Management buy-out · £5m–£20m
A management buy-out of an industrial business
How we structured a £5m–£20m management buy-out funded from future profits, supported the valuation and secured HMRC clearance for capital treatment.
The client
The owners of an industrial business, selling to their management team in a deal worth between £5m and £20m.
The challenge
- Funding the price. The management team couldn't pay the full price at completion. Much of it had to be deferred and paid from the business's future profits.
- Income or capital? When a business funds its own buy-out, there's a risk that HMRC treats payments to the sellers as income, taxed at dividend rates, rather than as capital gains.
- Valuation. The price had to be supportable, both commercially and in HMRC's eyes.
What we did
- Designed the deal structure, including how the deferred consideration would be paid out of future profits.
- Supported the valuation, working alongside the valuers to arrive at a price that could be defended.
- Applied for HMRC clearance to confirm the sellers' proceeds would be treated as capital.
The outcome
- HMRC confirmed capital treatment for the sellers.
- The deferred payments were set at a level the business could sustain.
- The deal completed smoothly, with the management team in place to lead the business.
