Agile Capital: Funding Management Buyout opportunities

Recent events have given rise to opportunities for some organisations to dispose of select non-core assets, this means that there are real prospects for entrepreneurial management teams to leverage PE to finance management buy-outs (MBOs).

“Now is a good time for management teams to look to collaborate with a PE firm. There are a variety of sectors, including healthcare, telecommunications, utilities, logistics and transportation that would be attractive to equity players,” says Liz Kolobe, principal dealmaker: Agile Capital.

Management Buyout opportunities are presented in diverse ways, and these range from retiring owners, selling the company to key managers, to an option to access funds for growth. Additionally, it presents an opportunity to team up with skilled and experienced professionals, an important resource for any business. “Private equity gives you the chance to find a partner to share the risks and rewards of your business, whilst focussing on long term solutions,” explains Kolobe. As such Private Equity allows for motivated management teams not only access to capital, but also subsequently provides sound strategic support.

With private equity as a partner in MBOs, the advantages for a business usually include the PE teams’ financial and strategic expertise which then augments any management team’s existing operational skills. Putting the right corporate governance procedures in place and driving BEE (Black Economic Empowerment) are generally also inherent in the process. Agile seeks to impact the business in a positive way: everything from governance, to succession planning and industry best practice.

“We see that businesses often become more entrepreneurial, improving efficiencies and find new ways to drive bottom line returns once the buyout is executed,” explains Kolobe. This is particular to committed teams who have moved from managing a company to taking strategic ownership of the Newco (new company).

Agile seeks to ensure that we align carefully (and strategically) with the management team as co-shareholders – we see ourselves as partners on the same team. The current trend in divestiture has allowed for entrepreneurial management teams to not only become co-owners, but it allows for more freedom outside of large corporates. This is turn drives innovation within the business and often means additional revenue streams from new products and services.

Harnessing any opportunities around PE funding requires understanding. Any PE partner considered should have a keen interest in the business and be able to add value around governance, funding, inorganic growth and general business strategy. Businesses need to carefully grasp the type of equity that will be provided, this will ensure there are no (unpleasant) surprises for either party in the future. It’s also of significance that Agile Capital has no exit timing pressure, which allows for long term stable partnerships.

Ambitious management teams in companies should consider a MBO when the right opportunity presents itself. It may be the ideal vehicle for an investment by management into what will become their own business. The Agile PE team can assist in creating a solid foundation from which the business can grow – and steer it towards long-term success.

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