MBOs: The goldmine opportunity

Many reports have covered Management Buy Outs since they rose to popularity in the 1980s. MBOs move majority control and ownership from current the owners to senior managers and generally follow a simple structure.

MBO structures and market reality

By volume, most MBOs are undertaken by small businesses typically backed by some combination of bank and vendor debt.

At their simplest, they can be relatively straight forward to put together compared to a trade sale and they are often more likely to give all parties a positive experience compared to a sale process.

Private Equity can often get involved at the ‘mid-market’ level (£10m cheque sizes or above, these days) and, at a personal level, these are the deals I enjoy most.

We have a guide as to how to put MBOs together on our website.

But there is something missing in everyone’s commentary and analysis; zooming out from the individual transaction, there is an opportunity of significant economic importance that gets little attention.

Why MBOs matter for UK ownership

Simply, for independent mid-sized UK companies (turnover of £10m to £250m and more than 10 employees), selling to an MBO team is vastly more beneficial to the UK economy, the Treasury and wider society than a typical trade sale is.

There is a simple reason for this that is obvious but is never said. That is; when a rational buyer acquirers a company they normally capture more long term value than the seller’s short term gain – otherwise they wouldn’t transact.

However, recently, the UK has been seen as a ripe market for both international acquirers, and domestic acquirers powered by international capital. When a UK company sells to these parties the UK often loses the benefit of retaining dividends and the capital value domestically. This leads to a loss in tax revenue, a loss of where leadership decisions are really taken and a loss of broader economic value.

MBOs are an antithesis to this; as the shareholders are typically domestic, value stays onshore. We have previously argued that the long-run benefits of this are so great to the economy that MBOs warrant their own discounted Capital Gains Tax in a similar manner to Employee Ownership Trusts.

MBOs keep UK managers incentivised, move people from thinking like employees to thinking like owners, keep tax revenue in the UK, keep the rewards of productivity domestic and provide a meritocratic transfer of wealth between generations.

Why do mid-sized UK firms present a strong opportunity?

In aggregate, these businesses are incredibly powerful, have enormous potential and are undervalued relative to peers in the United States. It is time to invest in them, to grow value and profits.

Any stimulus to grow these companies will create more opportunities to employ people at the cutting edge of a global landscape, and result in more tax revenues for HMRC.

Perhaps one route to stimulus that growth is shifting who owns these businesses to their UK-based management teams to keep the flows of economic and social benefit in the country for longer.

Who forms a typical MBO team?

MBO teams normally consist of a team of three and often include younger prospective shareholders than the current exiting owners. They are heavily incentivised to grow as they have just bought a business levered with debt at a significant rate of interest, against the wider backdrop of geopolitical and economic volatility.

Increasingly, many of the people in this new ownership cohort are millennials. The core team is normally a mix of a potential MD, FD and Chair, with a second-tier team not far behind them covering sales and operation.

This second-tier of management may also have some form of incentive, such as share options through an Enterprise Management Incentive scheme.

This means there are 38,259 potential core team MBO candidates out there, working in mid-sized, UK-based companies, poised to take the reins.

From a tax revenue perspective, HMRC lock into:

1. The Capital Gains Tax proceeds on sale to the MBO team.
2. The higher Corporation Tax receipts from the growing companies’ profits.
3. The Capital Gains Tax proceeds from the second sale.

In total, that is a number far in excess of £161bn over 15 years, or £10.7bn a year on average, excluding the company level taxes for the premium growth rate that an MBO team normally deliver compared to current owners.

Fiscal impact and wider social value

For reference, the difference between tax receipts and Government expenditure in the year to April 2026 was £129bn. Assuming that this gap continues (let’s be honest, given current inflationary world events it might widen!), we think that MBOs could be a powerful way to help close that gap which leads to higher borrowing.

Meanwhile, the wider benefits to society, and the feeling of what it means to be part of a UK business community that doesn’t need to sell abroad to get the pay day, could bring an intangible benefit that is far more valuable. Empowering those exceptional people to take risk (MBO team’s need ‘skin in the game’ – 1980s language for a 1980s transaction model) and create value for themselves and society as a whole isn’t novel, but it is untapped.

Where this leaves UK businesses

MBOs tend to keep ownership in the UK and support long term value creation. They help managers build stronger companies, increase tax receipts, and keep economic gains inside the country. Mid-sized firms offer a large pool of opportunities, and many trade at lower valuations than similar US-based firms. Extending UK ownership improves outcomes for both the companies and the wider economy.

Next steps

If you want to assess whether an MBO fits your business, start by reviewing leadership strength, funding capacity, and valuation. We can help you work through these points and outline practical options. Contact us today using the form below.