MBI Funding

Sterling Capital Reserve have vast experience in advising management teams on debt funded management buy-in (MBI) procedures where a new merger team take ownership of the business.

Obtaining finance for a management buy in is traditionally a difficult process, particularly when compared to a management buyout. From a lender’s perspective, a key consideration for MBIs will be the high inherent risk attached to an incoming management that will not be as familiar with the business as the incumbent management team. It is because of this risk that funding can prove trickier to secure. Banks can often be hesitant to lend for this reason but thankfully, through our key relationships with a variety of niche lenders and private lending consortiums, we have access to a wide range of funding options that can make the difference.

We are recognised as a leading adviser on MBIs with the experience, commitment and relationships to manage the often complex and time consuming process on behalf of management Buy-in teams.

 

We are regularly called in to assist Accountants and Corporate advisers source funding for MBI’s for their clients.  We are also referred to many proposed transactions by banks who can’t provide MBI finance.  We help fund the deal, then the bank takes the client back (at a cheaper rate) in 12 months time as a refinance.

Funding for MBO’s / MBI’s

In the SME sector, banks continue to have limited or no appetite for providing cash flow loans for Management Buy Ins (“MBI”) or Management Buy Outs (“MBO”) where the EBITDA is below £500k.   Whether this is due to higher risk, lack of skill set within the banks at this level, or not enough return to the banks (or a combination of all three) the banks won’t be drawn, it is accepted that is just their policy.

We have funded MBO’s and MBI’s using debt finance from a private lending consortium thereby providing a line of funding to transactions that can complement and blend with other funding lines including invoice discounting, asset finance and commercial mortgages to get away transactions that would otherwise flounder.

This alternative funding line has become more and more prevalent in funding corporate finance transactions, as the consortium lenders have far more empathy with the proposed transaction than most banks and are therefore willing to take a commercial viewpoint.

We view this funding as a “means to an end” to get the transaction away, and have helped many Corporate Finance professionals get their deals over the line . Within 6 to 12 months the bank is more than happy to take the deal back by refinancing the debt.   They are happy to do a refinance, but not a MBO/MBI !