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Management buyouts 'a good option if succession planning fails?

By Attracta Mooney

Management buyouts can help ensure a family business stays in the hands of people who care about the company and have worked hard for its success, according to a private bank.

Family businesses may be reluctant to opt for a management buyout, but if succession plans fail, then it could be a good solution, said Mark Evans, head of Coutts Institute.

“While most family businesses are looking at succession planning, the reality is that when it comes to driving the business forward there may not be a family member with the necessary skills or desire to take on the role,” he told CampdenFB.

If the business gets to this point, the family will need to consider their options and look at planning an exit.

Although many family business members will want the family to retain control, a management buyout will at least ensure the company is passed on to people who are already working in the business and have a personal attachment to it, said Evans.

“You are also passing it on to people that you have worked with and know and trust with an emotional attachment to making it succeed," he added.

His comments follow Coutts research, published in October, which found that the number of business owners who are considering a management buyout has tripled over the last three years, jumping to 18% from 6%.

However, one in four entrepreneurs said they would only consider it as a last resort.

The research, A Special Kind of Exit, also found that 85% of entrepreneurs and vendors who completed a management buyout were satisfied with the deal.