Charterhouse Blog

Vendor Initiated Management Buy Out

The Vendor Initiated Management Buy Out (VIMBO) is a means by which a management buy-out can be effected when the management wishes to buy the company, the owner wishes to sell, but the cash resources are simply not available for this to happen.

To address this common dilemma, Charterhouse has created a product which allows the company`s own funds, as generated by future targeted profits, to be utilised in a tax efficient manner to provide the management with the means to buy the shares from the current owner.

In essence, a plan is drawn up setting the management profit targets to achieve. The achievement of these targets provides the trigger for the vendor to reward them with equity.

A holding company is set up by the managers through which they own 100% of the shares in the trading company subject to restrictions that are controlled by the vendor. These restrictions are covered by the issue of loan notes and an activation process.

Each year that the profit target is achieved, the holding company receives a dividend from the trading company, which it uses to release an agreed amount of equity until the management has full control of the holding company and the vendor has the full agreed asking price for the business.

Advance clearance is obtained from HMRC for this process and all of the contracts and documents are drafted by us.

A VIMBO is a unique way for business owners to dispose of their businesses without the lengthy process of instructing agents and paying huge commissions.

Moreover, it creates the opportunity for trusted and loyal staff to own the business that they have worked so hard to build.

Charterhouse is a pro-active and determined accountancy practice with leading-edge expertise in accountancy and tax management services. Charterhouse has offices in Harrow and Beaconsfield and provides services to businesses and individuals in London, Watford, Uxbridge, Maidenhead, Windsor and throughout the UK. Charterhouse writes blog articles to help provide insights and advice on tax management and other financial matters.

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