Management Buyout Feasibility Study

As part of Chaffe’s Management Buyout Feasibility Study, a valuation and in-depth analysis will be performed to determine whether an MBO is a viable strategy for buyers and sellers.

The scope of services for Chaffe’s MBO Feasibility Study includes:

  • Understanding management and shareholder goals and expectations for a potential transition
  • Making sure buyer and seller interests are substantially aligned
  • Determining whether the target company is a good candidate for a MBO.
    • Are shareholders willing to explore a MBO and fundable deal structures?
    • Is the buyout team “deep” enough to support the company and will they be attractive partners to outside financing sources, if required?
    • Does the company exhibit consistent profitability and financing cashflows?
    • What is the company’s visibility on short-term and long-term performance?
    • Does the company exhibit risk factors or have contingent liabilities that would deter outside funders from participating in the MBO (customer concentrations, large contracts or “project” work that is not recurring, margin volatility, environmental liabilities, lawsuits etc.)? How can those be mitigated?
    • What are the markets served, the status of the industry, potential growth rates and the intensity of competition?
  • Assisting management to develop pro forma income, balance sheets and cash flows. In some cases the financial performance must be decoupled from an existing corporate framework, infrastructure or cost allocation assumptions.
  • Performing an independent valuation of the company to set clear value expectations before going into a transaction (see valuation services for more detail on this process)
  • Presenting viable MBO structures to pursue, with likely market terms

Chaffe can also assist in sourcing and securing outside financing for an MBO transaction, if requested.  Working closely with management and owners to present the company’s unique history, current and expected performance, and industry condition, Chaffe will craft materials to communicate that narrative to funding sources in order to find the best transaction partner.