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The owners’ must be willing to sell. This is often the key stumbling block where the owners’ have not emotionally accepted retiring.
The owners’ wants to sell to the managers. Establishing a strong relationship with the owner is critical to managers pulling off an MBO (Be open and transparent with executives and shareholders).
The business must be viable (Research the feasibility of the transaction) and capable of supporting outside financing.
The team of buyers must have broad capabilities to run the business successfully, a strong reputation with stakeholders and the ability to take on the responsibilities of ownership.
Overall, the key factors for a successful MBO rely greatly on the level of commitment from both the buyers and the sellers.
On one hand, the sellers must commit themselves in good faith and for the right reasons in the process, knowing that the transaction may take a long time to complete, and that they may sacrifice a portion of the value of their business by selling to their managers instead of making a deal with a strategic buyer.
On the other hand, buyers must be prepared to commit themselves financially and morally. The post-transaction role of each team member must be clear and accepted by everyone. The managing shareholder’s responsibilities are quite different from those of an employee; the buyers who are well prepared will be best suited to meet the challenges of their new standing.
