Acquisition Strategy
Hello, we have been asked to look into an acquisition with the following situation. Single Owner (old aged) wants to exit the business, since 5 years the business, which is a profitable one is on the market, 3 potential buyers were interested, brought by the Single Owner but deal didn't go through because Management was not happy with the potential buyers. Buyers were afraid to buy an empty shell somehow as clients might leave. Now management has approached us to back them with an MBO, which they believe have all the chances to succeed as they will push for it. In the initial deal structure, in the event we acquire the business, there will be a payout to the management which can stay or leave after some time. Now, we are a bit wary about the appropriate client retention strategy and more importantly, we are a bit concerned that the existing management will repeat their behaviour vis a vis previous single owner by blocking all future deals by saying no to future potential buyers. As solution, we are thinking of a staggered structure(on 3 years) for the payout( and number clients staying over the period) when acquisition is validated and also putting "our" people to onboard the client relationship over a period of 1 .5 years. Also some stringent clauses to be signed before final payout.
I wanted to know what other strategies do you think can be explored to make sure that we are not been taken for a ride by the management ( 2 MD's)?
Thank you very much
SB
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