There are no hard and fast rules to determine which businesses VCs and banks will support in a traditional MBO. Investment fashions are subject to change, whilst each financial institution will have its own particular investment policy. However, as a generalisation, VCs will consider a business that has the following attributes:
A reasonable asking price arrived at through an acceptale valuation method.
- High growth potential, supported by a professionally produced business plan and a trading record that supports the financial projections.
- In a high tech sector, such as medical and related industries.
- Acceptable CEO supported by suitably competent and entrepreneurial management that is prepared to invest some of its own money in the buy-out.
- The ability to borrow against its own assets.
- Feasible exit strategy, preferably through a flotation or a secondary sale, within five to seven years.
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