commitment.

2. 2. Funding structure and indicative terms

   We model debt capacity from EBITDA and cash flow, build a sources and uses table with senior debt, asset based facilities, vendor loan and equity, then run the case across the panel and bring back indicative terms.

3. 3. Credit approval and due diligence

   The chosen funder takes the case to credit. Financial and legal due diligence, a review of the business plan and forecasts, security and personal guarantee terms are agreed and the offer is issued.

4. 4. Legals and completion

   Facility agreement, debenture, share purchase agreement and any vendor loan note are negotiated in parallel. Funds draw on completion and the management team owns the business.

What that looks like in practice is a financing structure argued from the business rather than from a rate card. We model the debt the business can service, build the sources and uses table, write the funding proposal, and take it to the funders whose current appetite fits the sector and the size. Where a financial or legal adviser is already engaged we work alongside them; where one is not, we say what the transaction needs before it needs it. Most management buyouts reach us with a price already discussed and no view on whether the business can carry it, and closing that gap is the first piece of work.

See the full funder panel · The MBO process timeline · Talk to us