FAMBOs set to increase in South West
The latest trend in south west corporate activity is likely to be an increase in Family and Management Buy-Outs or FAMBOs.
FAMBOs are an efficient method of transferring company ownership between generations while allowing senior managers to be part of the buy-out team ensuring continuity of the family line and the retention of key operational skills.
According to Andrew Killick, an experienced FAMBO adviser with chartered accountants Francis Clark, this type of deal structure is very appropriate for many Westcountry businesses where owner/managed businesses predominate.
“Improving productivity and consumer confidence at a time of relative political stability and enthusiasm from many funders to lend or invest made 2014 a bumper year for Management-Buy-Outs. These factors, together with a very favourable tax treatment for sellers, resulted in a significant increase in the number of these types of transactions taking place.
“For many owner-managed south west-based businesses, however, the exit route/retirement plan of ‘selling to the trade’ may not be possible as there are less buyers in the area and the business may not be suitable for an overseas purchaser. Consequently other types of transactions are essential for the owners to realise the value that they have worked hard to build up over the years.
“The South West also has a high number of businesses that are family run with second and third or more generations working in the company. Whilst there may be a wish to pass the trade to the next generation, the family can sometimes find it hard to fill all the roles that the business needs to take it forwards. This doesn’t mean that an MBO can’t happen because the team can be supplemented by one or two of the Management team who aren’t family members – making it a Family and Management Buy-Out (FAMBO).
Andrew Killick added that such deals often require extra skills above finding the funds and that dealing individual needs and sensibilities requires understanding and empathy to conclude a transaction to everyone’s satisfaction.
Mark Greaves, Head of Corporate Finance at Francis Clark said: “Having a team with expertise in grants, banking, venture capital and with trained facilitators such as Andrew Killick, enables us to raise the finance required from a range of sources and to advise and work through the issues that might otherwise prevent these types of deals and goals being achieved.
“Management teams may think that an MBO is not possible for them as they don’t have all the funds available to buy the business. However this is rarely required and in some cases management may not have to put in any cash to complete the transaction. “
