Written by Neil Ackroyd
A lead advisor is one of the most
important roles in a Management Buyout (MBO) transaction. Typically he or she
is the first person that you approach when you are given the once in a lifetime
opportunity to do a Management buyout (MBO). The lead advisor is so named
because they have the skills, experience and personality to lead you through
the process but also lead you team of further advisors to the goal of
completing your Management Buyout (MBO) transaction.
Your lead advisor must be your closest and most trusted advisor for the
next 3-6 months of doing a deal. They know what you don't, they will cover your
back from risks you don't know exist and guide you past pitfalls that you can't
see. You don't have to be best friends with them but YOU MUST TRUST YOUR LEAD
ADVISOR, otherwise it is very difficult for both of you. Therefore the most
important facet of your lead advisor is INTEGRITY, not just you but the market
as a whole must trust them. If you meet an advisor and their CV or experience doesn't stack up, walk
away, there are plenty of real advisors in the world who do stack up.
Management buyouts are generally
funded by Venture Capital or Private Equity. Cutting to the chase, these
professions are exceptionally well paid. Given the old saying money attracts
brains it is very true that VCs and PE players are some of the sharpest and
most intelligent people I know. I know a VC who was a research physicist at
Oxford University, then decided to go into management consultancy so joined the
Boston Consulting Group for a few years before going into Venture Capital. That
individual also speaks four languages fluently. He is not an isolated instance, many of my friends in the Venture Capital and Private Equity arena are qualified
Doctors, research scientists, etc. Contrary to some public and press propaganda
these are very very clever guys and girls. They will look very closely at the
detail of your business to protect the money they are investing on behalf of
their investors. Your lead advisor is your man playing man on man with these
guys, its not about confrontation or contention necessarily, but if your main
advisor is not on a par with your funders the problems that you will run into
are really obvious.
It is essential that this
individual, therefore, be able to fully understand and execute all elements of
the process in a granular level whilst remaining focused on the big picture of
completing the deal. This is why, particularly on a Management Buyout (MBO),
your lead advisor must have an exceptional technical background. Here is a four
point plan to help you understand what to look for in your lead advisor.
EXPERIENCE AND INSTINCT - Assessing whether the deal is viable given the vendor price expectations and
his knowledge of the funding environment is done through a combination of
excellent technical skill, experience and finally a feel for the subtlety of a
deal.
CONTACTS - Your advisor
should typically have years if not decades of experience in dealing with the
top funders in the city and quite often will have come up with some of the
senior guys. This does not mean it is an inside job, rather it gives them some
leverage on your behalf.
TECHNICAL
SKILL/EXCEPTIONAL INTELLIGENCE - It is essential that your lead advisor has the
experience AND intelligence to understand complex issues and financial
structuring in your transaction. This is the principal difference between a
lead advisor and a broker. Many brokers are effectively double glazing or used
car salesmen, they have some skills but no real depth or substance, a lead
advisor will not only have numerous professional qualifications but will also
have passed their exams with exceptional marks.
A TRUE LEAD ADVISOR WILL HAVE
BEEN TRAINED FOR 8 YEARS PLUS BEFORE BEING ALLOWED TO ADVISE A CLIENT - If this
isn't the case they will resort to table thumping in negotiation or just
misunderstand issues and cost you money. Managing a management buy-out isn't
rocket science but generally the guy managing it for you should have had rocket
science as a genuine career alternative. A good trick when meeting a lead
advisor is to give them a whiteboard and 3 minutes to explain structuring of a
management buyout and how it delivers value to you. If they can't make that
simple for you and just waffle, then they aren't your man.
