Jun 26

Management buyout options for owner managed and family owned businesses

Written by Thaynara Charlesworth
Legal Director

DDI: 01423 726602
E: thaynara.charlesworth@raworths.co.uk

For many owner‑managed and family‑owned businesses, the question is not simply how to build a successful business, but how to realise value, protect what has been built, and pass that value on without disrupting the business, its people or its culture.  A management buyout (MBO) can be a powerful tool in achieving all three.

An MBO is where the existing owners of a company sell their shareholding, or a significant part of it, to the management team or a new company controlled by management.

By providing a structured and controlled route to succession, an MBO can allow founders or senior owners to realise the value they have created, while ensuring the business is passed to people who understand it and are invested in its future. An MBO can also be an attractive option because unlike a sale to a third party, the company does not have to be marketed widely, and the due diligence process can be more streamlined. This can make an MBO transaction easier, smoother and quicker than a sale to an external third-party.

For many managers, an MBO will be their first experience as shareholders or directors therefore a key risk is whether the management team is ready for the step up to ownership. Consequently, getting the management team to consider, as early as possible, how they will run the business after the MBO is advisable. It is common for selling shareholders to remain involved for a transitional period following completion. This can help transfer knowledge, maintain key relationships and support the management team as they step fully into ownership roles, reducing risk for both sides.

In most MBOs, the management team will not be able to fund the entire purchase price in cash on completion. There are several options that could be considered, including:

• using funds of the company itself to part fund the consideration
• using third party bank or other debt, or
• using deferred consideration which allows the managers to make payments at a later date through a series of instalments.

The choice will often come down to liquidity of possible sources of cash and also accounting/tax advice received by the parties to ensure it is favourable to all. Where consideration is deferred, sellers will often look for appropriate security to protect future payments, balancing commercial flexibility with protection of their value.

In the context of owner managed and family businesses, this is often less about an “exit” in the traditional sense, and more about managed succession with continuity. It is a strategic tool that can support sustainable growth, enable orderly succession and strengthen the business for the long term — provided it is planned carefully, with clear focus on value, people and risk.

How we can help

The Corporate and Commercial team at Raworths has extensive experience of advising owner managed businesses and family owned businesses on MBOs.  Please contact the team for further information.

Published on 30 June 2026

Raworths sponsors Yorkshire Business Insider’s Top 100 OMB rankings in June 2026’s edition of the publication.

The information and any commentary contained in this briefing is for general information purposes only and does not constitute legal or any other type of professional advice.