Considerations before a MBO

An MBO is just like any other take over and same consideration must be applied.

(i)  Potential of the business. Is it worth buying? What does the future hold for business and   what are growth prospects.

(ii)  Does management  have  enough  skills  to  run  business  on  their  own  without support   from the head office?

(iii)  Can management afford the asking price? Who will fund acquisition? Venture capitalists require high returns andequity stake. Bank may be unwilling to loan very large amounts.