MBO of a Specialist Engineering Firm by Three Senior Managers
£2,100,000 · 6 years · Senior 7.75% / Mezz 12% PIK. Three senior managers at a precision engineering company in the Midlands - the technical director, the commercial director, and the operations manager - had jointly negotiated an MBO from the private.
The Client
Three senior managers at a Midlands precision engineering firm
The Challenge
Three senior managers at a precision engineering company in the Midlands - the technical director, the commercial director, and the operations manager - had jointly negotiated an MBO from the private equity owner at an enterprise value of £3.2m. Between them they could contribute £350,000. They needed £2.1m of senior debt and £750,000 of mezzanine finance.
Our Solution
Doulton structured the full capital stack - arranging senior debt with a specialist MBO lender and introducing a mezzanine provider willing to take PIK (payment in kind) interest to preserve early cash flow. The three managers' complementary skills - technical, commercial, and operational - were presented as a significant strength of the management team.
The Outcome
MBO completed. All three managers now equal shareholders. Year one EBITDA of £510,000 comfortably serviced the senior debt with surplus for mezzanine PIK. By year three the mezzanine had been fully repaid from trading cash flow. Key highlights: Full capital stack arranged - senior debt and mezzanine; PIK mezzanine preserved early cash flow during transition; Mezzanine fully repaid from trading cash flow by year three.
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