Skip to content
GrowthBusiness Finance
Finance
Industries
Check what you could raiseMake an enquiry
Client loginPartner login
MBO funding

MBO funding for management teams

We raise the debt for management buyouts from £200k to £100m, combining senior, stretch senior or unitranche debt at up to 5x EBITDA with asset based lending and vendor loan notes, so the team can buy the business without overloading it.

Check what you could raise Make an enquiry

No credit search and no upfront fee.

EBITDA on acquisition debt
Up to 5xEBITDA on acquisition debt
transactions we fund
£200k to £100mtransactions we fund
acquisition debt terms
Up to 7 yearsacquisition debt terms
upfront fee
£0upfront fee

What is MBO funding?

A management buyout (MBO) is the purchase of a company by the people who already run it. Few management teams can fund the price from their own savings, so the deal is paid for with a mix of debt raised against the business, a contribution from the team, and often part of the price deferred to the seller through a vendor loan note.

MBO funding is the debt side of that structure. The lenders back the cash flow and the assets of the business being bought, and the team's personal investment shows it has real commitment. Getting the balance right matters: too much debt and the business struggles to grow after completion, too little and the seller does not get a fair price.

How an MBO is usually funded

Senior debt is the core of most buyouts: a term loan repaid over the life of the facility, priced on the strength of the cash flow. Where leverage needs to go higher, stretch senior or unitranche debt replaces separate senior and mezzanine tranches with a single loan. Asset based lending adds capacity where the business carries receivables, stock, plant or property, and a revolving credit facility keeps working capital headroom in place after completion.

A vendor loan note is the part of the price the seller agrees to receive later, usually with interest, ranking behind the lenders. It often closes the gap between what the business is worth and what the debt can sensibly fund.

Why use a debt adviser for an MBO?

A management team buying its own business is in an unusual position: it knows the company better than anyone, but it is negotiating with the owner it works for and may never have raised acquisition debt before. A debt adviser works for the team, not the lender. We set how much debt the business can carry, design the structure, present the deal to lenders in the way credit committees expect and run a competitive process, so the team signs knowing where the market really is.

We have access to 650+ lenders, from high street and challenger banks to debt funds and specialist asset based lenders, and we know which of them back buyouts of a given size and sector.

Talk it through

Tell us what you need and we will search 650+ lenders for indicative terms, with no upfront fee.

Check what you could raiseMake an enquiry
MBO funding

How we run an MBO funding process

  1. 1

    Assess debt capacity

    We review the accounts, forecasts and assets and work out how much debt the business can sensibly carry.

  2. 2

    Design the structure

    We set the mix of senior debt, asset based lending, RCF and vendor loan note around the agreed price.

  3. 3

    Prepare the credit paper

    We write the information memorandum and model that lenders' credit committees need.

  4. 4

    Run the lender process

    We approach the lenders best suited to the deal and collect indicative term sheets.

  5. 5

    Negotiate terms

    We compare leverage, pricing, covenants and fees side by side and negotiate the best package.

  6. 6

    Complete

    We manage due diligence, legal documentation and conditions precedent through to drawdown.

Working alongside your other advisers

On most buyouts we sit alongside the team's corporate finance adviser or accountant, who leads the deal and the price negotiation, and the lawyers, who lead the share purchase agreement. We own the debt workstream: the lender process, the term sheet negotiation, the facility agreement and the conditions precedent. Everyone works from one timetable, so the funding is never the reason a deal slips.

Who MBO funding suits

Management teams buying a profitable, established business, typically where the owner is retiring or selling a division.

  • Directors buying out a retiring founder or family owner
  • Teams acquiring a division or subsidiary from a larger group
  • Management buy-ins (MBIs), where an outside team buys the business
  • Buy-in management buyouts (BIMBOs) that combine existing and new managers
  • Manufacturing, professional services and technology businesses with steady cash flow

What lenders look at

Cash flow
A track record of stable profits and cash generation that will service the debt after completion.
The management team
The team's experience, its depth beyond one or two people and its personal investment in the deal.
The price
A valuation that leaves the business with headroom once the debt and any vendor loan note are in place.
The plan
Credible forecasts and a clear view of how the business grows and repays its debt.
At a glance

Typical MBO funding terms

Typical MBO funding terms
Deal size£200k to £100m
Senior leverageUp to 4x EBITDA on cash-flow lending
Acquisition leverageUp to 5x EBITDA with stretch senior or unitranche
StructuresSenior, stretch senior, unitranche, vendor loan notes
Asset based lendingReceivables up to 90%, stock up to 90% of NOLV
TermUp to 7 years
PricingPriced deal by deal on risk and leverage

All figures are "up to" and subject to status and lender approval.

Our process

How GBF runs the process

We start with the accounts, the management accounts, the forecasts and the heads of terms, and stress test the numbers the way a credit committee will. We then agree a target structure with the team, prepare a credit paper and approach a short list of suitable lenders. We compare indicative terms side by side, including covenants and conditions that matter as much as price, and manage the lender's due diligence and the facility documents through to completion. There is no upfront fee.

  • One senior adviser from first call to completion
  • A credit paper lenders take seriously
  • Indicative terms compared side by side
  • £0 upfront fee
Related facilities

Related facilities we arrange

Acquisition finance brokerDebt for buying another businessDebt advisoryThe full debt advisory serviceAsset based lendingBorrow against receivables, stock, plant and propertyBusiness loansTerm loans and revolving credit facilitiesAcquisition and MBO finance guideA fuller explainer on funding a buyout
FAQs

MBO funding: common questions

How much can a management team borrow for an MBO?

It depends on the cash flow, the assets and the price. Cash-flow lenders go up to 4x EBITDA on senior debt for strong businesses, and up to 5x EBITDA on acquisitions with stretch senior or unitranche structures. Asset based lending and a vendor loan note can add to that.

How much do the managers need to invest?

Lenders want to see a meaningful personal commitment from the team, sized to their own means rather than a fixed percentage. The rest of the equity gap is usually filled by a vendor loan note or, on larger deals, private equity.

What is a vendor loan note?

Part of the purchase price that the seller agrees to receive later, usually over several years with interest. It ranks behind the senior lenders, who set limits on when and how it is repaid.

How long does an MBO funding process take?

Most buyouts take 8 to 12 weeks from mandate to completion. We set the debt timetable to match the share purchase agreement and legal due diligence.

Can you fund a management buy-in (MBI)?

Yes. Lenders look harder at an incoming team's track record in the sector, so the structure is often more conservative, but MBIs and BIMBOs are funded regularly.

Is GBF a lender?

No. Growth Business Finance is a commercial finance broker and debt adviser. Finance is subject to status and lender approval.

Talk to us about mbo funding

Check what you could raise in two minutes or make an enquiry. No upfront fee and no credit search to get started.

Get startedMake an enquiry