Management Buyout (MBO) and Management Buy-In Financing

Many management teams know the business better than any outside buyer, have the seller’s trust, and a clear plan for the next phase, yet still watch control slip away because the numbers do not add up. Banks will only fund part of the price, personal resources are limited, and vendor support alone will not satisfy credit committees.

Financely works with management teams and incoming managers that need a structured capital stack to complete a management buyout or buy-in. Through regulated partners, we help arrange senior debt, mezzanine capital, bridge facilities, and structured vendor notes so that credible teams can move from discussion with owners to an actual closing.

Who This MBO and MBI Financing Service Is For

This service targets teams with a real opportunity on the table, not a general wish to own a company one day. Typical clients include:

• Existing management teams buying out a retiring founder or family owners.
• Incoming managers backed by a seller that is prepared to support a structured MBI.
• Senior leaders acquiring a division or carve out that does not fit a corporate parent.
• Mixed situations where management, outside investors, and a vendor all share the capital stack.

In each case, there is a specific business, a seller willing to engage, and a management group ready to commit time and capital.

How MBO and MBI Financing Structures Work

MBO and MBI funding usually combines several components. Senior lenders provide a term loan and working capital lines against earnings and assets. Mezzanine investors or preferred equity support a higher overall leverage level where cash flows justify it. Sellers may accept a vendor note as part of the price. In some cases a short tenor bridge facility covers timing gaps around refinancings or earn outs.

The mix depends on the quality of the business, the strength of cash generation, the depth of management’s equity contribution, and the seller’s willingness to stand behind the deal. A credible MBO package starts with the business and its cash flows, not with a target leverage ratio pulled from headline stories.

Senior, Mezzanine, Vendor Support and Bridge Funding

Financely acts as advisor and arranger through regulated partners; we do not lend from our own balance sheet. Our work is to design a capital structure that the business can carry, then secure interest from suitable capital providers. In practice this often covers:

• Senior term loans and revolving facilities from banks and specialist lenders.
• Mezzanine loans or preferred equity that close the gap between senior debt and management equity.
• Vendor notes and earn out structures that reflect seller support without undermining lender security.
• Bridge to close funding for cases where an initial structure later moves into a longer term refinance.

Each piece needs clear pricing, security, and control terms. A loose, improvised stack is unlikely to survive serious review.

Leverage, Equity and Personal Risk

Many management teams want the maximum possible leverage and the smallest possible equity cheque. Lenders take the opposite view. They want to see conservative leverage, a clear buffer for shocks, and meaningful capital from managers and outside investors.

Total funding for stronger MBO and MBI cases can often reach 70 to 80 percent of enterprise value when cash flows are strong and the sector is acceptable to lenders. Some deals can carry more, others less. Personal guarantees, security over shares, and restrictions on distributions are common. Any team considering an MBO needs to be clear about what level of personal risk is acceptable before talks with lenders begin.

What Management Teams Should Prepare

MBO and MBI processes move faster when managers arrive prepared. In practice that means:

• A clear outline of the deal with the seller, including price, timing, and any vendor support discussed.
• At least three years of financial statements and current management accounts for the business.
• A simple but honest financial model showing base and downside cash flows and debt service.
• Evidence of management equity commitments and any outside investor support.
• A short written overview of the team, roles after closing, and the strategy for the next three to five years.

Teams that cannot produce these basics tend to spend their time on repeated explanations rather than moving toward an actual funding decision.

Our MBO and MBI Advisory Process

Financely applies the same level of discipline to MBO and MBI mandates that institutional buyers expect. The work typically runs in three phases.

Step 1: Initial Review and Transaction Assessment

Management shares the outline of the deal, financials, and their own profile. We review whether the numbers and structure have a fair chance of attracting senior and mezzanine support. If the profile is weak, we say so directly rather than pushing the deal into a long process with little chance of success.

Step 2: Structuring, Modelling and Lender Pack

If we accept the mandate, we work through cash flows, leverage levels, and covenant headroom. We then prepare lender grade materials and agree a capital structure that combines senior, mezzanine, vendor, and equity in a way that reflects the real risk in the business. That structure forms the basis for discussions with capital providers.

Step 3: Market Approach, Term Sheets and Closing

We approach a focused group of lenders, credit funds, and investors through regulated partners, handle questions, and coordinate feedback. Once term sheets are issued, we support management through comparison, negotiation, and documentation, including intercreditor terms and security packages, until the funding is ready for closing alongside the share purchase.

Fees and Engagement Terms

For MBO and MBI mandates, Financely uses a clear fee structure:

• Structuring fee: USD 5,000, payable once we accept the mandate and begin detailed structuring and modelling.
• Underwriting and distribution fee: USD 15,000, covering preparation of materials, lender outreach, and process management through regulated partners.
• Success fee: 2.5 percent of the gross debt and mezzanine proceeds raised at closing, paid from transaction funds.

Legal, tax, diligence, valuation, and other third party costs are for the account of the client group. All mandates are on a best efforts basis and governed by a separate engagement letter that sets out the commercial terms and any exclusivity.

MBO and MBI Financing FAQ

Can management complete an MBO with no personal equity?

Purely debt funded MBOs without meaningful management equity are rare. Most lenders expect managers to contribute capital alongside any outside investors. Where management has no financial commitment, credit appetite is limited.

Are personal guarantees always required?

Personal guarantees are common in smaller MBOs and MBIs, particularly where the deal size is modest and lender security is concentrated in the business itself. At larger sizes or with deeper equity backing, guarantees may be limited or structured differently. This is always a negotiation point and depends on the full risk picture.

Can vendor financing replace mezzanine capital?

Vendor notes can reduce the need for mezzanine but rarely replace it completely. Lenders look at the combined structure. If the seller sits too far ahead of outside lenders in terms of repayment, third party appetite weakens. Vendor support needs to fit cleanly into the intercreditor position.

Do you work with early stage or highly distressed companies?

Our focus is on businesses with proven earnings and a viable path under management ownership. Early stage ventures with no track record and companies in deep distress usually do not support a professional MBO financing package.

Do you lend your own funds to management teams?

No. Financely does not lend from its own balance sheet. We act as advisor and arranger through regulated partners. All funding comes from third party lenders and investors, subject to their underwriting and approvals.

Disclaimer: This page is for general information only and does not constitute advice, an offer, or a solicitation to buy or sell any financial product. References to leverage levels, lenders, and structures are high level and may not reflect the details of your situation. Financely acts as advisor and arranger through regulated partners and is not a bank or direct lender. Any facility or investment is subject to underwriting, KYC, AML, sanctions screening, legal review, perfected security, and approvals by relevant stakeholders. Professional and corporate audience only.