In a management buyout (MBO), the existing management team buys the business it already runs. It's usually funded with cash-flow-led debt that the company itself repays, part of the price deferred to the seller, and a stake from the team.
How an MBO is usually funded
- Senior debt, structured so the business can service it from its own cash flow.
- Vendor finance: the seller is often paid part of the price over time, which suits an owner who wants a smooth handover. See What is vendor finance?.
- The team's own stake, which shows lenders the managers are committed.
Why lenders like MBOs
The buyers already know the business, its customers and its numbers, which lowers the risk of the handover.
Examples from our deals
- A coffee services business in London (£670,000): bought by its existing management with a £645,000 specialist facility and £25,000 from a government scheme.
- An industrial manufacturer in the West Midlands (£5.5 million): bought by its management with a £4 million term loan and a £1.5 million revolving credit facility.
What lenders will look at
The business's maintainable profits, the team's track record, how much the team is putting in, and how the seller's deferred payments rank behind the lender.
Last reviewed: 8 October 2026