PIONEERING MIBO PLUGS THE SME FUNDING GAP IN BRISTOL
A new and innovative financial vehicle for buying South West companies, and keeping the existing management in place, has been launched.
London-based SG Berkshire, working with independent brokers in the South West, is pioneering the Management Involved Buy-Out (MIBO).
This enables the ownership of a company to be transferred to SG Berkshire, as private acquirers, but who also involve the senior staff in equity ownership.
is pioneering the Management Involved Buy-Out (MIBO), which enables the ownership of a company to be transferred to SG Berkshire, as private acquirers, but who also involve the senior staff in equity ownership.
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A MIBO aims to compensate for the lack of funds currently available from the banks, which has undermined the traditional Management Buy-Out (MBO) model for perpetuating British SMEs.
This lack of funds has led to "Transfer Failure", which affects at least 30,000 British SME businesses each year.
Gerard Tilley, the chief operating officer of SG Berkshire, commented: "With the wave of baby boomers now coming up to retirement age, this means that a lot of businesses will need to transfer ownership.
"If the existing management cannot afford to buy the business, because of lack of funds, the retiring owners have to either decide to keep the firm and delay their retirement or resort to liquidating the assets and making all staff redundant.
"This is clearly a disastrous course of action, as the vendor does not realise the wealth he or she deserves for a lifetime's work, whilst the staff are thrown on the unemployment scrapheap," said Mr Tilley.
"At the same time, the wealth goes up the chain to the bigger conglomerates which sell or make the same products, whilst the local community is adversely affected," he added.
SG Berkshire is a partnership set up to tackle this problem head on, by buying genuine retiring vendors' businesses with a new means of funding finance.
Mr Tilley explained: "We have an innovative way of funding the deal that keeps the cost of funding very low and we don't want to see the business sold to trade for less than it is worth with the legacy of the vendor lost forever.
"At the same time, we want the remaining management to have equity and a vested interest in the sustained success of the business," he added.
Mr Tilley said: "A trade sale rarely delivers the price or the legacy the vendor wants, and , out of necessity comes innovation. Enter the MIBO or Management Involved Buyout.
"The key element to this is that a third party buys the company with the incumbent management who will have real equity on day one. This really appeals to the naturally paternalistic feelings the vendor has towards the management and makes breaking the news of a sale easier, as does the knowledge that the staff and location of the company are not under threat.
"SG Berkshire has the infrastructure, experience and financial engineering in place to execute this type of purchase, which meets the deeper needs and requirements for the genuine retiring vendors of small to medium businesses and achieves a good sale price.
"With their new Retained Private Equity structure, each acquired company has its own CEO, FD and Marketing Directors to make the Board as deep as it needs, in the same way as a private-equity or PLC company would do, but the costs of such are ´´retained´´ by SG Berkshire ensuring that all profits remain in the business.
"We have built our acquisition platform so that all parties win. An excellent price is paid for the vendor's firm; the vendor's legacy is protected; the management team get equity; the staff keep their jobs; and the firm gets entrepreneurial leaders to take it forward," added Mr Tilley.
For further information, contact Chris Taylor 01423 781408/ 07770 786762.