Management Buy-In: what it is and what you need to know

Home " Management buy-in " Management Buy-In: what it is and what you need to know

The Management Buy-In (MBI) is a very common form of business acquisition. In an MBI, a person from outside a company buys in. It may involve a partial or full equity stake. If you are considering looking for an MBI candidate for your company or are thinking about buying in, it is important that you know what a Management Buy-In is and what is involved.

Who is a Management Buy-In suitable for?

A Management Buy-In is not the right solution for everyone. Some people simply fit this construction better than others. You yourself are a suitable MBI candidate if you:

  • Independently able to (further) develop a commercial organization
    Are you someone who likes to work independently and always sees opportunities for improvement, but can't get rid of them as an employee then the MBI is an interesting option.
  • Enough equity has
    You can be entrepreneurial by nature, but taking over a business costs money, a lot of money. So you will need to have built up some equity to make the MBI successful.
  • Lots of specialized knowledge
    If you yourself are a great specialist in a particular field as well as having management skills, an MBI can be a very attractive opportunity to better utilize your qualities.
  • Aspires to become an entrepreneur.
    One in three employees dreams of being their own boss. This not infrequently stems from dissatisfaction with the current work situation. Usually you have many ideas of your own that you cannot implement within the organization where you work and you feel you have too little autonomy.
  • Assumes financial benefits
    You obviously hope to benefit financially. By buying into a business you are going to share in the profits, and if you manage to grow the business you will only be able to reap greater financial benefits.

Are you facing a business acquisition? Take advantage of opportunities - avoid pitfalls

  • Business acquisition coming up?

    Take the right steps.

  • Turn on the Helpline

    Our experienced business acquisition attorney will consider your issue. 

  • Free advice

    We share - at no cost - our view of your case. 

An MBI candidate could be the solution for your business if you:

  • Haven't found a good successor yet
    After years of hard work in your own business, you are ready for something else and want to sell your business quickly. Or you are approaching retirement and have no family members willing to take over the company. An MBI can be a quick solution.
  • Drastic wants to take action through a turnaround
    Should things not go the way you want with your business, a turnaround may be necessary. An MBI can play an important role in this. This way, your business can be in a completely different state in no time.
  • Experiencing strong growth
    Your company may have grown tremendously fast in recent years. The incumbent management can barely handle this growth. An MBI can then provide a solution by relieving you of your duties.

Financing a Management Buy-In

By far the most difficult issue in a Management Buy-In is financing. How much will the MBI pay? What will he get for it? And how will he finance it?

Management Buy-In

Not infrequently, an earn-out is negotiated. That is, there is a gradual acquisition of shares. Payment of the acquisition amount is also made in stages. The total acquisition sum ultimately depends on the performance achieved. This is risky for the selling party. After all, the current owner has limited influence on future performance.

Whether this is a good option for the seller depends in part on the quality of the incumbent management. An MBI has only general management knowledge and usually knows little about the technical and operational details of your business. The second layer of management does possess that knowledge.

Non-financial factors
Funnily enough, it is the non-financial factors that are decisive in a business acquisition. Almost always, financing an MBI is difficult. Solvency is usually weak and the number of uncertainties high. Moreover, the Capital Protection Act(art. 2; 207C BW) stipulates that there must be a separation between acquisition financing and working capital financing.

To compensate, good cash flow is needed. Future sales must be enough to pay for the acquisition. For this, non-financial factors such as market conditions, management quality, competitive position and industry are crucial.

Two major advantages of a Management Buy-In

  1. Existing Business
    The big advantage of an MBI is that you are stepping into an existing business. There are already customers, there are already products and there are suppliers supplying the products. So you no longer have to delve into that. You skip the whole, sometimes years-long build-up phase. You also skip the doubts, uncertainties and even despair that come with building a business.
  2. Instant Income
    Everyone who starts out setting up a business knows that in the first few years there is little that can be credited to the bank account. All profits are often invested directly back into the business in order to continue to grow. Not everyone has the financial room to go through such a costly build-up phase. An MBI allows you to pay out a management fee directly from ongoing cash flow.

3 things to consider with an MBI

A Management Buy-In is an attractive way to quickly become owner of a company or to sell a company in a short period of time. However, there are a number of things you need to pay attention to.

  1. Matching business
    Whether you are buying or selling a business, it is very important to see if MBI and business are a match. Every year, some 12,000 businesses in the SME sector are sold in the Netherlands. In 40 percent of the cases this involves an MBI. So there are plenty of options. Buyer and seller have a much better chance of success if they examine in advance whether the branch, location, cash flow, position, growth cycle and type of company match the wishes and capacities of the MBI candidate.
  2. Financing
    Since the financial crisis just over a decade ago, it has become much more complex to finance a Management Buy-In. Much more equity must be contributed than in the past. To raise the amount needed, an MBI often deploys multiple resources and methods, including equity, a bank loan, outside investors, a vendor loan from the seller and leasing. The key is to understand as early as possible in the process whether or not the financial room is there.
  3. Personal click
    About a Management Buy-In, they say it must be awarded to you. It's usually not the selling party's first choice. An ordinary business acquisition yields more. Furthermore, after the transfer, both parties have to interact a lot and the MBI must also be accepted within the company. If there is no click then it often becomes a tricky business.
Management Buy-In

Help with a business acquisition

Direct contact with an experienced advcaat: call 055 303 1950


About mr. Ernest Loor

Ernest is founder of He advises on all legal issues involved in a business acquisition. From due diligence to recording.



Free Intake

What is your issue? During a no-obligation intake interview, we are happy to think along with you. 

Want to know more? We are at your service.

We are happy to think with you. Request a free intake interview for initial advice.