6 pitfalls to consider in a Management Buy-In

Home " Management buy-in " 6 pitfalls to consider during a Management Buy-In

You have decided to become self-employed. The fastest way to get there is through a Management Buy-In (MBI): you buy into an existing company and enjoy the benefits of an already running business. However, there are a number of pitfalls with a Management Buy-In to consider.

You skip the whole time-consuming and money-consuming set-up phase and can immediately use your extensive knowledge of the field and your management skills. An MBI, provided you have sufficient assets, seems like a logical and even simple step, but there are a number of pitfalls with a Management Buy-In that you should be aware of.

  1. The company is too dependent on the owner

    Before proceeding with a Management Buy-In, it is better to investigate how dependent the business is on the owner. Especially in SMEs, it is common for customers to buy specifically from that company because they have a good relationship with the owner. The staff is willing to go the extra mile because they get along so well with their manager. You have to rebuild that loyalty as the new owner, but sometimes that is not possible and customers go straight to a more financially interesting company as soon as the old owner has left.

  2. You have fallen 'in love'

    What goes for buying a house also goes for a business: falling in love is never a good idea. As a result, you ignore the hidden defects in a house, that highway in the backyard no longer matters, and you think at every crack: the plasterer will fix it. Meanwhile, you pay way too much for a house that ends up being a disappointment. It's no different with a business. You can think so hard that this is your dream business, but always remain critical and investigate whether it is really such an interesting purchase.

    Management-Buy-In Traps

  3. You have to pay for obsolete stock

    Most people are not cheering when there appears to be a large stock. It always poses a risk. Therefore, research carefully what that inventory consists of and make sure you don't get stuck with obsolete goods, i.e. products that are difficult to sell, such as obsolete goods or products that have not caught on. If you do take them over, but don't get rid of them then they can become quite an expense.

  4. You implement changes too quickly

    You are enthusiastic and want to get started as soon as possible. Naturally, you are tackling things differently than your predecessor. No doubt you already have some changes in mind that you would prefer to implement as soon as possible. Be careful with that. The staff needs time to get used to you and is probably happy with how things were. If you push them too hard, there is a chance that the best ones will leave. That's not good for your business.

  5. As a Management Buy-In candidate, you do the negotiations yourself

    A consultant costs money, and you yourself are an excellent negotiator. Still, it is better to leave the negotiations to someone else. It is important to maintain a good relationship with the owner and staff. It is better to let a consultant play the "bad guy" and remain friendly. This will benefit you later.

  6. You underestimate the financial pitfalls of a Management Buy-In

    A Management Buy-In is a costly investment. Research your financial options first and don't underestimate the importance of investing equity. Start talking about financing at an early stage. If it falls through at the last minute, it is a waste of everyone's time. If you are sure you can get financing, find out what risks are associated with the MBI.

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About mr. Ernest Loor

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



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