Company buyout as alternative form of doing business

New research platform on management buyouts at Vlerick Business School

When we speak of running a business the image of the starter who has put a lot of hard work into starting his own business from scratch immediately springs to mind. The economic crisis and the ageing of the baby boom generation is propelling us towards a broader understanding of entrepreneurship. An alternative option which is often overlooked is that of taking over an existing company. In the coming 10 years a lot of businesses are likely to disappear through lack of a successor; this is also a missed opportunity for our economy. In order to further bring the possibilities and advantages of a so-called management buyout or buy-in to the attention of potential entrepreneurs Vlerick Business School has come up with a new research platform, namely the ‘Platform for Entrepreneurial Buyouts’.

The initiative that builds a bridge between theory and practice, originated with Vlerick Professor Miguel Meuleman along with Vlerick Prime Foundation Partner BDO Belgium and Hans Vanoorbeek, Executive in Residence at Vlerick, entrepreneur and buyout specialist. The platform is aimed at all entrepreneurs who are seriously considering a buyout. The cornerstones and processes which form the basis of a successful buyout are mapped out by means of research, cases, conferences and training courses.

Miguel Meuleman, Professor of Entrepreneurship at Vlerick Business School: “Entrepreneurship is high on the agenda of a lot of business schools. The ultimate goal of this initiative is to see a considerable number of graduates going on to a career as an entrepreneur. There are a lot of obstacles on the way between theory and practice, and only a few effectively succeed in starting up a successful business, particularly so outside of the high-tech sector. The majority founder due to a lack of financing, too little interest from the client, or not managing to deliver a product or service at an acceptable price. Certainly for anyone who follows an MBA it is a shame that entrepreneurship remains limited to the theoretical exercise of writing a good business plan.

So should people with entrepreneurial aspirations shelve their plans? A buyout can be a valuable alternative. “The risks involved in a buyout are a lot lower than those involved in a start-up. The company already has an existing product or service, along with its own clients, suppliers and well-established business processes. Private investors are in turn also more inclined to invest in a buyout rather than in a risky start-up,” Miguel Meuleman explains.

The firm in question can also benefit from a buyout. “A change in management signifies a new vision and strategy. Existing firms are often used as a platform for the development of new products or services, which in turn tap into new markets. In this way the company can continue to expand, become more efficient and create greater economic value.” 

Challenges

Naturally in the course of a buyout a number of specific questions arise to which the platform will provide an answer:

  • How can you find a suitable company to take over?
  • How do you set about a due diligence process?
  • How do you manage and structure such a transaction?
  • Which possible sources can create value with a buyout?
  • How do you finance a buyout and how do you deal with investors?
  • What is the role of private equity in a buyout?
  • How do you run an SME?
  • How do you introduce a new management?
  • How do you develop a new strategy for the future?
  • How do you sell a company?

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