A VIAMBO is a strategic option and is a viable consideration providing advantages to both buyers and sellers offering a low risk, high reward option when reflecting on their future direction.
VIAMBO is a Vendor Initiated Assisted Management Buy-Out. It is a sale of the business to management whereby the owner initiates and assists in funding the deal.
This is consequently an attractive option for the vendor, management and bank currently funding the business or just want to sell it without “going to market”.
It is a viable alternative to traditional trade sales and MBOs. It may also be particularly relevant to owner-managed businesses that are looking to sell their business in difficult economic circumstances or have struggled to sell it in recent times.
How does VIAMBO work?
- The vendor agrees a price for the business with the management team
- Part is paid as cash up front
- Most is paid as deferred or a ‘corporate IOU’ over an agreed time period
- An amount of bank debt may also be raised
- The acquiring management team may have to invest a small amount of cash themselves
- ‘Blood’ relatives are not allowed
- There are no complicated funding negotiations. The bank is providing a relatively low level of finance so has limited exposure/low risk. Banks are thus keen to support a VIAMBO
- Sales are tax-efficient, with the possibility of vendors limiting their effective tax on the gain to 10% (subject to government policy changes)
- The possibility of a premium price – as a reward for delayed full payment
- The vendor effectively retains control over the business until fully paid thus reducing the risk of the business and the deal failing
- Vendors don’t need to give onerous warranties or indemnities
- Minimal impact on the business compared to a third party. The management team are not distracted from running day-to-day operations
- Goodwill transfer issues are avoided. As the vendor often remains involved, and the management team is still in place, no knowledge is lost from the business and no external relationships weakened yet the business is able to enter a new phase of development
- The terms of the deal mean that the vendor is protected if the management team is unable to meet loan note commitments
- The management team get shares as a result of their employment.
If you would like to hear more, please contact us in absolute confidence.