Family Offices and Management Buyouts – What You Need to Know

About the Episode

A management buyout, or MBO, offers an attractive option for selling a middle-market company to the people who know it best – the management team. B.G. and Geordie Lemmon discuss how their family office views these businesses as partners and share insights on what can make an MBO successful. They discuss what the family office looks for in a company, how the finances work, how the management team is involved, how the company can grow over time, and what this means for the next generation of management owners.

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“The management buyout (MBO) is a different tool that helps business owners transition their business from either one generation to the next or sell to their management team – so the people who are creating the value can own it and share in it.”

B.G. and Geordie Lemmon

In this Episode

2:24 What are management buyouts (MBOs)?
6:35 How are management buyouts structured? Where does the money come from, and how does the management team get involved?
11:42 How do family offices make money from management buyouts?
14:11 After an MBO, what does the ownership split look like over time between the management team and the family office?
16:53 How does the management team repay the loan that comes from the MBO?
19:13 What profits are distributed in a management buyout?
21:20 When someone on the management team leaves the business, what happens with their equity shares?
26:27 How does open-book management work?
32:02 When an MBO occurs, who is typically on the management team?
34:28 How does The Brynavon Group use profile tests with the management team of a business they are considering working with in an MBO?
37:14 How much of diligence is people-related in management buyouts?
39:40 What role do profile assessments play in making decisions about the management team?
45:37 What are the criteria to look for in a company that might be a good MBO candidate?
48:07 Which buyers do family offices compete with?
55:12 What’s the most difficult thing about orchestrating and running a successful MBO?

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Acronyms or Terms Used in This Episode

  • MBO: management buyout – this occurs when the management team of a company acquires the business by borrowing money to buy out the current owner(s)
  • LBO: leveraged buyout – the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition
  • EBITDA: earnings before interest, taxes, depreciation, amortization
  • OBM: open-book management – the practice of sharing a business’s financial information with the employees

Meet Our Guest

B.G. Lemmon

B.G. Lemmon

Acquisition Analyst

B.G. Lemmon graduated from The Wharton School at The University of Pennsylvania with a Bachelor of Science in Economics, concentrating in Accounting and Legal Studies & Business Ethics. He then worked as an Analyst at Frasca & Associates for two years before joining his dad at their family office, The Brynavon Group.

Since joining Brynavon in 2019, B.G. has had a wide range of jobs, from helping to implement a new ERP system for their business in Nevada, to working on the manufacturing floor at one of their plants, to managing the transaction of their most recent acquisition in Effort Foundry, and helping to launch the real estate portfolio of Brynavon.

Location Location: King of Prussia, Pennsylvania
Website Website: brynavon.com

Meet Our Guest

Geordie Lemmon

Geordie Lemmon

CEO of Brynavon Group

Geordie Lemmon is CEO of his family office, The Brynavon Group, where he was a principal and CFO of Brynavon Group, Inc. from 1989-1994 as well as managing the acquisition program of that firm since 1985. Geordie has over forty years of experience as a principal and a manager of businesses whose revenues are under $50 million. From 1995-2004 Geordie was the President and CEO of Owosso Corporation, which was a $170 million, publicly-traded, diversified manufacturer comprised of 10 operating subsidiaries whose revenues were under $50 million.

Geordie received an MBA from Villanova University and is a graduate of Harvard College. He is currently a principal and a director of several small manufacturing and service companies and has been a Trustee of the Children’s Hospital of Philadelphia and The Children’s Hospital Foundation from 1996-2011. He serves on the advisory board of Day & Zimmerman, which is a $2.0 billion diversified manufacturer and service company with concentrations in the staffing, power, and government service sectors.

Location Location: King of Prussia, Pennsylvania
Website Website: brynavon.com

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