Selling to Key Employees

Many business owners look to key employees (Management Buy-out) to take over their businesses out of a sense of friendship, or loyalty to those that have worked with the business for many years. Employees also know the business, clients, and suppliers, and there may be advantages related to continuity.

There are, however, quite a few challenges to a Management Buy-out:

  • Employees seldom have the cash needed to buy the business. Banks are usually unwilling to fund the full purchase price; therefore, the owner often must take a financial risk along with the risk of non-performance of the business.
  • Managers in the business often have specialized qualifications, such as finance, marketing, or operations, but seldom have the full circle of competencies possessed by most entrepreneurs, that are necessary to successfully run a business.
  • When expectations of management are raised by the possibility of a Management Buy-out, and the offer is not accepted, there is an increased chance that the key employees involved will leave the company.

When the owner of a business weighs the pros and cons and decides to sell to management, Robbinex may assist with:

  • Business valuations
  • Psychological assessments of key employees
  • Negotiations
  • Financing
  • Deal structure
  • Closing the transaction