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Investec sees fourfold increase in vendor-backed MBOs in 12 months

Investec Growth & Acquisition Finance, part of Investec Specialist Private Bank, says that during the last 12 months it has seen a fourfold increase in the number of vendors looking to support management buyouts of their own companies.

They are mainly achieving this through the use of loan notes and/or by participating in the equity structure of the new company.

The benefit to the vendor is that they are able to retain a financial interest in the business without responsibility for the day-to-day running of the operation. The management team, meanwhile, does not have to raise the same level of capital at the outset for the MBO.

Investec provides support to such transactions with the provision of revolving debt, amortising debt and mezzanine finance, as is appropriate for each transaction.

Gary Edwards, head of the asset-based lending team at Investec Growth & Acquisition Finance, says: “Irrelevant of economic conditions, management desire to own equity and shareholder considerations for change remain, be it retirement, the investment strategy or levels of liquidity. There has been commentary suggesting that it is still the wrong time to sell if you don’t have to as it is at a low point in the cycle for value. Yet we have found that the use of loan notes and/or roll-over equity has facilitated deals that meet all stakeholder objectives whilst delivering shareholder value.”

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