Buy back of ownership for a family business
A successful manufacturing company was owned 50% by one family and 50% by another. One of the families’ senior members was and continues to be involved in the day-to-day business; the other family had no significant day-to-day involvement.
With help from the firm’s accountants a proposition was prepared for both shareholders to consider to buy the non-participators out of the venture via a company purchase of own shares.
The shareholders not involved day-to-day recognised they needed to step aside and allow the active shareholders committed to the business to have full control if they were to be motivated enough to plan for long term growth and on-going future development of the business.
Their existing bank and a new bank were approached (the new bankers as both a back up and to add competition to the process) to help fund this buy back. Both received details of how the new structured company would operate and forecasts of future trading were prepared by the accountants in full consultation with the family remaining in the business.
Understanding and preparing the right quality and detailed financial information required by the lenders, all forwarded in good time, helped achieve the objective. As did having advisers with a network of funders to approach in order to match the lending need, funds available and personalities of all involved.Best Practice The combination of a well run business with a good track record who had always kept their bankers fully informed and a committed management team prepared to work with their professional advisors made the decision by the banks a lot easier. Outcome Acceptable funding offers were received from both banks and again, using their accountants to help advise on the most cost effective and efficient way to complete the transaction, they decided to stick with their existing bank and opted for an invoice discounting facility as this was the most flexible option in terms of potential for early repayment.