Britain's Trapped Entrepreneurs
As executives climb the corporate ladder, turning their skills towards the politics of promotion, they accumulate both wealth and debts - the very things that tie them to the career choice they made years before. Quite frankly, even the most driven of people find it practically impossible to step out and 'do their own thing' - their lifestyle wont permit it. This is often cemented as children come along and the executive has their partner and kids to think about before they follow their dreams or bright business ideas.
Of course true entrepreneurs, the Bransons, Sugars and Trumps of this world are too driven to even join the corporate ladder. But they are exceptions. So what do bright executives do?
There is a solution; a Management Buy Out or a Management Buy In (MBO/MBI). As the names suggest this involves buying a company, often with others as part of a team, with external financial help. Management Buy Outs - where the executive is employed by the company they are buying is far more common than a Buy In where that executive attempts to buy a company based on his knowledge of the market and the company from outside the organisation.
MBOs will need a good team, a leader, a credible growth plan and plenty of cash. Many MBOs are funded by Private Equity (often called Venture Capital) who are convinced by the executive that they have a plan which will give them both a great return.
Private Equity firms, many of which are based in London and reach out across the globe, manage funds supplied by pension companies, investment organisations and even the wealth stored up in 'family offices' - homes for the money of the super rich. Their job is to seek opportunities for Buy Outs and they need to be convinced by the three P's; the People, the Plan and the future Profits.
Before a MBO is considered the executive has to take his or her first big risk. The potential Buy Out executive needs to ask the boss if they can do the buy out. This is often the most difficult issue for a number of reasons:
1 The company, division or subsidiary may be too valuable to the present owners
2 The executive may not have a good relationship with the boss or owners
3 This shows the boss the executive may not be committed and ruin future prospects
4 The boss may be jealous - his underling may end up richer than him!
There are many other reasons, least of which are to do with business, more to do with the emotional context of working in a big organisation.
Many mangers who have successfully executed a MBO/MBI have grown very rich as a result. Working with Private Equity is not just about money and returns. They bring expertise, knowledge, a huge network of connections and they help managers of their portfolio businesses keep their mind on the ultimate goals; growth, value, cashflow, profits and selling the business on to make great returns for their funds and the executives brave enough to have that first conversation with their boss.