Management Buyout Strategy | Management Buyout Consulting Firm


Management Buyout Strategy



“I spent years doing research and speaking to advisors, investors, and banks.  I cold find no support for the find of management buyout transaction I wanted to do and believed could be done.  That is, until I stumbled upon Lantern Capital Advisors.  Just one phone call to Lantern and I heard the words, “it absolutely can be done!”  Lantern then helped me make it happen.  I will be forever grateful to Lantern Capital Advisors for their counsel, expertise, and hard work in leading us to our goal.”

— DF, CFO, Full Service Call Center

“I spoke with multiple financial firms about the possibility of conducting a management buyout of a particular division.  Most of them seemed more interested in developing a long term relationship with the parent company than they were in securing the best possible deal for me.  I was then referred to Lantern Capital Advisors and things just clicked.  They listened carefully to my vision for the business and patiently explained every step of the management buyout process.  They met every expedited timeline and used their extensive network to find me the best possible investment group.  I don’t know that a deal would have been completed without their guidance.  I would recommend Lantern Capital Advisors to anyone contemplating a similar transaction.”

— JR, CEO, Consumer Products Company

Contact Lantern Capital Advisors to help your company CONFIDENTIALLY explore Management Buyout/MBO Financing.

If you are an executive interested to do a management buyout, you likely have two objectives: (1) complete the management buyout AND (2) achieve management buyout funding in a way that maximizes your personal ownership and control of the Company. Most books and resources provide plenty of information on how to accomplish objective #1 but little on accomplishing objective #2. In fact, accomplishing a management buyout where management owns a significant portion of the equity requires some out of the box thinking that can go against the conventional wisdom for financing management buyouts.  As part of your management buyout strategy, here are five important strategies for both completing a management buyout and maximizing management’s ownership.

If you are a manager interested to do a management buyout and you really want to maximize your ownership in the process of achieving management buyout financing, consider these 5 (unconventional) strategies. If you want more information on these steps or want to discuss how we can help you and your team, please contact us. We believe in the management buyout strategy discussed here and we use them everyday to help our clients maximize their ownership and get the most out of their opportunity.

Become Pre-Qualified to Execute The Management Buyout

Owners often don’t take managers seriously when it comes to management buyouts, because owners don’t believe managers can come up with the funds to buy the business. So, before trying to really explore buyout terms with the owner, have some preliminary discussions with potential financing sources to determine their likely interest level.

Your goal is to find one or more financing groups that are sincerely interested to explore funding your management buyout, even before the definitive terms of a buyout have been set. We routinely use this approach of connecting early with interested financing sources and we find our clients enter talks with greater confidence and greater clout in the owner’s eyes if they already have a few interested financing partners identified.

Develop Win-Win Terms For Your Management Buyout

Another conventional management buyout strategy is to focus exclusively on the price for the Company. Price is certainly important, but there are many other ‘dealpoints’ of a management buyout such as payment terms, equity retention, and future performance that can impact the amount of ownership a management team is able to secure. In fact, Lantern Capital Advisors has worked with managers and helped them negotiate management buyouts where the price for the Company was actually higher than first discussed and the management team ended up with more ownership. This is the definition of a true ‘win-win’ management buyout! Win-win management buyout terms are developed by understanding the key parameters for each party then adjusting the deal terms in a way that appeals to all groups-the managers, the owners, AND the management buyout financing partners.

Drive The Management Buyout Process

Once you have selected a management buyout financing partner and worked out the management buyout terms with the owner, make sure to keep driving the process through closing! It may seem odd, but some owners drag their feet during the closing process because they still have mixed feelings about selling the business. Finance groups can also drag their feet too because they are busy working multiple financings at the same time. Once you have deal terms set, you want to move as quickly as possible to close on the deal. The faster you can keep things moving the less likely something is going derail the process, like the owner changing his or her mind or some unexpected interruption to the business. Also your assertiveness during the process will make a favorable impression on your new management buyout financing partners.

Management Buyouts Beyond Traditional Private Equity Firms

Look beyond traditional private equity firms to finance your management buyout:  The conventional way of financing a management buyout is with a private equity fund. The problem with that is that most private equity funds often end up owning 90% of the equity in the business. To get more equity, managers need to look at other sources of financing such as specialty debt providers. Specialty debt providers can generally provide more capital than traditional banks but at a higher rate. They also often offer attractive terms like customized repayment schedules and limited or no personal guarantees. Some of these groups may also look to take part of the equity in the company in order to meet their target investment returns but their ownership requirements are usually much less than what private equity groups would require. To give you an example, we recently helped a manager finance the buyout of his division for $7.5 million. The manager ending up owning 27% of the business at the closing. However if the manager hits his three-year financial projections, that ownership will increase to 43%. In addition, the selling owner retained 12% of the ownership thus giving the manager and the selling owner the opportunity to collectively own 55% of the combined business and control its future if they hit their numbers.(For a more detailed discussion about financing options for buyouts, see our other related white paper, Creative Management Buyout Strategies.”)

Management Buyout Financing Play the Numbers

Another common approach in management buyout financing is for managers to lock into one financing group very early in the buyout process. If you have time, you want to consider as many financing groups as possible because there can be a big range (or spread) in financing terms and cost. In fact, clients have seen the spread in financing terms be 50% or more of a Company’s equity. This can mean the difference between managers having a controlling stake or a minority ownership stake in the Company. Finance is not an exact science! So given what is at stake, it pays to cast a wide net. In our typical management buyout process, we strive to contact 50 or more capital groups including a variety of different types of capital providers. From this effort we expect to obtain multiple offers which gives our client options and creates competition which can dramatically improve the cost and terms of financing a management buyout.


Lantern Capital Advisors is a management buyout consulting firm that specializes in corporate financial planning and executing management buyouts, specifically geared towards raising capital for established growing companies.

Lantern Capital Advisors is a Management Buyout Consulting Firm specializing in helping clients achieve management buyout financing. Our management buyout strategy is very efficient, effective and proven.  We can very quickly package a company for the market, confidentially solicit institutional interest, and negotiate proposals – clients can expect term sheets as soon as three to five weeks after engaging our firm to execute the management buyout process, and achieve management buyout financing in as little time as eight weeks.

We help companies CONFIDENTIALLY explore management buyout financing alternatives in order to buyout shareholders, afford an owner an exit strategy, or execute a leveraged buyout.

We believe that a company’s best interest is to look for and secure multiple management buyout financing options (MBO Financing) in order to achieve the best financing terms.

As a management buyout consulting firm, Lantern Capital Advisors has a defined process to raise capital.  Learn about our three phased approach to raise capital to finance management buyouts.