Asset Based Lending -

Management Buyouts, Buy-Ins and Capital Gains Tax – A structured lending package

As a business owner, are you actively exploring exit options due to a potential hike in Capital Gains Tax? Arbuthnot Commercial ABL can offer flexible solutions designed to deliver greater certainty.

Published

18th December 2020

Category

Arbuthnot Commercial Asset Based Lending

Chancellor Rishi Sunak’s plans for a potentially significant hike in Capital Gains Tax (CGT) on business sales, which we discussed last week has caused a spike in the UK’s Mergers & Acquisitions (M&A) market.

Asset-based lending for MBOs & MBIs

The prospect of a CGT rise by the Chancellor has led to a plethora of businesses considering an exit to realise the value of their business ahead of the budget announcement next March.

There are three essential conditions that a business owner will need to meet in order to ensure a successful Management Buyout (MBO) or Management Buy-in (MBI) before the budget:

1. A motivated buyer

An MBO is a form of acquisition in which a company's existing management team acquires a large part, or all, of the business from the owner. There are many benefits to this approach; the existing management team knows the business inside out and they gain the opportunity to advance their careers and drive it forward to the next level of success.

An MBI involves an experienced individual or external team not only acquiring the business from the existing owner but also leading the company into a new era. Typically, they will have a successful track record within the same sector as the business they wish to acquire.

2. High levels of funding

With either an MBO or MBI scenario, there will be an immediate requirement for the buyer to raise a large amount of capital to fund the initial purchase. They will also need to have the resources to embark on a journey that will deliver substantial business growth in order to realise their ambitions.

With the support of asset-based lending (ABL), MBOs and MBIs owners can accelerate the process of achieving a successful sale. Indeed, an ABL solution can provide financing for both the initial share purchase and the additional working capital needs the management team might need to grow the business post-sale.

The advantage of an ABL facility is that it generates a higher level of working capital than traditional sources of finance making it popular with businesses. As it is based on a complete mix of assets, combined with an additional cash flow injection, this type of facility is able to provide even greater financial headroom where required.

Crucially, given the timescales involved, the security provided by a strong asset base can also help lenders to make faster decisions, giving the management team the peace of mind that sufficient funding is in place.

3. A specialist lender with a proven track record of delivery

Recognising that increasingly business owners are actively exploring the exit options available to them, Arbuthnot Commercial ABL can now offer solutions designed to deliver greater certainty.

MBI & MBO structured lending package 

  • Combined ABL and cash flow offering, providing optimal levels of funding 
  • Preserves equity of the management team 
  • Bespoke solution, designed around the specific requirements of the business 
  • Senior team with a proven track record in delivering event-driven transactions to tight timeframes  
  • Focus on expertise, flexibility of funding and speed of delivery

Criteria 

  • Revenue £10m – £100m 
  • Minimum sustainable EBITDA > £500k 
  • Established business 
  • Experienced and successful management team 
  • Robust strategy

To discuss opportunities where you or your clients wish to realise value through an MBO or MBI, please contact us.

Get in touch

Richard Ackers
Director Business Development
(North East region)

RichardAckers@arbuthnot.co.uk

07741 162590

 

Joe Taviner
Director Business Development
(North West region)

JoeTaviner@arbuthnot.co.uk

07341 479 334

Keith Rose
Director Business Development
(Midlands and South West region)

KeithRose@arbuthnot.co.uk

07973 912611

 

James Marler
Director Business Development
(London & South East region)

JamesMarler@arbuthnot.co.uk

07741 148364


Gatwick Office: The Beehive, City Place, Gatwick, RH6 0PA

Registered in England and Wales no. 10915339. Arbuthnot Commercial Asset Based Lending Limited’s registered office is Arbuthnot House, 7 Wilson Street, London, EC2M 2SN. Arbuthnot Commercial Asset Based Lending is not authorised and regulated by the Financial Conduct Authority.

 

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