MBO meaning

In a private equity-backed management or leveraged buyout, the principal documents fall into three main groups: Acquisition documents — these set the terms of the purchase between the seller and the buyer (ie newco) Equity documents — these set the terms of the equity investment and govern the relationship between the investor/s and management Finance documents — these cover the provision of the debt facilities and any related facilities (for example, a revolving credit facility for working capital) Acquisition documents Heads of terms (acquisition) The heads of terms, kept to a short form, provide a high-level summary of the parties’ expectations, shared understanding and agreement on the key terms of the intended acquisition. They are signed at the outset of the deal once the parties have aligned on the principal points and before the investor incurs costs on due diligence and the negotiation of the transaction documents...

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This Practice Note forms part of the Lexis+® UK Corporate private equity buyout transaction toolkit. Beyond choosing between a share sale and an asset sale structure, a range of matters should be weighed at the outset of a private equity buyout (MBO), before due diligence begins and the principal transaction documents are negotiated. These matters can influence the core commercial and legal terms, so each side is well advised to address them before settling any headline terms (and before executing heads of terms for both the acquisition and equity elements) and before fixing the transaction timetable. The topics outlined below (and in the Practice Notes referenced in this sub‑phase) may remain relevant throughout the deal, particularly during negotiation of the formal documentation, but they are highlighted early because lawyers for all interested parties ought to consider them and brief their clients as soon as possible. Corporate issues to consider Selected corporate law points are outlined below; applicability will vary with the nature of the deal and the parties...

This Practice Note forms part of the Lexis+® UK Corporate private equity buyout transaction toolkit. Timing A private equity buyout (MBO) typically opens with discussions aimed at settling the key commercial principles in outline. In contrast to a routine share or asset acquisition, three groups are at the table: the investor/private equity fund, the seller, and management, who may, in certain cases, have interests in the seller and/or the target. The fundamental points to confirm to determine if a deal can proceed are the price for the business (commonly via a share sale) and the allocation of management equity after completion. Beyond these, a number of early commercial and legal considerations must be addressed at the outset of any prospective transaction. After the principal commercial terms have been agreed in principle, consideration of the main legal issues is underway and a transaction structure has been settled, the parties are...

This Resource Note summarises the core provisions of Rule 21 of the City Code on Takeovers and Mergers (the Code). It covers the limits on an offeror taking frustrating action in connection with an offer, and the approach to inducement fees and other offer-related arrangements. Rule 21 also mandates that competing offerors are given equivalent information, and that the offeree’s independent directors receive all information supplied to external finance providers in a management buy-out. It signposts relevant materials, commentary and guidance from the Panel on Takeovers and Mergers (the Panel), alongside Lexis+® UK analysis and resources, to provide practical direction on the interpretation and application of Rule 21... Materials covered in this Resource Note include: Practice Statements issued by the Panel Executive (the body responsible for the day-to-day supervision and regulation of takeovers) (Executive), offering informal guidance on how the Executive typically interprets and applies the Code Panel Statements issued by the Panel (P/S) and Panel Instruments Public Consultation Papers (PCP) and Response Statements...

[ On letterhead of the Investor ] Strictly private and confidential [ insert Manager names ][ insert contact address of Managers ] (Managers) Date: [ insert date ] SUBJECT TO CONTRACT Dear Managers, Proposed investment in [ insert name and registered number of company ] (Company) 1 Introduction Following our recent conversations, this letter outlines the key terms and conditions on and subject to which we have agreed to invest with you in the Company (the Proposed Investment). The provisions in this letter are not comprehensive and, save for this paragraph 1.2 and paragraphs 14, 15, 16, 17 and 18, are subject to contract and are not intended to create legally binding obligations between the parties. No party to this letter will be legally bound to proceed with the Proposed Investment unless and until a formal written [ share purchase agreement OR asset purchase agreement ] has been executed...

[ Letterhead of offeror’s financial adviser ] The Directors [ Insert name of offeree’s financial adviser ] [ Insert address ] [ insert date ] Dear Directors Rule 21.3 of the City Code on Takeovers and Mergers In our capacity as financial advisers to [ insert name of offeror or potential offeror ] (the Company), we hereby contact you in accordance with Rule 21.3 of the City Code on Takeovers and Mergers (Rule 21.3)...

This Agreement is entered into on [ insert day and month ] 20[ insert year ]. Parties [ Insert name of company in which the shares are held ], incorporated in England and Wales under number [ insert company number ], whose registered office is at [ insert address ] (Company); [ Insert name of company in which the shares are held ], incorporated in England and Wales under number [ insert company number ], whose registered office is at [ insert address ] (Newco 2); [ Insert name of company in which the shares are held ], incorporated in England and Wales under number [ insert company number ], whose registered office is at [ insert address ] (Newco 3); The several persons whose names and addresses are set out in Schedule 1 (together, Managers); and [ Insert name of fund ], incorporated in England and Wales under number [ insert company number ], whose registered office is at [ insert...