Management buyout

Buying and selling a business – Management Buy Out

Introduction

We were asked to advise the founders on a tax-efficient way to transfer control to an existing employee and a minority shareholder. The founders now wanted to have a minority stake in the company.

The problem

The minority shareholder did not have the funds to purchase the shares from the founders. As an existing employee, we also had to consider employment safeguards legislation.

How we solved it

A Newco was created which acquired all the shares of the trading company (“Oldco”). The minority shareholder exchanged shares of Oldco and the founders exchanged their shares for a combination of cash, loan notes and shares of Newco.

The result

The cash consideration and repayment of the loan notes were financed by future profits generated by the trading company, thus allowing the employee to end up with a majority stake for a relatively small financial commitment.

Next steps

Do you want to cede control of your business? Do you want to make sure this is done in the most tax efficient way? Contact us and our team of expert tax advisors will be happy to guide you.