Articles
The Owner Wants An Exit But You Don't!
If the principals want to leave the business but you don't, don't panic. Lloyds TSB Commercial Finance offers a solution to help effect a change of ownership in the business, allowing you to complete such a transaction by leveraging the assets of the business. LTSBCF have built a strong reputation over the years and have successfully funded numerous management buy-outs.
Their solution is asset based lending, which often possesses the ability to release more available funding into the business than traditional facilities, such as overdrafts and loans. Asset based lending will always include an advance against debtors and can also involve funding against one or a combination of stock, plant and machinery, land and buildings. The exact mix of assets utilised will depend on your needs and the strength of security in the assets themselves. Leveraging these assets can help fund the price of the deal, or a large part of it. After purchase it can also provide the ongoing working capital required by the business.
So, whether your business is owned by a large group which suddenly decides that the sector is not core to its business strategy, or if the business is owned by an individual who is nearing retirement age and therefore wants to sell, help is at hand for the remaining management team.
A vast amount of the transactions that Lloyds TSB Commercial Finance completes are Management Buy Outs (MBOs). In fact, the company completed a total of 32 MBOs in 2003 which represents a 68% increase compared to 2002.
"A management buy out is often a viable option as the business is sold to the team that knows the business best. MBOs also ensure continuity to the employees as well as the customers and suppliers. MBOs can be the perfect way to inject fresh ideas and enthusiasm into a business and often management teams are surprised by what can be achieved in terms of structuring these transactions without the need for much, if any, outside equity funding," says James Cullen, Southern regional director of Lloyds TSB Commercial Finance.
In the past, there has been a degree of negativity towards a change of ownership in a business but today it is seen as a positive way forward. "Over the last couple of years the vast majority of MBOs that Lloyds TSB Commercial Finance has financed have been fully leveraged deals or they have included an element of deferred consideration. There has often been no outside equity provided other than maybe a small injection from the management team. Therefore, the transaction has been solely funded by Lloyds TSB Commercial Finance. This allows the management teams to keep 100% of the equity rather than give any away. This is obviously a positive and beneficial way to start managing a business," says Cullen.
If Cullen could offer one piece of advice to those curious about MBOs it would be: "Make sure you are comfortable with your commercial finance partner and their ability to deliver. Lloyds TSB Commercial Finance treats every deal individually, as each business is different and we are far more interested in the future of a company than the company's historic track record. Nothing pleases us more than seeing our clients reach their potential," concludes Cullen.
Lloyds TSB Commercial Finance is part of the Lloyds TSB Group plc.
Lloyds TSB Commercial Finance is part of the Lloyds TSB Group plc.
