Vendor initiated exits on the rise, says advisory firm
VIAMBO deals are gathering pace, according to national audit, tax and advisory firm Crowe Clark Whitehill. The Kidderminster-based firm said that owners were increasingly using the method of 'Vendor Initiated Assisted Management Buyouts' to exit their businesses.
Andy Kay, corporate finance director at the firm’s offices in Kidderminster and Walsall, said: "There are many different structures but they typically involve a cash payment, loan notes or deferred consideration payments, and possibly a small minority stake going forward.
"The attraction is that it reduces reliance on securing third party funding at a time when it is very tight.
"Often owners are selling to the teams that have been running the business successfully anyway. Potential drawbacks include the limited cash element of proceeds and the risks involved in future underperformance faced by the exiting owners."
However, Kay warned that the procedure can involve interest payments on loan notes/deferred consideration at better than deposit rates.
He added: "The need for extensive warranties and indemnities is diluted, which assists owners if they are not as close to the business as they used to be. And ten per cent entrepreneur's relief makes such a deal an attractive proposition if correctly structured."
