Two-stage management buyout for furniture company

Background

Hunters – The Furniture Company is based in Dagenham and Clerkenwell, and is one of the UK’s leading independent furniture specialists, with an annual turnover of £37 million. The founding shareholders decided it was time to hand over the succession of the business to a new management team, as part of a partial-exit management buyout (MBO).

Action

FRP’s Corporate Finance team was appointed by the founding shareholders. Partner Adrian Alexander and Senior Manager Nick Lovelock worked closely with shareholders to help them realise part of their capital in the business as the first step in the partial-exit MBO, while enabling the succession of the business to the management team. They also ensured the owners retained an equity stake in the business and a share in any upside achieved on future exit.

FRP advised the shareholders on the whole concept of a two-step exit, agreeing the deal with the management team which included valuation and deal structuring. Some innovative approaches are in place for the pre-agreed step two – when the management will take control of the company within pre-agreed parameters – including a valuation mechanism using a ‘put and call’ option agreement.

Outcome

The first stage of the MBO has been completed successfully, with four long-standing employees now appointed as the new management team of the business. Corporate Finance Partner Adrian Alexander said: “This transaction reflects a move by some company owners to consider alternative exit plans as opposed to a trade sale or a more traditional management buyout. It’s often a benefit for both existing owners and management teams, who can own part of the business and share in the growing value of the company going forward, with owners retaining an equity stake.”